Fast Facts Napa Valley Real Estate
Fractional Facts
“CUTTING EDGE” in Napa Valley and similar to the evolution of the SAN FRANCISCO TIC MARKET, the fractional vacation home market is likely to become an active niche in Napa Valley real estate. For several years now, as the demand for Napa Valley properties continued and values consistently increased, real estate has been purchased by more than one owner; each with a deeded fractional interest in the property. Until recently, this type of property acquisition was seldom an “advertised” fractional offering; the Buyers typically being sophisticated individuals with the knowledge to effect a fractional sale and purchase, independent of a sales promotion. TITLE INSURANCE COMPANIES recognize fractional ownership in Napa County and LOCAL REALTORS are “getting up to speed” with this latest form of second home ownership. NAPA COUNTY CONSERVATION, DEVELOPMENT, and PLANNING has recently clarified fractional forms of property ownership; a Letter of Opinion dated June 2007 is specific to this form of vacation home ownership within the County. Established guide lines enable fractional vacation properties to comply with local and state requirements. Residential vacation home fractional property ownership is distinctly different from resort fractional property ownership within the County of Napa.
Fractional Vacation Home Ownership is an INTELLIGENT, PRACTICAL FORM of PROPERTY OWNERSHIP for the sophisticated Buyer or Seller, and the educated Realtor.
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NAPA VALLEY FRACTIONAL MARKET
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F R A C T I O N A L HOME O W N E R S H I P
THE SECOND MOST POPULAR VACATION DESTINATION in California, Napa Valley’s inherent supply/demand factor, has historically insulated it from following the time patterns of regional or statewide slumps and recoveries; a Napa Valley slow down is rare and the recovery cycle is short. With a solid 17 year performance record of property value growth, Napa Valley is an impressive market.
17 Year Performance - Average Sold Price 1,000,000 900,000 800,000 700,000 600,000 500,000 300,000 200,000 100,000 0
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NAPA VALLEY REAL ESTATE MARKET
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F R A C T I O N A L HOME O W N E R S H I P
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Resort and residence club managed properties usually have many dwellings divided into ten interests per dwelling, yielding over 100 ownership interests in one property. A example of a resort managed property in northern California is CALISTOGA RANCH: 27 LODGE RESIDENCES with ten possible ownership interests each, equating to a maximum of 270 Owners of the157 acre Auberge managed property. Like most resort and residence club properties, Owners do not have use rights to a specific dwelling and they typically stay in a different house each time they occupy the property. The FRACTIONAL HOME OWNERSHIP concept allows people to MATCH THEIR REAL ESTATE PURCHASE with their EXPECTED USE of a luxurious second home. Fractional Ownership significantly reduces the financial outlay and eliminates the maintenance burden of vacation home ownership. It is an intelligent way to enhance your lifestyle while creating a legacy for your family and/or promoting your business. Although not a time share, each fractional ownership interest is commonly assigned an exclusive use block of time for a specific area of the property or the entire property. Most typically, the fractional interest equates to a portion of a 12 month year; as an example 1/12 fractional ownership commonly equals one month or four weeks of exclusive use. Usage plans vary from property to property; some larger properties exclude certain time blocks for maintenance and repairs, etc. Most fractional ownership agreements provide for the pre-assigned designated use time block to rotate on an annual basis; thereby permitting each Owner to have access to prime seasonal and/or holiday intervals. MORE THAN ONE FRACTIONAL INTEREST MAY BE PURCHASED by a single buyer making this ownership concept practical for an individual desiring additional time or space to purchase more than one fractional interest.
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FOUR OWNERS = 1/4 FRACTIONAL INTEREST is a popular model for vacation homes located in ski destinations. TEN OWNERS = 1/10 FRACTIONAL INTEREST is typical in U.S. vacation destinations with a large luxury residence; International properties often use a 1/12 Fractional Ownership. A vacation pied-á-terre in Paris is frequently a 1/12 fractional ownership property.
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THE NUMBER of OWNERS depends upon the property and the management entity; there might be as few as two or as many as several hundred Property Owners of a fractional property.
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MODELS IN GENERAL
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Fractional ownership is an actual investment in a property’s likely APPRECIATION. Fractional Property Ownership offers equity participation in APPRECIATION; unlike a traditional time share, where approximately 50% of the value goes to marketing, commissions, promotions, give-a-ways and other fees and expenses not incurred by fractional ownership sales. Time share investment value traditionally decline. Do not confuse fractional ownership with a time share! BUSINESS EXPENSE; you can reward employees, entertain clients and write off part of your fractional if you use it for business. In 2002, the IRS RULED TIC FRACTIONAL INTERESTS could be used as a replacement property in a 1031 EXCHANGE; allowing people to buy and sell interests in vacation homes as investment properties as well as second homes.
Prospective Buyers and Sellers are encouraged to consult with and engage qualified tax advisors and seek legal advice pertaining to fractional ownership for personal, business, investment purposes and/or IRS 1031 tax deferred exchange qualifications and/or second home expense deductions that may specifically apply to each individual.
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FRACTIONAL SECOND HOME OWNERSHIP is superior to a traditional time share. Two things separate fractional ownership from time share; OWNERSHIP & CONTROL.
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FRACTIONAL HOME OWNERSHIP is a recorded and undivided deeded interest in a property; providing all the benefits and privileges of home ownership. The property is professionally managed, relieving the Owners of the burden and responsibility of care and maintenance upkeep. Fractional ownership is an actual deeded interest: you can sell it, leave it in your will, put it in a trust and do practically anything you can with a deeded property. It is insured home ownership with legal and financial insulation from other owners.
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FINANCING AVAILABLE With the advent of fractional financing in 2005, individual loans are available through a variety of lenders. Although, 80% of fractional vacation homes are purchased by cash buyers; many have opted to leverage a line of credit against their primary residence.
FRACTIONALS ARE QUICKLY BECOMING THE MOST PRACTICAL FORM OF OWNERSHIP IN THE MOST EXCLUSIVE OF DESTINATIONS.
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DESIRABLE LOCATIONS are in demand; more people can own the same parcel of rare-air real estate, an environmental advantage to fractional ownership. “EMPTY NESTING” is out; “BESTING” is the latest buzz word. “Besters” are buying better nests, not downsizing for retirement; this is a dynamic shift in lifestyle expectations for mature adults. The U.S. market is in a clear trend of more shared/fractional ownership. Many non-U.S. Boomers will retire in the U.S. The under told statistic is that there will be 103 million boomers in Europe by 2009 and Japan will have 32 million boomers by 2010. International Boomers will be competing with U.S. “Besters” for a uniquely similar lifestyle.
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RARE-AIR REAL ESTATE BUZZ
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NATIONAL SECOND HOME SALES have been rising more than twice as fast as new single-family home sales (since 2004) and nearly four times faster than all resale homes, according to the National Association of Realtors. This amounts to an unprecedented portion of the marketplace. The luxury vacation home market remains significantly protected from the effects of the 2007 blood bath experienced by an extraordinary number of geographically specific primary home markets and investor owned real estate in our domestic market. A LARGE NUMBER of BOOMERS continue to indulge in second home ownership and are changing the vacation home ownership market in the United States. Boomers have proven that they are willing to pay, for the lifestyle they want. 78 MILLION BABY BOOMERS WILL RETIRE in the NEXT 15 YEARS LARGEST BOOMER POPULATION TURNED 50 IN 2004 – 2005 28% U.S. POPULATION IS A BABY BOOMER 2016 PEAK YEAR - 4.3 MILLION 59 YEAR OLD BIRTHDAYS Boomers have just begun buying their second/retirement homes . . . the power of the Baby Boom Generation by the sheer mass of this population competing for prime property is a trend that is already under way.
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Today, Fractional Ownership is a popular and widely accepted form of property ownership in Tahoe and most Colorado ski destinations. CNN Money reported in 2006, more than half of all real estate sales in Aspen, Colorado involved fractional ownerships. One of the fastest growing forms of second home ownership in the United States; Colorado ranks first, followed by Florida, Hawaii, California and Nevada.
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Domestic FRACTIONAL VACATION PROPERTY OWNERSHIP has been around for more than 20 years. According to CNN Money, fractional ownership became a fast growing segment of home ownership in Utah OVER 10 YEARS ago, where many expensive homes were under-utilized and owners were spending a lot of money for just a few weeks or months of use.
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U.S. VACATION HOME MARKET
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