FAQ | Fraxioned

General

Financing

*Fraxioned Corp and its affiliates do not provide tax, legal, or accounting advice. These FAQs are for informational purposes only, and are not intended to provide and should not be relied on for, tax, legal, or accounting advice. Fraxioned makes no representations or guarantees regarding the economic benefits to be derived from the purchase or resale of the Interest or rental of the Property.

Scheduling and Use

General

Ownership

Buying

Selling

Real Estate Agents

1031 Exchange

Financing

Scheduling and Use

General

Ownership

Selling

Buying

Real Estate Agents

1031 Exchange

Financing

Scheduling and Use

General

Buying

Selling

Ownership

Real Estate Agents

1031 Exchange

Financing

Scheduling and Use

Ownership

Buying

Selling

General

Real Estate Agents

1031 Exchange

Scheduling and Use

Selling

Ownership

Buying

Financing

General

Financing

Scheduling and Use

Buying

Ownership

General

Financing

Ownership

Buying

Scheduling and Use

General

Financing

Scheduling and Use

Ownership

General

Buying

Financing

Scheduling and Use

Ownership

General

Scheduling and Use

General

Ownership

Scheduling and Use

Ownership

General

Ownership

Scheduling and Use

General

Scheduling and Use

General

Ownership

General

Ownership

Scheduling and Use

How are house expenses handled?

Common expenses such as utility bills, property taxes, and insurance are estimated and included in the annual dues. These estimations for a particular Property are divided equally among all Owners of that Property. Should the annual dues not cover the total amount of these common expenses, the deficit will be divided equally among the Owners of that Property.

Are pets allowed at Fraxioned Homes?

Pets are generally allowed in each Property unless otherwise specified by Fraxioned. Even if Fraxioned specifies that pets are not allowed at a Property, the exception to this rule is service animals as defined by applicable law, which are always permitted. Owners will need to specify when they are bringing any pet to a Property, as there is typically an extra cleaning fee associated. Refer to the table below.

Do owners have to pay cleaning fees?

All owners are obligated to pay a cleaning fee for each stay. This fee varies by property and is instituted to ensure that the fractional home is maintained in pristine condition, providing a comfortable and clean environment for all owners during their stays.

What is Peak-Season vs Off-Season?

Each calendar year is divided into the “Peak-Season” and the “Off-Season” at each Property. The Peak-Season of the home encompasses the height of the tourist season to the region where the Property is located.

How many nights does each owner get to use the property each year?

Owners receive an equitable number of nights at the Property, determined by their ownership percentage. This number is split between Off-Season nights and Peak-Season nights to ensure equitability and fairness between Owners. The allocation resets on December 31st each year. When purchasing a share, the allotted days are prorated based on the purchase date, ensuring fairness and simplicity among Owners.

Example: If an Owner purchases a 1/8th share on June 1, 2024, their annual nights are prorated. Instead of the full 44 nights that are annually allotted to a 1/8th share Owner, they get 22 nights for the remainder of the year, equitable split between Peak and Off-Season. Midday on December 31st, their annual nights reset, providing 44 nights for the following year.

How would the title be held under a fractioned ownership?

In most cases the tittle would be held as Tenant in Common (TIC). TIC is a legal ownership structure where multiple investors may own an undivided interest in a real property asset. Owners can hold unequal shares and they can sell their shares independently from other tenants.

What is not allowed in a 1031 Exchange*?

According to IRS rules, certain transactions and property types are not allowed in a 1031 exchange. These include personal use properties like primary residences, stocks and bonds, dealer properties intended for sale, foreign real estate, personal property like furniture, and property acquired with immediate resale intent. Consulting a tax professional is recommended to understand eligibility and compliance requirements.

Can I do a partial 1031 exchange*?

Yes, it is possible to do a partial 1031 exchange, where only a portion of the proceeds from the sale of the relinquished property is transferred in the replacement property. In this case, the seller would have to pay capital gains taxes on the portion of the proceeds that were not used for the new property purchase. The portion utilized through the 1031 exchange would still benefit from tax deferral.

What types of properties qualify for a 1031 exchange*?

To qualify for a 1031 exchange, the properties involved must be considered "like-kind." This generally means that real estate must be exchanged for real estate, and personal property must be exchanged for personal property of the same nature or character. There is some flexibility within these categories. For example, an apartment building can be exchanged for a strip mall, or a piece of raw land can be exchanged for a rental property.

When is the commission paid?

The commission is paid to the real estate agent within two weeks after closing.

I have a buyer interested in Fraxioned. What is the next step?

The next step is to reach out to Fraxioned. We enjoy collaborating with realtors and can provide answers to any questions, guiding you through the sales process. You can even arrange an introduction with your interested buyer to our sales team.

How does Fraxioned compensate Real Estate Agents?

Fraxioned compensates real estate agents with the industry standard 3% commission from the share price.

Does this work like a regular real estate transaction?

No, this is not a typical real estate transaction. As the home is owned by a property-specific LLC and owners own a share of the LLC, the process differs slightly from a standard real estate transaction. However, our sales team will guide you through the process, handling all the work and heavy lifting to ensure a seamless experience.

Do I need an agent to buy a home in Fraxioned?

No, you do not need an agent to purchase a share of a vacation home with Fraxioned. We gladly accept buyers with or without realtors.

Are the fractional ownership properties fully furnished?

With Fraxioned, each property is fully furnished by an interior designer and stocked with family activities, such as paddle boards and kayaks if your vacation home is by a lake.

What happens regarding any damage to the property?

We have cleaners come in after every stay to clean and assess the home. If there are any damages after a stay, the owner will be billed for any damages that occurred during their stay. Also, with annual dues each owner puts money into a reserve fund for repairs and maintenance needed on the home.

What if another owner damages the home?

We have cleaners come in after every stay to clean and assess the home. If there are any damages after a stay, the owner will be billed for any damages that occurred during their stay.

How much time will I have in my home each year?

The amount of time you have in your home each year depends on your ownership share. With 1/8 ownership, you'll have 44 nights a year, 1/10 ownership grants 37 nights, and 1/13 ownership offers 28 nights annually.

Can I keep personal items at my home?

We try to provide a designated space for owner lockers at each property. Here, owners can securely store smaller personal belongings for their visits.

Are the properties insured?

Yes, our Fraxioned vacation homes are all insured.

How many fractional shares can I own?

You can own multiple shares of a vacation home. Want more nights each year? Buy 2 shares. We have owners who have shares in our Bear Lake homes and shares in our St. George homes. They get the best of both worlds in Utah.

How many weeks are typical of fractional ownership?

We don't require you to stay at your home in week blocks; instead, we go by nights. With 1/8 ownership, you get 44 nights a year, with 1/10 ownership, you get 37 nights a year, and with 1/13 ownership, you get 28 nights a year.

Can I schedule consecutive stays at the property?

Fraxioned's booking policies are designed to ensure fair and equitable access to vacation homes for all co-owners. While you're able to book consecutive stays, there must be a gap of at least 5 nights between your arrival and your prior departure.

How quickly can I get approved?

You can typically expect the approval process to be completed within 14 days. However, the exact timeline may vary depending on the specific circumstances and requirements of your application.

What is the process to fractionalize my home?

Fraxioned oversees the transfer of your home through a dedicated property-specific LLC. After finalizing the transaction, your ownership interest in the LLC aligns with the percentage of the home you opt to retain. The residual portion of your home is subsequently sold to other Fraxioned buyers. This approach allows you to unlock the value of your property at an enhanced rate while benefiting from the comprehensive management services provided by Fraxioned.

Can I sell my ownership of the property?

Yes, with Fraxioned, you have the flexibility to sell your ownership share after a pre-determined holding period.

Can my fractional shares be transferred to a family member upon my death?

Yes, your fractional ownership shares can be transferred to a family member or other beneficiary upon your passing. Fraxioned's co-ownership agreements allow for straightforward transfer of shares through inheritance or willful reassignment. This provides flexibility to keep the vacation home in your family's possession or have it pass to designated heirs after your lifetime.

Can owner borrow against their ownership interest?

No, Fraxioned does not allow co-owners to borrow against or leverage their fractional ownership interest in the properties. Your ownership share represents an equity stake, but cannot be used as collateral for financing.

How much does a fractional share cost?

The cost of a fractional share varies depending on diverse factors such as the property's value, location, and the percentage of ownership desired. Fraxioned offers shares typically ranging from 1/8th to 1/13th ownership interests.

Our detailed cost information allows prospective co-owners to clearly understand the funds required to purchase a fractional share in one of our vacation rental properties. We have a selection of properties in different price ranges, to fit individual budgets.

What extra costs do I need to pay over and above the share price upon purchasing?

In addition to the share price for the property, there are some additional one-time costs at purchase. These typically include closing costs like legal fees, transfer taxes, closing costs, property transfer taxes, and any administrative fees. Fraxioned provides detailed estimates of these ancillary expenses upfront for full transparency.

What costs are involved in running and managing the property?

As a Fraxioned co-owner, your ongoing costs are conveniently bundled into just the annual dues and a cleaning fee per stay. The annual dues comprehensively cover utilities, insurance, maintenance, repairs, and reserves for the property.

What home insurance does Fraxioned arrange on behalf of the co-owners of the property?

Fraxioned arranges comprehensive home insurance coverage on behalf of co-owners, protecting against risks like property damage, liability claims, and natural disasters. Our tailored policies safeguard the interests of all co-owners, providing peace of mind. This ensures a secure, worry-free ownership experience for all share owners of the property.

What does a property management company do?

A property management company, like Fraxioned, handles various tasks related to property upkeep and operation. This includes property maintenance, tenant management, rent collection, financial management, and handling legal matters. Fraxioned ensures your property is well-maintained, maximizing its value and providing a hassle-free ownership experience for co-owners.

Do I benefit from a growth in the property value?

Yes, as a co-owner you may participate in any appreciation of the property's value over time. Fraxioned strategically selects high-end homes in desirable vacation destinations. If the market value of the property increases during your co-ownership tenure, your ownership share gains value proportionally.

Is fractional ownership worth it?

We certainly think so. Fractional ownership can be very worthwhile for many people. It provides a way to enjoy a luxury vacation home without the full costs of whole ownership. By sharing the purchase price and ongoing expenses with other co-owners, fractional ownership makes a high-end second home more financially accessible.

Do shared ownership properties increase in value?

Yes! they can! Shared ownership properties have the potential to appreciate in value, just like traditional real estate. Fraxioned is committed to excellent property management and enhancement, to maintain the value of each home.

If you decide to sell your share of a Fraxioned home, you will capture appreciation acquired from the sale, after paying standard agent fees.

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Does Fraxioned manage each home directly?

Yes, Fraxioned oversees the co-ownership structure and overall property operations. We collaborate with reputable local property management firms in certain markets to handle day-to-day tasks for our co-owned homes. Our tech platform facilitates seamless communication between co-owners and managers, ensuring consistently high standards across all our vacation rental properties.

What annual costs will I have to pay as a Fraxioned owner?

As a Fraxioned owner, you'll pay annual dues each year. These are calculated based on the specific property's operating costs and your ownership percentage. The annual invoices will be issued by January 1st for the upcoming calendar year's dues amount. During the sales process, our team will provide you with the projected annual dues for any property you're considering.

Is LLC Ownership the same as tenants in common (TIC)?

No, LLC ownership isn't the same as a tenants-in-common (TIC) situation. With a TIC, each owner has an undivided stake in the entire property. But with an LLC, the LLC itself owns the property outright, and you as a member own a slice of the LLC pie.

LLC provides more structured governance, liability protection, and potential tax advantages over a TIC arrangement.

Is LLC co-ownership new to real estate?

No, co-ownership through LLCs is not new to real estate. This model has been used for several years, especially for investment properties and vacation homes. However, Fraxioned's platform streamlines and simplifies the process, making fractional real estate ownership more accessible and convenient for individual investors.

What are the risks of fractional ownership?

Fractional ownership carries risks like limited control over decisions and potential conflicts among co-owners. However, Fraxioned mitigates these risks through clear communication channels, structured governance, and expert management services. We ensure a seamless ownership experience while maximizing the benefits of shared ownership.

Do I actually have ownership of the property?

Yes, you have real ownership when co-owning a property through a property-specific LLC, where you and co-owners collectively own 100%. Your ownership interest can be sold or transferred. The extent of your ownership rights and responsibilities will depend on the specific co-ownership agreement.

What is Co-ownership of a property?

Co-ownership of a property is a model where multiple individuals or entities share legal ownership and rights over a single property. In simple terms, it means that the property belongs to more than one person or party.

Co-ownership through Fraxioned is simple. We set up a property specific LLC, and share owners buy a portion of that LLC. The agreements are made through a Purchase Agreement and an Operating Agreement. Fraxioned handles all the legal documentation, ensuring a smooth and simple process.

Who Maintains the Property?

Fraxioned partners with professional property management companies and cleaners to ensure the ongoing maintenance of each property. As an owner, you won't need to lift a finger to maintain the home. At Fraxioned, we're dedicated to providing you with a hassle-free vacation home experience, taking care of your property inside and out.

What is the role of a Home Manager or a Property Concierge?

As a Fraxioned co-owner, you'll have a dedicated Owner’s Services team who serve as your personal contacts for the home. They can assist you with scheduling and address any questions you might have about the property. Upon joining, they'll conduct a welcome call with you, guiding you through the booking process and explaining how your home operates. Rest assured, they're always available to provide support and answer any inquiries you may have.

Why would I opt to utilize Fraxioned to sell a portion of my house?

Leveraging a service like Fraxioned to sell a portion of your house can provide several potential benefits. If you're finding that you don't have the time or resources to fully maintain your property, Fraxioned could offer a way to free up some capital while still retaining partial ownership and usage rights. This could be especially appealing if you want to reduce the financial burden of managing a larger home.

Additionally, Fraxioned's model allows you to continue enjoying your property without the sole responsibility of ownership, potentially making it a more accessible and manageable option compared to a full sale.

How does Fraxioned resale work?

As a Fraxioned owner, you have full autonomy over the sale of your ownership share. You can choose to sell your interest at any time, setting the price as you see fit. To help you determine the optimal listing price, Fraxioned will provide a current market analysis for your specific share. When you're ready to sell, Fraxioned will leverage its established marketplace of pre-qualified buyers to facilitate the transaction.

Who furnishes the home?

Fraxioned takes care of furnishing and equipping vacation homes for its fractional co-owners. We work with expert interior designers to thoughtfully decorate each property, creating luxurious and comfortable living spaces tailored to the home's unique style and location. The homes are outfitted with high-end, luxurious furnishings and finishes, as well as the latest smart home technologies.

It's a completely turnkey experience where you can simply arrive and start enjoying your getaway.

Can owners personally rent out their time on Airbnb or similar sites?

No, Fraxioned co-owners are not allowed to independently rent out their allocated time in the vacation home on Airbnb, VRBO, or other public rental platforms.

Can owners rent out their unused time at the home?

Yes, at Fraxioned collective properties, any unused nights are automatically posted for rent on Fraxioned’s short-term rental listings.

Fraxioned handles all the marketing, booking, cleaning, and other logistics, of running a short-term rental. Share owners don’t have to lift a finger to rent out their unused nights.

Can Fraxioned modify the owner-operating agreement?

Fraxioned has some flexibility to make minor, non-material changes to the owner-operating agreement on behalf of the co-ownership group, such as adjustments (like change of address) for state reporting purposes. However, any significant or material modifications to the agreement require a formal vote and approval by the ownership group.

What services are offered to second home owners with Fraxioned?

With Fraxioned, you don't have to worry about the hassles of second home ownership. We take care of it all - property maintenance and repairs, paying the bills and taxes, managing the legal LLC, enhancing our technology platforms, and providing you with dedicated support 365 days a year. As a Fraxioned co-owner, you simply get to enjoy your luxury vacation home without any of the typical headaches.

What kind of LLC does Fraxioned create?

Fraxioned utilizes a multi-member manager-managed LLC structure. These LLCs serve as a cohesive entity representing and safeguarding the interests of our buyers. Each LLC possesses its own bank account, tax ID number, and holds the title to the Fraxioned property, ensuring clear ownership and streamlined management processes for our clients.

Is Fraxioned a timeshare?

No, Fraxioned is not a timeshare - it's a true co-ownership model that enables you to own your vacation homes at dream destinations. With Fraxioned, you and a small group of 2-8 other owners purchase and share legal ownership of the property. This is a fundamentally different experience than a timeshare, which typically provides "usage rights" without actual ownership.

With Fraxioned, the property is not shared among dozens or even hundreds of timeshare owners annually. It's an exclusive arrangement that provides all the benefits of a luxury second home, with none of the restrictions of a timeshare.

How is fractional ownership different from a timeshare?

The key difference between fractional ownership and a timeshare model is ownership. With fractional ownership, you and a select number of co-owners share legal ownership of the property, allowing for more flexibility and control over your investment. Each owner typically has a set amount of time allocated for personal use, ensuring exclusive access to the property during designated periods.

Timeshares, on the other hand, only provide the right to use the property for a set number of days or weeks. While timeshares offer a level of flexibility in terms of location and duration of stay, they do not provide actual ownership of the property.

What is Fractional Co-Ownership?

Fractional co-ownership is an innovative approach to vacation home ownership. Rather than buying an entire vacation home outright, fractional ownership allows you to purchase a share or "fraction" of the property - dividing both the ownership and usage rights. Each co-owner enjoys exclusive use of the home during scheduled stays throughout the year. With a one-eighth share, you'll have access to the home for 44+ nights annually, providing ample opportunities to relax and create unforgettable memories in your dream vacation getaway.

What is Fraxioned?

Fraxioned is a vacation home co-ownership company. We help buyers purchase and enjoy a share of a luxury vacation home. We handle every aspect of the process - from sourcing the ideal property in desirable destinations to designing and furnishing the home, to ongoing property management. Fraxioned's turnkey approach allows you to embrace the vacation lifestyle without the hassle of traditional second home ownership. We're dedicated to curating exceptional living experiences that exceed the expectations of today's sophisticated vacation home buyers.

What is Fraxioned's cancellation booking policy?

Fraxioned's cancellation booking policy states that if an Owner cancels a booking more than 7 nights before the scheduled stay, they will reclaim the number of nights in the booking to their total number of allotted annual nights. However, if the cancellation occurs with less than 7 nights' notice, the Owner will not reclaim the nights to their total number of allotted annual nights.

Furthermore, if the Owner neglects to cancel until after the time of check-in, they will still be charged a cleaning fee for the booking.

Note: Owners will not reclaim an allotted holiday if they cancel with less than 7 nights' notice.

What if I need to cancel a stay that I have already booked?

If you need to cancel a booked stay, simply contact our Owner Services team for assistance with the cancellation process. Please note our cancellation policy: Cancelling more than 7 nights' before the start of your scheduled stay allows you to reclaim the nights to your total number of allotted annual nights.

However, cancelling with less than 7 nights notice or neglecting to cancel until after check-in will result in the nights not being reclaimed to your total allotment. Additionally, a cleaning fee will still be charged for the booking. Rest assured, our team is here to support you through any changes to your plans.

How far ahead can I book a stay?

You can book stays up to 24 months in advance, providing ample opportunity to plan your vacations with precision. Our user-friendly online calendar allows you to check availability and schedule your stays accordingly, ensuring a seamless and stress-free booking experience. Enjoy the convenience of planning your getaways well in advance with Fraxioned.

Can I swap stays with other owners?

No, our booking system operates on a first-come, first-served basis, with rules ensuring fairness and equity among owners. Each owner enjoys flexibility in choosing their dates for stays at their property using an online calendar, which is always open for bookings.

How many holidays can each owner book?

Owners are permitted to reserve only one Off-Season holiday per year, per share owned. Owners are also permitted to reserve one Peak-Season holiday every two years, per share owned. This rule ensures equitable access to the fractional home during holiday dates for all Owners. Owners are encouraged to plan their holiday bookings judiciously, keeping in mind the shared nature of the Property and the interests of the wider Owner community.

Example: If an Owner books a stay for President’s Day 2025, they may not book any other Off-Season holidays that occur in 2025. However, the same owner could also book Memorial Day 2025 (a Peak-Season holiday), understanding they will not be allowed to book a Peak-Season holiday in 2026.

How long are owner stays?

Owner stays must adhere to specific guidelines: a minimum stay of 3 nights and a maximum stay of 14 nights per shared ownership, with a cap of 28 nights. Additionally, if booking multiple stays consecutively, there must be a gap of at least 5 nights between stays. These guidelines ensure fair and equitable usage among co-owners while maximizing the enjoyment of the property.

How many bookings can I make at a time?

Fraxioned owners can book as many or few stays as they wish, within their allotment of annual nights. Each booking has a 3 night minimum, and a 14 night maximum. Bookings can be made up to 24 months in advance, or at the last minute. The calendar is first come first serve.

Do owners have a priority rank order for scheduling?

No, owners do not have a priority rank order for scheduling; reservations are made on a first-come, first-served basis. Dates can be booked up to 24 months in advance, ensuring fairness among owners. Our system promotes equity by restricting the overbooking of holidays and preventing the monopolization of peak tourist seasons.

How do short notice stays work?

Short notice stays, facilitated through our Last Minute Bookings (LMBs), enable owners to reserve the property if it remains unbooked within 3 nights of a specific date. Notably, these bookings do not deduct from your total allotted days, granting you the flexibility to optimize your property usage to the fullest extent possible.

Do I have to meet my co-owners?

You are not required to meet your co-owners. Fraxioned handles all communications and arrangements among owners, guaranteeing a streamlined and stress-free experience for all parties. Rest assured, your journey with us is designed for convenience and peace of mind.

How do I schedule the dates when I want to enjoy the property?

To plan your visits to your Fraxioned property, access our convenient online calendar to view availability and book your desired dates. If you require assistance or have any questions, our dedicated Owner Services Team is ready to assist you every step of the way. Enjoy hassle-free scheduling and seamless experiences with Fraxioned.

What are the finance options available?

Fraxioned offers limited financing options tailored to each property, ensuring accessibility and ease for interested owners. These in-house financing options are property-specific and subject to qualification criteria. Additionally, owners have the flexibility to explore alternative financing methods such as Cash and Home Equity Line of Credit (HELOC).

Rest assured, our dedicated team will provide comprehensive guidance throughout the financial process, ensuring a seamless and stress-free fractional ownership investment experience.

Does the property have a loan?

Depending on the number of buyers who finance their purchase versus the number of cash buyers, the property may or may not have a loan. In any event, the loan will not exceed Fraxioned’s lending guidelines, which are designed to protect the interests of all owners.

What down payment is required to purchase a share of a second home?

While cash transactions are standard and preferred, if you qualify for financing through Fraxioned, an initial down payment ranging from 30-40% is typically necessary. This upfront acquisition cost secures your ownership stake in the property, while the remaining balance is financed over a predetermined period, making luxury vacation home ownership more accessible and affordable.??

Can I finance my purchase of a Fraxioned share?

At Fraxioned, we provide limited financing options for fractional ownership properties, and availability varies depending on each property's regulations. While we may offer some financing solutions, we typically recommend exploring options with your mortgage lender, including Home Equity Lines of Credit (HELOCs), which can be a flexible and viable way to finance your purchase of a fractional property.

Fraxioned is able to facilitate 1031 exchanges for eligible property transactions.

Is there a financing fee?

Yes, there are normal and customary fees and/or points associated with financing fractional ownership properties. These fees cover various aspects of the financing process and may vary depending on the specific terms of your financing arrangement.

What is the approval process?

The approval process for becoming a Fraxioned fractional co-owner is straightforward. It begins with scheduling a call with Fraxioned's sales team. They will work closely with you, addressing any questions you have and guiding you through the steps to complete your approval. Fraxioned's goal is to make the onboarding process as smooth and transparent as possible.

To whom do I make my loan payments, and at what interval?

You make your loan payments directly to Fraxioned every month. Fraxioned will provide you with regular invoices outlining the payment amount due each month for your financing of the fractional ownership share. This streamlined payment process is designed to make managing your obligations as a co-owner simple and straightforward.

Can I pay off my loan early, is there any prepayment policy?

Yes, with Fraxioned, you have the flexibility to pay off your loan early without any penalties. Fraxioned imposes no restrictions on prepayment, so you're free to pay down your financing balance at your own pace. Whether you choose to pay off the loan over the full term or accelerate the payoff, our financing options are designed with your goals in mind.

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