Why Private Residence Clubs Are Beginning to Trump Second Homes

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The Burst That Changed the Market: Why Private Residence Clubs Are Beginning to Trump Second Homes

“Necessity,” as Plato once wisely noted, “is the mother of invention.”

And so it’s no surprise that a new breed of second and vacation home ownership is growing in an otherwise sluggish market. After all, we are in a recession, so less is indeed more.

NetJets Offers Private Jet Ownership Through Fractional OwnershipTake private fractional jets, for examples, such as Warren Buffet’s NetJets. Considered the ultimate luxury, private jet travel was a rare thrill few could afford, but then back in the 90’s, someone got the idea of taking a $20M jet and fractionalizing for better economical sense for both companies (large and small) and affluent travelers who could share in the gigantic acquisition costs and maintenance expenses. Even companies that could afford the “whole thing” saw the benefit of sharing expenses based on how much time it would be sitting in a hangar, eating money.

It was such a smart business model that even Warren Buffet, who is a very selective and savvy investor, believes in the sharing of costs and expenses of luxury items. As he explains, “why buy the cow when you can have the milk for cheap?”

Well, apply that logic to the second-home market and it becomes clear why the sales of private residence clubs, also known as fractional ownership, have been gaining the upper hand in winning over vacation home-buyers and for some time. Shared ownership just makes more sense in today’s financial climate.

Fractional Ownership at The Rock Creek Club in Cashiers NC

What IS a Private Residence Club?

The concept began in 1991 when Steve Dering, founding partner of Destination Club Partners (DCP) International, launched the world’s first private residence club at the renowned Deer Valley Resort in Park City, Utah. He split up the purchase price and expenses of each luxury ski-in/ski-out townhome in the mountain retreat between like-minded owners and perfected a simple and equitable usage and reservation system to coordinate each owner’s time enjoying their home.

Dering’s luxury real estate model worked out so well, it spread to other prestigious destinations across the globe.

The idea is simple, and that simplicity is evidenced in the testimonials of Owners at Residence Clubs everywhere. You find a million dollar getaway in your favorite exotic location, pay a percentage of its cost and then enjoy it as often as you like, with minimal restrictions.

In addition to experiencing far less financial burden, club owners are also pampered–absolutely free from the hassles of long-distance home management. No worrying about cleaning, airing out rooms, paying utilities, tending to constant upkeep of the house, insurance and theft protection or renting out between visits. All the maintenance is done before you arrive. And when you head home, leave the dishes in the sink and beds unmade; the club staff does that, too.

Now you can own a million-dollar home — for about $150k — a fraction of the acquisition and maintenance costs… and, basically, use it as often as you want if it’s available. With the services of a boutique hotel, the club staff oversees the arrangements, managing everyone’s use of the home through the simple reservation policy and, well, taking care of everything else, too. As with any other deeded real estate purchase, the property rights can be sold, passed on or placed in a trust.

In short, you discover the smarter way to own pricey luxury real estate in a volatile market. It’s like owning a slice of paradise at the fraction of the cost.

Ridge-Run-Club-Wisp

Not a timeshare

If you’re thinking, “timeshare?”… please don’t.

Few people can truly justify owning a million-dollar second home they use 5 to 6 times per year, so now, many buy a portion of one and pay only for what they use. Private residence clubs offer luxury real estate with high-end furnishings, greater flexibility and far greater amenities than what traditional timeshares offer and, in most cases, beyond what whole ownership can offer– from concierges to housekeeping and even grocery-shopping services. You’re also buying actual property and not just “time,” as with traditional timeshares, where you’re usually locked into the same week at the same location, year after year.

Private residence clubs are the opposite of timeshares. While greatly reducing the costs, they deliver the services one would expect from a boutique hotel—without the guilt. You don’t even get these attributes owning the whole thing. They are indeed “the more affordable way to vacation like a rock star,” as The Los Angeles Times puts it.

The New Second Home

The Del Pacifico Club in Costa Rica

As anyone who owns a TV or has opened a newspaper in the past few years can attest, there’s been a seismic shift in the habits of vacation and second home buyers, largely due to the evolving priorities of baby boomers (the most active in this market). They’ve become more pragmatic and more cautious about spending large chunks of their wealth during these unstable times.

Industry analysts say it is for this very reason that private residence clubs have expanded into a billion-dollar-per-year business and are seemingly going against the grain of the rest of the housing market.

Today, dozens of these clubs can be found throughout North America, Europe, the Caribbean and Latin America, proving this home ownership model, which produces 90%+ client satisfaction, is here to stay.

The initial development by DCP International was so successful, they now have more than 40 clubs worldwide with over a billion (with a B) in sales since the early 90’s. Now in partnership with Residence Club Partners from Asheville, NC, the pair have launched 8 new clubs in just the past 36 months.

Residence Club Partners alone has added to its portfolio of destinations, including The Asheville Club at 151 and The Preserve at Rock Creek, both in Western North Carolina; The Creekside Club and Ridge Run Club, both located in the popular Deep Creek Lake area of Western Maryland; and the new Del Pacifico Club on the Pacific coast of Costa Rica.

“There has been a definite spike in people’s appetite for private residence clubs in recent years due to the model’s diminished financial risk for buyers and the more ‘bang for the buck’ mentality,” writes Luxury Living International. As Dering says, it’s because “the popularity of residence clubs is based on simple logic. The ownership cost is more commensurate with actual use.”

And this shouldn’t come as a surprise.

“The fundamentals of the vacation home market have changed. The days of buying a $3 million house … with the expectation of 20% annual appreciation are gone for the foreseeable future. Recent events will enhance the attractiveness of the high-end fractional products as compared to whole ownership,” explains Dr. Richard Ragatz of Ragatz Associates, the leading Fractional and Second Home marketing-consulting company.

John Grant, author of The Green Marketing Manifesto, echoes the sentiments: “We are looking at a complete redesign of modern life…. Fractional ownership, where products are pooled and shared, will explode.”