Fractional ownership vs renting a holiday home

The number worth working out

Ask what a share costs and you will get a price. The more useful question is what a night in the house costs you. Every home has a set number of nights a year and a running-cost budget shared between the owners, so the cash cost of a night is simply one divided by the other.

That is the running cost only: management, insurance, upkeep and the reserve, divided by the nights the share entitles you to. It is not the whole story, because it ignores the money sitting in the share. But it is the part that behaves like rent — the cash that leaves your account each year whether you go or not — and because it is shared between the owners, it is usually well below what a comparable whole house costs to rent for the same nights.

What to do about the capital

The share price is not a cost. You own a real share of the house and you can sell it. But it is capital you cannot use for anything else while it sits there, and any honest comparison has to charge something for that.

The fair way to do it is to pick the return you would otherwise expect on that money and add it to the running cost. Try 3%, 4% and 5%: they are plausible, unexciting numbers, not a forecast of what your alternative is. Change the rate and the answer changes with it; the point of showing the workings is that you can.

Read the result as a break-even rental rate. If an equivalent house in the same place costs you more than that a night to rent, the share is the cheaper way to have it — before any change in what the property is worth, and before the extra nights described below. If it costs less, renting is cheaper and you should rent.

This is arithmetic rather than advice. It leaves out taxes, which differ by country and by your own situation, and it assumes the property's value neither rises nor falls. We are an estate agent, not a financial adviser, and the method is here so that you can do your own sum rather than take ours.

Three things the arithmetic understates

You will probably get more nights than you paid for. The nights a share gives you are usually a minimum, not a cap. With some homes, a stay booked at short notice does not count against your allocation at all. An owner who lives within reach and books late uses the house considerably more than the headline number, at no extra cost — which pushes the real per-night figure down, sometimes a long way.

The house is set up for you. Your things stay there between visits — owners can leave sports equipment or clothes in the property. You arrive to a house you chose, furnished once, rather than to the least-bad option available on your dates. For families who return to the same coast every summer, this is most of the reason people buy.

The capital may come back. You own a real share of the house, so when you sell, the value goes with it. You set the price. Your co-owners get the first chance to buy at that price; if they pass, it goes on the open market. How long a sale takes varies by home, and a share can fall in value as well as rise, like any property.

Where renting genuinely wins

We list these homes for a living and we still think renting is the right answer for a lot of people. It is better if:

• You want a different country every year. A share commits you to one house.
• You take less than about three weeks a year away. The running cost is charged whether you go or not, so light use makes the per-night figure climb steeply.
• Your plans might change — a job move, a child's schooling, a health question. Renting stops the moment you stop booking. A share has to be sold, and that takes weeks at best.
• You would need the capital back at short notice. Even a fast resale is measured in weeks.
• You want no involvement at all. Co-ownership is light on admin, but it is not zero — there are other owners, a calendar, and an annual budget.

Where the share wins

• You already return to the same region every year, and have done for several.
• You take four weeks or more, and would take more if it were easy.
• You travel as a family or a group, where renting a whole house is the only sensible option and the nightly rate reflects it.
• You want the place to feel like yours — your things in the cupboard, your choice of house, the same beds each time.
• You want a stake in the property rather than a series of receipts.
• You want to be able to hand it to your children. A share is an asset that passes on; a decade of rentals is not.

The honest risks

Three, and none of them is a reason not to buy, but all three should be priced in before you do.

Resale is not instant. A resale can take some time, depending on the market and demand. You set the price, your co-owners get the first chance to buy at that price, and if they pass it goes on the open market. Plan on months rather than days.

The running cost does not pause. A year when you do not go is a year you still pay. That is the single biggest risk to the arithmetic above, and it is why light users should rent.

Letting the home out is not always allowed. If your plan is to cover the running cost by renting your unused nights, check the rule for that home first — some homes cannot be let at all, others can, and whether a specific home can be let also depends on the local rules in that town.

How to work out your own answer

Take the number of nights you actually spent away last year in the sort of place you are imagining. Multiply by what you paid a night. Then take a home you like from our listings, add its yearly running cost for one share to 4% of the share price, and divide by the nights the share gives you. If the first number is bigger, you are already paying for a house without owning one.

Running costs are shared between the owners; we send you the figures for any home you're interested in, in writing, with its availability, before you commit to anything.

Common questions

Is fractional ownership cheaper than renting?

Per night, usually yes, once you are using the home for four weeks or more a year. The running costs are shared between the owners, so the cash cost of a night is usually well below what a comparable whole house costs to rent. Add a fair charge for the capital in the share and you have a break-even rate to set against what you pay to book. We send you the figures for any home you're interested in.

How many nights do I have to use for it to be worth it?

There is no universal figure, because it depends on the rental rate you are comparing against. The mechanism is simple though: running costs are charged whether you go or not, so the per-night cost falls the more you use it. Under about three weeks a year, renting is almost always cheaper. Over four weeks, buying usually wins on the arithmetic.

What does a night in a co-owned home actually cost?

It depends on the home. Divide the home's yearly running cost for one share by the nights the share gives you, and you have the cash cost of a night for the whole home; add a charge for the capital, say 4% of the share price a year, for the all-in figure. Running costs are shared between the owners; we send you the figures for any home you're interested in.

Do I get my money back when I sell?

You may get more or less than you paid, as with any property. You set the price. Your co-owners get the first chance to buy at that price; if they pass, it goes on the open market. How long it takes varies by home.

Can I rent the home out to cover the costs?

It depends on the home and on the town. Some homes cannot be let at all — owners may lend them to friends and family but not rent them out. Others can be let during unused periods, though parts of Spain are tightening short-term letting rules. Check before you buy rather than after.

What if my plans change?

This is the strongest argument for renting. Renting stops when you stop booking; a share has to be sold, your co-owners get the first chance to buy at your price, and the process takes weeks at best and months at worst. If there is a realistic chance you will want out within two or three years, rent.

Is a share better than buying a whole holiday home?

Different question, and it turns on how much you actually use it. Typical holiday-home owners use their property six to ten weeks a year, which is roughly what a single share gives you. If that matches you, a share buys the same access for an eighth of the capital and an eighth of the running cost. If you want to be there half the year, buy the whole thing — the model is not suited to that.