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Fractional Ownership: Property You Can Afford
January 8, 2009 by Fractional Property Ownership, Timeshare & Luxury Travel Magazine · Leave a Comment
If you’ve dreamt of owning a house abroad, but have so far been held back for financial reasons, or want a touch of luxury but can’t quite afford it, fractional ownership could be your answer.
It’s one of the main buzzwords in the property world right now and hails from the US, where it’s already successful, but what exactly does fractional ownership mean and what can it do for you? Put simply, fractional ownership basically means buying a share in a property.
You get to enjoy all the benefits of the property, usually have a set number of weeks per year when you can stay at the property, and share it with the other owners. The title deed is divided into fractions – depending on the property, these can be anything from a quarter to a twelfth – and this gives you the right to stay at the property for the equivalent fraction of the year. A company runs the property, ensuring that everyone pays a maintenance fee each year for the upkeep, and all you have to do is enjoy staying at your property.
It may sound like timeshare with a different name, but it’s not. Unlike timeshares, you own your fraction of the property outright, so you can sell it at any time if you wish. One of the benefits of buying in this way is that you’re spared the hard work of dealing with the usual buying process that accompanies foreign property purchases. It can be a good way to get a foot on the foreign property ladder and it also offers you the chance to buy into properties that you’d otherwise be unable to afford on your own.
“Many developers are turning to fractional sales in a bid to raise more immediate revenue, providing overseas property investors with a quick, inexpensive and secure entry into the market,” says Kevin Prior, investment director at Obelisk International. “However, I’d say that fractional ownership is more suited to those who can’t afford to buy a property in its entirety.”
Fractional ownership properties can befound worldwide and there are options for all budgets. But the types of property UK investors tend to go for seem different from those favoured by the thriving US market.
“The adage, ‘An Englishman’s home is his castle,’ is more apparent in the ever growing UK fractional arena than in the US market, which is dominated by condos, complexes and private residence clubs,” says Karen Kennaby, founder and owner of the UK fractional ownership company, Affordable Millionaire. “English buyers are currently more interested in private homes and apartments than resort style complexes and they can’t seem to get enough of them.”
Buying Issues
When it comes to buying a fractional ownership, it’s best to buy through a developer or company. Although it’s a tempting idea to buy a property with a group of friends and split it into fractions yourself, there’s a whole host of issues that can erupt. If you buy through a company, they have experience with the process and their contract will cover all issues.
Before signing, “Check the reputation of the developer and the solidity of the contract,” advises analyst Andrea Elliott, from Obelisk International. It’s vitally important to ensure you’re purchasing equity in the property. “If you are not buying equity, you’re essentially buying holiday ownership. Some shares only provide one week per season of use, therefore the comparison between fractional ownership and holiday ownership becomes distinguishable by the presence of a title deed, nonetheless the former is noticeably more expensive,” Andrea adds.
Also thoroughly check the service offered by the managementcompany. Look to see what dates you’re eligible to book, whether it’s possible to change dates, whether you can rent out your weeks, how the property is maintained and whether friends and family can use the property instead of you. Ideally maintenance fees for upkeep and repair should be fixed, or at least fixed for a set time period, so you know what you’ll be paying out.
It’s also worth considering the resale options. Some companies, for example, guarantee that they’ll buy the property back if you want to sell, which can offer peace of mind. Once you’ve carefully checked the contract and are sure it’s right for you, it’s time to sign and buy. Then you can start planning your foreign holidays in your new abode.
Article by Rachel Newcombe for Owners Perspective Magazine – also previously published in Living Abroad Magazine. Examples of fractional ownership properties available for purchase can be found in the original article – click here to view
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