Fractional ownership – How to Live like A Millionaire For a Fraction Of The Cost
UK investors are increasingly buying overseas property (and other items such as luxury cars and boats) through fractional ownership schemes – also known as shared ownership. The idea being that you only use these luxury items occasionally so why not share the cost with someone else whilst still being able to enjoy them whenever you want.
So how does fractional ownership work and why is it becoming so popular?
When you buy a property you generally buy 100% of it (with or without mortgage borrowing). With fractional ownership, you essentially buy a fraction of the property (mortgages are available through companies such as the Manchester Building Society).
Is this not just Timeshare re-invented?
With Timeshare you buy time – a right to use a property at a specific time each year – you don’t gain from increase in property value, and can not use a mortgage.
With Fractional ownership you own a fraction of the property (anything from half to a twelfth). You have your own title deeds to the property or share in a company which owns the property, and can sell your fraction at any time. Critically, you do gain from increase in value of the property over your period of ownership, so if you buy a quarter share of a £200,000 property for £50,000 and price of the property increases to £300,000, your share will be worth £75,000 – an increase of 50%.
What other advantages does Fractional ownership offer?
The properties are usually fully managed by a management company, who will take care of repairs and maintenance in your absence. In many cases they will also take care of changeovers, checking for damage, cleaning the property, and changing bedding and towels, meaning you arrive to a clean, aired, fully maintained property. Some management companies also operate a rental scheme whereby you can offer your spare weeks for rental and generate extra income.
Few people use their holiday home for more than 13 weeks each year, yet they pay maintenance and other charges for the full year. With fractional, you only pay charges proportional to the size of your share.
Sounds interesting, but isn’t it all a bit new and untested?
Actually the US market has been selling this way for years, and it now accounts for a significant percentage of annual US sales. Household names such as Intrawest and Donald Trump have been selling fractional ownership for years. As prices in a market increase, the number of people who can afford to buy the property outright will fall proportionately. Fractional, offers an innovative way to make luxury properties, in the best locations available to large numbers of investors.
Oliver Marsden, who specializes in promoting fractional ownership of luxury property, says “We firmly believe fractional ownership will revolutionize the property investment process. Clients can have a stake in 4 properties for the price of buying one outright. They can spread their investment portfolio amongst several countries to minimize risk, and they gain from the increase in value of all four properties.” Oliver adds, “And of course people rarely tell their friends they have bought another fraction, just that they’ve bought yet another overseas property – “that’s our fourth you know!”
The Investor Portal offers Fractional Ownership opportunities. Our current project offers a share in a luxury 5 bed, sea view villas in Mallorca. Fractional ownership shares start at £100,000. Finance is available subject to status.
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