Fractional ownership within the property sector is booming at present. Simply because so many people would like holiday homes, but don’t want the hassle and expense of owning a place they can only use a few weeks at a time.

However, they do want the value, equity and other benefits associated with property ownership. This is where fractional ownership comes in. Like timeshare, you are entitled to stay at an apartment or town house for an agreed period every year. But unlike timeshare, you own a freehold share in the property.

Statistics show that in the main second and third homeowners only utilize their asset between 10 and 17 days per year yet the owner remains responsible for all the associated costs of the property throughout the entire 365 days! Armed with this knowledge a fractional property makes superb economic sense and the cost: benefit ratio is highly appealing.

The property title or deed is legally divided into shares. Those shares are then purchased and owned by more than one individual. Shared ownership of the property and the deed will also entitle shareholders to certain usage rights in the form of weeks. Conceptually, Fractional Ownership is not the same as timeshare. Fractional ownership affords much of the freedom and usage benefits offered in timeshare, however, the fundamental difference with fractional ownership is that the purchaser owns part of the title (as opposed to units of “time”). Therefore if the property appreciates in value so do the shares. As with full ownership fractional owners can sell whenever they deem necessary or prudent and release any available capital growth from their investment.

If you want to own an impressive second home complete with personalised services and located in an expensive resort area but cannot quite justify the expense because you’ll only be using it a few weeks or months of the year, this type of real estate arrangement may appeal to you.

Most private residence clubs offer extensive amenities. These may include an extravagant clubhouse and spa, plus five-star hotel services, the kind you couldn’t expect to have in a wholly owned vacation home, high-end condo or timeshare.

Imagine this: You are going on vacation and you call ahead to the staff at your private residence club home. At your request, the staff shops for your groceries, dry-cleans your clothing, makes your restaurant reservations, heats your private splash pool, and places knick-knacks and favorite pictures of family members around your residence. You are met at the airport by a member of staff who shuttles you to your home where a just-detailed Jaguar is sitting in your parking space for use at your disposal. A true home from home.

Obviously it is possible that the market could drop off in the future- this does not seem likely in the mid-term with prime locations currently in strong demand and fractional share resale increasingly sought after- but it is best to consider the worst case scenario which actually highlights another benefit of fractional purchasing. If you only own, say, a 10th share in a residence then you are insulated against any price fluctuations by the virtue of the fact the financial benefits and possible pitfalls by your fellow owners. But bear in mind seasonal demand- do not invest in a property that is only desirable for a short period each year!

www.fractionallife.com

Aaron Weddell

3/4/08