Fractional Ownership Explained
Shared ownership of holiday homes, hotel suites and resort accommodation
Fractional ownership can be defined as shared ownership and shared usage of professionally managed leisure use asset such as a luxury holiday home, villa, lodge, boat or private jet. As the asset is owned by more than one individual, this means your capital investment; risk and ongoing costs are drastically reduced.
Many people around the world can simply no longer justify 100% ownership of a holiday home, either because it sits unused for the majority of the year, or the rising costs associated with whole ownership amount to a small fortune. Perhaps overseeing the holiday rentals becomes something close to a nightmare for you. Sound familiar?
Fractional property ownership is a convenient and cost effective way of owning and using one or more professionally managed luxury holiday homes, either for leisure or corporate use. Your Fractional property shares are directly underpinned by the market value of the property, making fractional ownership a unique and alternative between 100% ownership and non equity ‘use of time’ only products.
There are some exciting and flexible fractional home ownership and private residence club models available globally, each offering shared ownership and shared usage of one or more luxury holiday homes, hotel suites or resort real estate, with some providing you with instant access to exchange into hundreds of other fractional homes and luxury resorts around the world.
Ownership and usage
‘Most Fractional ownerships offer lifetime ownership with flexible usage, rental and resale options’.
Fractional ownership and private residence club memberships range from quarter share ownership (4 owners, each with 3 months usage per year) right up to 26 owners with 14 days usage per year, with the most popular model in South Africa being 13 owners, each with 28 days usage per year.
Flexibility through global exchanges and rentals
Should your fractional shares be affiliated with a global exchange company then each year you will have the flexibility of booking into your fractional residence or opting to exchange your allocated time into another resort or destination. The added flexibility of experiencing new, luxurious and exciting destinations each year makes fractional property ownership that much more attractive.
If you decide not to book into your residence or opt to exchange then you have a third option which allows you, the owner to rent out your allocated time to someone else, this can either be facilitated through your managing agency or privately, and the rental income (minus fees) is yours to keep.
All aspects of operating and maintaining the fractional properties are managed on behalf of the owners by a professional hospitality management company. This company will oversee the general bills and administration, shareholder usage, cleaning and servicing as well as maintenance.
Should you wish to re-sell your fractional shares you can do so. Fractional shares can also be passed on to family or friends through a simple transfer of shares process.
How the concept of fractional ownership was first introduced.
The fractional ownership concept was commercialised in the United States aviation industry by a business visionary and pioneer by the name of Richard Santulli.
Net Jets (founded in 1964) was created in order to provide business leaders and celebrities with a flexible form of jet ownership and usage that enabled its privileged members to phone in a book an aircraft to be delivered to the closest airport and fly them to wherever they wanted to go, this was aptly named as the fractional Jet plan. Members would purchase flying hours, and these would be used as credits.
In the late 1990’s Fractional ownership played a significant role in revitalizing the aviation manufacturing industry to such an extent that most manufacturers now actively support fractional ownership jet programs. At around the same time the fractional real estate products became popular in the US Rocky Mountains ski resorts. According to the world’s leading fractional ownership research firm Ragatz Associates By 2006 there were over 250 fractional developments in North America alone.
Fractional ownership in South Africa - a new era in holiday home ownership.
In 2005 Fractional ownership started becoming popular in South Africa. South Africans were actively looking for alternative ways of owning luxury holiday homes that were more professionally managed than private syndications, yet offered more ‘bricks and mortar’ ownership and long term investment potential than non equity timesharing programmes.
The recent global economic pressures also forced many people to rethink their financial position and capital risk exposure (particularly regarding luxury assets) this new creative approach towards shared asset ownership which is revolutionizing the way current and future generations will own and use leisure real estate.
To date South Africa has over 100 completed fractional developments with substantial international investment currently underway which will lead to many more exciting fractional interests being released over 2010 and 2011.