Fractional Ownership News

What is Fractionalization?

Date: 19/11/2009
Article source: www.maxvest.co.za

MaxVest offers sellers the opportunity to create shared ownership opportunities! Fractionalizing their properties, is a great alternative to “conventional” selling.

What is Fractionalization?
Fractional: Parts or sections of a whole
Collaborate: To work jointly on an activity, project or intellectual endeavour.
iFractionalize: The process of fractionalizing to enable collaboration, through joint ownership or usage rights.

Case Study
MaxVest worked with Jennifer Harding from a real estate agency in the Knysna area on a number of properties. Jennifer and her team quickly grasped the fractionalization concept and realized value this can add to her clients – both sellers and buyers. Not only is fractionalization an excellent method for selling properties, but also offers the estate agency a chance to introduce another value added service to their clients.
One of the properties we worked on was a beautiful estate overlooking the lagoon; an eight bedroom house consisting of four “separate” units.

It was clearly a difficult sell due to the size of the house and current market conditions – but perfect for fractionalization.
After introducing MaxVest to the seller, MaxVest representatives, through a process known as ifractionalize, created a shared ownership product for each of the units. The fractional model included the up-front procurement costs for the property and furniture, as well as ongoing operational costs.
The result was a fractional ownership investment with prices ranging from $6,200 (R49,600) to $21,300 (R170,400) per two week fraction. We were able to structure the product in such a way that there is only a nominal levy. The investment also includes a “bonus” week at any of our international destinations.

How does this benefit the local estate agency?
In the current market finding willing buyers who will qualify for a bond is not easy. This is even more prevalent in the case of “second” or holiday properties. Fractionalization creates “shared ownership” opportunities. As we all know there are always more “people with less money”, and, when there is uncertainty in the market, people will rather commit a smaller amount of money for the same experience – i.e. instead of buying the property outright and then only using the property for two weeks a year, they prefer to only pay for the time they are actually going to use.
Fractionalization enables multiple people to own the property. From the estate agents’ point of view it presents an additional mechanism to sell the property.
Fractionalization is a growing trend, not only in South Africa, but certainly international. More and more buyers will be asking about it, and in time more sellers will request this service as an alternative to traditional selling.

For more information on the ifractionalize process offered by MaxVest and the fractional opportunities created, please visit the website at www.maxvest.co.za