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Fractional Ownership Defined |
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Fractional Ownership is the smart and affordable way to own a holiday home in a sought after destination and can be found at some of South Africa’s most sought after real estate developments. In essence it is the joint ownership of a luxury property with managed hospitality and support services , where you only pay for the share you own. |
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Cost
Effectiveness |
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Fractional Ownership is defined as the collective ownership of a luxury asset, usually one with a high monetary value. Owners purchase a share in the property, generally anything from ¼ share to 1/13 share giving you a certain number of weeks per year at the property. By only paying for the time you, fractional ownership is a cost effective way to stay in desirable locations. |
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Legally
an Asset |
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Legally, fractional ownership is the shared ownership of an asset, unlike timeshare when you pay for the right to use a specific time of year in the property, but do not directly own the property.
Fractional Ownership can vary in its legal structure, but the industry norm is to register the property into a normal company or share block company. The purchaser buys share in the company and a share certificate provides proof of ownership. |
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Generic
Benefits Of Fractional Ownership |
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| Fractional
ownership of property is the joint
ownership of a luxury property,
through an accepted legal structure,
where you have a usage agreement
determining how often you are
entitled to its use and where
all the supporting services are
supplied on your behalf. The upkeep
costs are shared between the shareholders. |
| It’s
a way of obtaining perpetual access
to an exclusive vacation property. |
| Its
property ownership and your share
are underpinned with real property
value. |
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only pay for the portion or fraction
you own and use and are not exposed
to excessive |
| Upkeep
and maintenance costs. |
| The
hospitality, finance, rental and
maintenance management is done
on your behalf giving you the
real enjoyment of a holiday home
without the hassles. |
| Time
is allocated and shared on a roster
system, so you know years in advance
when it’s your time to take
a break – a great way of
ensuring structured relaxation. |
| Fractional
ownership is a way of getting
access to otherwise unaffordable
destinations. |
| When
no longer used, fractional ownership
can be traded. You can sell your
share with the greatest of ease
through recognised promoters. |
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| The
Real Estate Value –
“The Multiple Calculation”:
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 Take
the number of fractions
in one residence or
apartment and multiply
this number with the
asking price for the
fraction.
The
total sum should not
exceed 1.5 to 2 times
(the multiple) the
price you would pay
if you were the only
owner of the property.
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| The
Usage Value – “The
Pay-Back Calculation”:
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 Take the number of days of your annual usage right and multiply this with the rate you would pay for similar accommodation offering the same standard of luxury.
Deduct from this annual value, the annual levies for the fractional ownership and you will arrive at an adjusted annual value.
Take the purchase price of the fraction and divide this by the adjusted annual value to arrive at the number of yours it will take to payback your initial purchase price. Globally, this payback is between four and ten years, which effectively means that if you stop renting holiday accommodation and utilise these funds for the purchase of fractional ownership, you will be taking annual holidays for very little cost in the future.
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| The Likelihood
of Capital Appreciation: |
| Check
whether the product is sold in
a market where there is a rising
property and hospitality market,
as the underlying fundamentals
of this product are real estate
and hospitality. |
| Ensure
that the product is a deeded product
and the usage rights are in perpetuity
(eternity). |
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After doing these
calculations you should find that
fractional ownership adds up to an
attractive proposition not only as
a luxury holiday year in and year
out, but like all property can provide long term capital appreciation. |
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| Now… |
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| 8 easy steps
to acquiring your first fractional home: |
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Decide which destination best suits your holiday profile, be it golf, sea, game farms or an international destination.
Assess the options available at the chosen destination, i.e. are you interested in a 2 bedroom or a 3 or 4 bedroom unit.
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| Assess
the weeks available. Basic fractional
products are allocated on a 28-day
per year basis, structured into
four weeks per annum - one in
every season. This roster moves
on with one week per annum. This
implies that all weeks are of
equal value. |
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| Fractions are available from Pam Golding Properties for as little as R275,000 and upwards. A 15% deposit is payable upon signature for the fractional with the balance due and payable when occupation of the property is granted. |
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| Upon
completion, the usage agreement
is activated, ensuring you the
use of it four times per year. |
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| At this time the annual running cost budget is to be funded by the shareholders, amounting to a contribution of approximately R650 per shareholder per month. |
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| Weeks
not used can be rented out through
the rental management system.
Rental on a 4-bedroom unit is
approximately R3200 per day. The
income so derived directly accrues
to the shareholder. |
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| The
payback calculation on this investment
is five years. In other words
the cost of renting this villa
for the 28 days per year, over
five years is equal to the outright
purchase amount. |
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Note:
Although we are not promoting a fractional
investment as a guaranteed high yielding
financial investment, based on the
expected increase in the share price,
the bare minimum is already a means
of recouping your holiday expenses
after five years if you should sell
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