5 Questions to ask when looking to purchase fractional property abroad
14 May 2013
Fractional property investment is a concept which is rapidly gaining popularity and is making inroads in markets across the globe. The idea has proven to be a popular method of investment for many ‘luxury’ products, including aircraft, yachts and holiday homes – as people can only enjoy these for a proportion of their lives. As such fractional investments appeal to both the head and the heart.
There is still a long way to go in terms of awareness for this investment option. Those wishing to purchase a fraction of a holiday home should do their research first and ask the right questions when looking to do so. We recommend any purchase made should be done through a reputable company – preferably one that is a member of the Association of International Property Professionals (AIPP).
Put simply, basic fractional ownership consists of buying a share – or a fraction – of a property, that allows owners a set number of weeks usage per year. The most common misconception about fractional ownership is that it is timeshare, with another name. With timeshare owners don't own a tangible asset, but time periods of usage – i.e. two-weeks per year for 25-years.
Fractional ownership allows investors to buy a percentage of actual bricks and mortar – whether this is a share of a deeded ownership or a property held in trust by a specialist trustee company. This fraction then entitles owners to use the property for a certain number of weeks a year, and unlike timeshare, the ability to transfer or will ownership or sell the fraction on.
The key to success for fractional ownership is the financial banking and management, therefore purchasing from a proven developer is an important consideration for purchasers. When looking to invest in property Select Resorts in association with Savills International recommend undertaking research and asking the following questions:
1. What exactly does ownership include?
2. How much control will I have over the property?
3. What are the monthly running costs & service charges?
4. What are the management like?
5. What is the process should I wish to sell my fraction at some point in the future?
An example of a successful fractional investment opportunity is “The Beach Villas”, a collection of stylish contemporary ocean front properties on the beautiful Caribbean island of Little Cayman owned and managed by reputable and experienced developers.
With a well-run management scheme, this hands-off investment opportunity is targeted for the country’s expanding leisure market. Divided into 43 fractions, owners are able to use the luxury oceanfront properties in a stunning location – at a far more reasonable cost to purchasing outright.
Buyers have a choice of four week categories from which to purchase, Platinum (Christmas and New Year,) Gold (January-March), Silver (April-July, December) and Bronze (August - November). This option allows investors to either use the villa over their selected dates, or rent them on to others and appreciate the returns from their rental.
Cayman Island fractional Ownership means even more benefits for investors. The islands are the fifth largest offshore financial centre on the planet and residents benefit from absolutely no taxes – including no income tax, no inheritance tax and no capital gains tax. Offered by the developer with a five-year interest-free payment schedule, this option offers a reputable investment opportunity, whilst providing an excellent holiday alternative too.