Fractional ownership is, more often than not, asset-linked and deeded leisure property. The property will typically enjoy an exclusive, sought after location in an upscale established resort or residential destination and feature exceptionally spacious accommodation and high-spec fixtures and fittings.
Fractional ownership appeals to those who can afford to purchase a luxury second home property outright but do not have the time to use or maintain it all year round, as well as to those who aspire to the luxury lifestyle but can’t afford to buy into it through a whole ownership.
For most it simply makes economic sense to only purchase the time you can spend in the property – and fractional ownership properties are usually sold in anything from one-quarter to one-twelfth shares, so giving anything between four and 13 weeks’ use. The use periods throughout the year are allocated on either a rotational basis or a mixture of fixed and floating periods within a season.
Apart from the initial capital investment being quite literally a fraction of what can be a multi-million pound purchase, these properties are high maintenance having extensive gardens and private swimming pools. This makes sharing the maintenance costs and shedding the responsibility of maintaining the property to a management company good sense.
Initially launched in the US, the fractional product is gaining in popularity throughout Europe with properties located across the continent. The categories of fractional ownership are also growing and today it is possible to buy shares in luxury yachts, prestige cars and private jets, handbags and jewellery.
Find your fractional ownership
There are three main models of fractional ownership with varying use plans and entry prices:
Fractional/Private Residence Clubs
These are usually a deeded ownership in a luxury residence set in a unique and established location. Purchases are commonly in periods of between 4-12 weeks of the year in a two to three-bedroom unit, and an exchange service is usually available to purchasers. Private residence clubs represent the ultimate in luxurious fractional living with a high level of service and amenities.
Joining a destination club can provide you with an equity or non-equity purchase, either deeded to a percentage of the entire real estate portfolio or a non-deeded, right-to-use membership. Membership can potentially give access to unlimited use of exclusive properties in some of the world’s finest luxury holiday destinations through a closed and exclusive exchange programme.
This fractional model offers the whole-ownership purchase of a hotel suite or room. The owner decides how many weeks they require each year for their private use and the remainder of the year the hotel operator manages its rental as a hotel room for a fee. The average rental management fee falls between 40 to 60 per cent of the rental revenue and some hotel groups offer a guaranteed yield over an agreed period of ownership. Rooms are usually studios or one-bedroom units. At the end of the specified period or when the owner decides to sell, the hotel room is sold and all parties benefit from any resulting capital appreciation.
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Category: Fractional guides