What is it about fractional ownership investments that excites real estate investors. Well, there’s a couple of factors and we’re going to explore those right here on the number one real estate information portal South Africa has to offer.
History of Fractional Ownership
The fractional ownership concept was first introduced by the aviation industry in the mid 80’s. The concept of fractional ownership was first introduced by Richard Santulli, the founder of Net Jets.
In 1995, the 2nd wealthiest person in the world, Warren Buffett purchased his first fractional aircraft share in the NetJets program. Three-and-a-half years later, Buffett`s Berkshire Hathaway purchased NetJets Inc.
Fractional ownership in real estate initiated during the late 90’s and by 2002 the concept had found its feet in the American market. This is now the fastest growing real estate market in the world with a $500million turnover during 2004 in the U.S.A alone.
What is Fractional Ownership
It’s not a new concept people contrary to popular belief, the naming convention maybe but the concept goes way back. Do you remember the little units (timeshare) units that you could by in Sun City. You could get a 2 week option or a 1 month option to buy the little chalets in Sol Kersners dream palace. Well fractional ownership is exactly that. It’s an amazing concept. A piece of real estate will contain 13 shares thus allowing a maximum of 13 shareholders. Shareholders may hold more than 1 share but not more than 25% of the shares. So in essence, if you sell 12 shares, each investor will have the property for a month in the year!
Why is Fractional Ownership so great?
Previously when you purchased a holiday home, you bought the place on your own or with a friend or family member. Of course we all remember the days when real estate and property in South Africa was affordable. But these days, with the new credit act in place and banks placing stringent credit lending laws on people, fractional ownership makes sense. It’s 1 property with risk that’s spread out over 12 investors. The banks have no problem, plus it means that you don’t have to have 1 holiday home. You can now have 5 holiday homes with a month in each. WHAT A PLEASURE and hence the concept of Fractional Ownership being so popular.
What’s fractional ownership investments are there in South Africa right now?
Fractional Ownership Specials
Very often confused with Time Sharing, Fractional Ownership is the joint ownership of an asset with high monetary value with shares and costs split amongst shareholders. The main difference between Fractional Ownership and Time Sharing is that Fractional Ownership an investment into a “property” or “real estate investment” versus Time Sharing being an investment in a resort.
If this sounds good to you, I suggest you keep on reading!
Fractional Ownership is now the fastest growing sector in the South African Real Estate industry. Getting a home loan for a fractional ownership investment is pretty easy too. However with the national credit act in place each person in the ownership investment now needs to qualify individually. What’s so great about this relatively new entrant in the Real Estate market is that it allows people to own those exclusive properties that were previously out of reach. It’s no longer worth your while buying that second property just for holidays especially when you only use it once a year. Invest in a place, that’s owned and shared by various people. This way the responsiblity of the place is not all yours, it’ll be used all year round, and if you don’t use it, you can sell your months investment to tourists making yourself some extra cash.
Fractional Ownership vs. Time Sharing
With fractional ownership normal bond transfer and registration costs apply. Your ownership is REAL. You’ve actually invested into a property. There is a maximum of 13 people that are allowed to go in together, in other words, 13 partners. What this in effect gives you is 1 month a year. 4 weeks per share.
You find fractional onwership type investments in areas such as: Costal Regions, Bushveld Investments and Golf resorts.
Time Sharing has astronomically high marketing costs, which are generally hidden from you until you invest. Then they wack you with a bill of extra charges and costs.Time Sharing resell value has dropped considerably in South Africa. You’re buying a week or two in a resort, it’s a resort holiday.
A thing of the past, Fractional Ownership is the latest and greatest thing in Real Estate.