SA Homeowner magazine explains how to own your piece of vacation ownership real estate

Source: SA Home Owner

SVENJA GERNOTH

SA Home Owner magazine - NOVEMBER 2008

The concept of fractional ownership originally became popular for business jets and small aircrafts and has since been extended to the property market, particularly luxury vacation homes.

The term fractional ownership simply stands for "the division of any asset into portions or shares" (www.wikipedia.org).  It works like this: a group of individuals come together and purchase a vacation home, commonly under a company name (for tax purposes and simplifying the transfer of shares matter), with each person owning a specific percentage. That percentage entitles the owner to a certain number of days or weeks per year to use the property exclusively.

This is determined by a rotational roster which ensures everyone will get a fair time slot.  In addition, a party may choose to sell its share and possibly make a substantial profit, depending on the market value at that time and the predetermined agreements in the contract. 

In other words, fractional ownership translates to - a holiday at a resort you may have never had the opportunity of staying at otherwise!

According to Dirk Wilson, co-founder of www.fractionalownership.co.za there are three main fractional ownership and usage instructions "Classic fractional ownership of property is shared ownership and exclusive usage of luxury holiday property in highdemand estates and areas. Your share value is directly linked to the value of the actual property, so you are likely to see capital appreciation on your investment.

High-end fractions are similar to classic fractions, but offer a slightly enhanced structure, where you purchase into one or a portfolio of properties with flexible usage and added luxury hospitality services. Your portfolio is spread across a number of properties and there are often 'nice frilly bits' added in, such as the use of a helicopter, membership clubs, and so on." Dirk goes on to explain the third and most extravagant type of fractional ownership he defines as "private residence clubs", by noting that this option offers one a membership purchase into a resort  environment, usually at a five or six-star level. This often includes services such as exclusive access to a luxury boat, helicopter, and concierge service.

Exchange with similar resorts around the world is typically included. 

"The beauty of fractional title is that it is open to anyone from the middle income level upwards and gives everyone the opportunity to own a piece of an amazing lifestyle," says Henry Greyling, CEO of Seeff Fractional Ownership. He goes on to state: "The benefits of fractional title ownership are substantial.  You get to own a piece of an amazing destination at a fraction of the price, that is a secure investment with great growth potential, that you can get companies such as Seeff Fractional Ownership to manage the daily upkeep and duties of. In addition, you can sell the shares at any time and the time roster ensures that everyone will get a fair time slot. The only downside to this type of ownership is that you don't own the whole site or building, but then again, how many weeks in a year do you spend at your holiday home?"

According to www.wikipedia.org, the key aspect for any fractional owner is to understand their usage rights and the reservation plans. These vary from property to property. Some offer fixed occupancy periods in which an owner uses the same time each year, some offer floating periods in which the occupancy times rotate throughout the year and some offer a mixture of these, with some time fixed and some time floating.

The best place to start when looking for a fractional title investment would be to first determine the preferred location of your "second home". The next step would be to find a professional company that is fully capable of facilitating this process and can then provide you with all the necessary information. Some fractional title agencies even offer potential clients the opportunity to spend a free weekend at the destination as a "test drive" before making a final decision to purchase.

In conclusion, Werner Geyser of Pam Golding Fractional Ownership notes: "I see the joint vacation ownership industry, and specifically the fractional market in South Africa, as the biggest booming market segment with immeasurable potential. This opportunity to offer direct vacation property ownership to anyone with a reasonable disposable income and not just to a few select, is bringing a lifestyle opportunity within reach." 

• With special thanks to Pam Golding Fractional Ownership, Seeff Fractional Ownership, www.wikipedia.org and fractionalownership.co.za

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