Fractional ownership? A lesson in algebra or a share of luxury?

The term fractional ownership is not very familiar to most people here in Europe and readers could be forgiven for wondering what on earth it means. In fact, fractional ownership has been well-known in the US for twenty years but is now spreading rapidly around the globe as a means to enable people to buy a slice of luxury for their holidays.

You may have plenty of cash to splash out on a second home, but if you can only take three weeks holiday a year, you can bet that you will spend some of that precious time fretting over the cracking paint and long grass instead of enjoying your well-earned break. Back home, you will spend the rest of the year with constant niggles about the security and upkeep of the property. You may have some capital to invest but couldn’t ever afford to buy the kind of luxury holiday home you’ve see advertised here in the UK or in exotic locations like the Caribbean or the Seychelles. Beautiful homes set in inspiring locations with first class leisure facilities cost a small fortune. Even in Europe, the cost of holiday homes has increased rapidly over the last ten years, putting them beyond the reach of many would-be owners.


Buying a share of the property

This is where fractional ownership proves its worth. Instead of buying an entire luxury property, which even if you could afford it, is likely to become a millstone around your neck, you buy a share of the property. Usually the share ranges from a quarter to a twelfth. This gives owners the right to stay at the property for the corresponding fraction of the year, spread across the low, mid and peak seasons and rotated so that all owners get a fair share of popular times. A management company maintains the property and each fractional owner contributes to an annual maintenance fund If owners do not want to spend their whole allocation at the property they are free to rent out some of their weeks, making a tidy sum in the process. Alternatively some management companies offer to take weeks off the owners’ hands and rent them out to cover management and maintenance fees. To many people this is the ultimate “no hassle” option. They can turn up to a beautiful resort and spend their chosen weeks relaxing in an immaculately maintained property with no additional costs.


Sustainability

For those who are after an ethical solution to owning a holiday home, fractionals provide many answers.

Fractional ownership is more sustainable and better for local communities than regular second home ownership since it ensures almost 100% occupancy and has little inflationary impact on the cost of local property and so does not push prices beyond the reach of local people. So for those who are after an ethical solution to owning a holiday home, fractionals provide many answers.

Unlike traditional timeshare where you are buying the right to use a particular space for a number of weeks per year, which can be a great lifestyle product, fractional ownership usually offers an equity stake in the property itself- the bricks and mortar.

So what happens if you want to sell up and move on? Arrangements differ but essentially you have the right to sell your share either to the management company or on the open market. Some plans have an agreed sell on point – perhaps after 8, 12 or 16 years the fractional owners jointly agree at the outset that the property will be sold and any added value shared between them.

Many commentators believe that fractional ownership is set to really take off here in Europe as more and more people are looking to buy a place in the sun or indeed for those keen to avoid airport hassle, a home in a beautiful drive-to resort location.

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