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What is fractional ownership?
Fractional Ownership is becoming the most popular way of purchasing a second property, either for private use or for investment both in a SIPP and privately.
It began in the USA, and is now growing in popularity in Europe too, for obvious reasons.
Most working people are entitled to 4 or 5 weeks annual holidays. Of these weeks, the average person spends 2 weeks abroad, with sometimes a single week in addition somewhere else at another time in the year. With this in mind, it does make sense to not purchase a full second property, one that's going to remain empty for most of the year, and that is going to cost the owner all year round, for just a few weeks usage. Although some people choose to rent out their second home when they're not using it, this in itself can become a full time job if you're not paying high rates to a lettings company.
In steps fractional ownership. Here, the property is divided into say 12 fractions. These fractions are purchased individual via a company which is set up to own the full property. As asset is still acquired, just as in full ownership, and the fraction can be sold on at any time just as in full ownership. The hotel management company looks after the property and the fractional owner would receive 4 weeks usage, 2 in high season and 2 in low season (with weeks usually rotating each year to make it fair for all). These weeks can either be kept for personal use, or can be allotted to the hotel in order to be rented to guests to the hotel, in exchange for a rental income.
This allows the possibility of owning properties in many different locations, for less than the price of a full property in just one location. Owners can choose each year if they want to visit their property in the allocated weeks, or whether they would prefer to rent it out, receive an income and go to one of their other properties instead.
If you would like more information, please let us know, and we'll try to help in any way we can.
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