Fractual or fractional ownership is the hottest new approach to buying luxury items that an individual would not otherwise be able to provide.
Fractual (fractionally actual) ownership allows a group of individuals to buy a percentage of real estate, luxury car, resort, vineyard, restaurant, jet, yacht, artwork, or already a fine Rolex. Fractual owners or investors reap all the benefits of ownership, but their investment expense is also smaller so they can provide a larger home, yacht, or several watches.
How Fractual Purchases Work
Luxury homes, condos, and exotic vacation homes are the most popular items for fractual ownership. Typically, the title or deed is divided into shares and those shares are then purchased by a group of investors, usually numbering between four and twelve, sometimes as many as fifteen. A management company is often employed to continue the character and manage the investment. In some arrangements, the owners truly keep up shares of a mezzanine structure or company that in turn owns the assets.
Most fractual similarities are set up with an ownership agreement or contract that includes some fees to cover the cost of managing the character, details for usage for each owner, and various other guidelines for renting out one’s proportion or selling it in addition as do’s and don’ts for the character. Some groups are formed among friends or family members working with a lawyer to set up the contract. Others are strangers working by a fractual development company or broker. Either way, a sound, clear and concise agreement is meaningful to ensuring a carefree and hassle free investment. And similar agreements can be produced and put into place for fractual purchases other than real estate.
Advantages to Fractual Ownership
Although it may sound like a new name for timeshares, fractual ownership is not the same as a timeshare. In a timeshare situation, the purchaser only owns “units of time,” not the character. Additionally, much of the cost of a timeshare, up to 50%, pays sales commissions. Because timeshare ownership is not connected to the character combined with the fact that they have faired poorly in the secondary market, the value of most timeshares have experienced a marked depreciation of their value.
Fractual ownership of a character entitles owners to usage rights but since they own a fraction of the title and deed, their investment increases in value as the character appreciates. Fractual owners are also eligible for any tax advantages associated with owning the asset. edges and mortgage companies often treat fractual purchases as second-home purchases making it easier to finance them. Lastly, fractual shares in a character or assets can be transferred or sold fairly easily.
Fractual ownership is growing in popularity for other high-end items including jets, yachts, real estate and jewelry. Many of these opportunities are found with companies online. The Internet has opened up markets worldwide for buying and selling everything from recondite art to collectible figurines to fine jewelry to ski lodges in the Alps or a condominium in Madrid. With the practice of fractual ownership, these investments are becoming obtainable to more people with some degree of a disposable income.