To start with, it's probably best to explain what Fractional Ownership property isn't and that is Timeshare.
A Fractional Ownership Model allows you to buy properties in shares rather than as a whole in the case of a traditional full sale. What you are buying is a share of the actual property and not just a right to use a certain week. As such you benefit from all the upsides of property ownership but your are insulated against many of the downsides.
Fractional ownership property is generating huge amounts of interest as consumers are becoming increasingly aware of its many benefits over whole ownership.
Under the current economic downturn real estate buyers are being more prudent when considering an overseas property purchase.
Their base their decision to buy on the key factors such usage, affordability, desirability and investment potential.
Fractional ownership property can be an ideal way to get the most out of your investment by purchasing only the shares or time you require from an asset. All other aspects are split, both the benefits and the costs, among a limited number of shareholders or members.
Considering a large, and expensive, property that may be difficult to purchase and care for on your own. Instead of becoming the sole owner of the property, you purchase a share of it, as do 12 other people. Now, you own 1/12 of the property and have others to share in the burden of maintenance costs and taxes. Though this option is popular with larger properties, it may be used with smaller, lower cost properties as well.
So many people would like holiday homes or a second home, but don't want the hassle and expense of owning real estate they can only use a few weeks at a time. However, they do want the value, equity and other benefits associated with property ownership.
This is where fractional ownership property comes in he form of fractional real estate. Like timeshare, you are entitled to stay at an apartment or town house for an agreed period every year. But unlike timeshare, you own a freehold share in the property.
Many fractional ownership property developments now offer the opportunity to swap some of your allocated time through a fractional luxury exchange network.
For example, if you purchase a share in a property with three other fractional owners, you may have use of the property for one week out of every month. The other owners would have their weeks as well and you would not have use of the property at that time. Keep in mind, however, that each fractional ownership property model is different and some allow owners to use the properties more or less than one week per month. Some people choose to use fractional ownership as income property too.
If an owner doesn't plan to use some or all of his allotted weeks, he may choose to rent them out to others. Depending on how much he charges, he may be able to earn a profit. He might even be able to rent his weeks to other owners, allowing them to spend more time at the property. Rules concerning renting the property to others are usually covered in a fractional ownership contract.
The legal structure is however a little more complex and the simple "deeded title" or undivided share is commonly admired but not yet perfected. It requires the counseling of experienced companies dedicated to this market niche. Big brand developers around the world are now entering the market mainly for the development of Private Residence Clubs. This is a very positive sign that the bigger developers are also supporting this market segment. This shows that the positive correlation between tougher economic conditions and a higher appetite for shared ownership does indeed exist.
For the success of this model it requires a third party or management company to ensure that the Fractional Ownership property Model, Legal Framework and Holding Company Structure can be relied upon and trusted. A reliable company also takes care of everything from taxes and insurance to furnishing the property, taking care of cleaning, maintenance and repairs. Though you have little responsibility with a fractional ownership, you do get the deed to the property, specifying the number of shares you own. You can gift it or sell it as you wish.
Although some leading-edge companies in Colombia have begun to offer this model, it still sounds a bit distant for local buyer. However the market of second homes continues to grow in latest years despite the crisis, in a middle class population of America and Europe with an average purchasing power of USD150.000 (a considerable amount anywhere in the world ).For developers It is a powerful tool in allowing clients to either buy into a project that could not afford to or to upgrade to a much more expensive property.