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These people >> http://www.profitbyproperty.com/indexnew.php << advertise a lot on REM fm. The adverts focus on what might be called 'baling out' or 'distress sales'. Anyone know any more or care to comment on the ‘fractional ownership’ idea?
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Whatever they say, it is still another version of timeshare as you cannot use the property for more than a week. So I would say be careful. they claim everything is drawn up by a UK solicitor but you would still need a good spanish lawyer to look into this. There was a scam many years ago where a property investment company was set up on the CDS..end result, one guy owned everything 😯
These schemes are set up to attract people who do not have enough money to buy their own. I heard an Irishman at the next table to me in a cafe explaining to two Irishwomen they could invest as little as 10000 euros in a similar scheme last year.
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No, wasn’t thinking about buying/investing/whatever 🙂 – but having heard the advert on the radio (yet again) this morning I was curious enough to want to find their website.
Their adverts focus on the “can’t sell your property? let us solve your problem!” angle.
The website is about ‘fractional ownership’ – whatever that might be or whatever they mean by it.
. . .You, too, can join others already reaping the rewards of the success of our business, by purchasing a fractional in one of our Spanish portfolio properties. This, in turn, allows us to release our own capital in order to further expand the asset base of the business. Put simply, we are able to have our own funds readily available to move quickly on new property purchases, frequently at distressed values.
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Somewhat surprised that they, and their two-way-facing operation hasn’t been mentioned/exposed/commended on here before, considering the quantity of their advertising.
Seems like they use ‘investor’s’ funds to buy up distress properties, then they sell timeshare-like ‘weeks’ in those properties on ‘share of the equity’ type basis.
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Hi Nick
the concept is not a new one and has been around for many years. It was a concept originally developed for jet engines to allow companies to use the same jet and pay a fraction of the cos. Basically the way it should work (and I don’t know the company you are talking about so cannot comment on it) is that the asset is divided into a fixed number of shares – be it one or 365.
Donald Trump (he of Trump towers fame) brought the idea into the property world when selling high value York Real estate
Each fractional owner has use of the asset for an amount of time – decided between all the owners up front – and can use this on a time slot basis – be this weeks of the year days of the week hours of the day etc.
The difference between fractional ownership and timeshare is
1. Timeshare basically buys you a week or weeks use of a property – you don’t own the property or a share of it – only the right to use it.
Fractional ownership means effectively there are a number of owners and each owner owns a share – NOT just a right to use the property. This is a big fundamental difference.
2. Timeshare costs a great deal comparatively speaking (€10,000 for the use of one week in summer would equate to a property value of €520,000 for a property worth about €200,000)
Fractional ownership basically divides the share of the total price between the owners according their share
3. It is usually difficult to sell on a timeshare at a profit or break even
Fractional ownership – because it is just a share in a property – can be sold at any time. If the property has increased in value then you would receive your additional amount – you would have effectively sold your share in a company or asset.
4. Maintenance charges for timeshare can be disproportionately high – I have heard of charges of €150 per year per week. Add this up over a year and some management company is raking it in.
Fractional ownership means whatever the maintenance costs are, they are divided equally between all the fractional owners.
There are many more differences but given the choice between fractional ownership and timeshare – I would choose the former. The latter is just an expensive holiday voucher.
The correct mechanics for fractional ownership would be to set up a limited company and each owner has a share in the company (it also makes transfers cheaper when you do sell your share)
The owners agree on a period of time to own the property and a sale date is agreed. Once disposed of the owners then get a share of the proceeds according to their share in the company/property.
Providing everything is set up correctly – it is no more dangerous than buying a house outright – but obviously you don’t own it outright and you have other shareholders to contend with
Best wishes
Vince
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Hi Nick
I would say this makes good business sense to be honest. Distressed sales give the seller a much needed buyer – and some of the people selling would otherwise be left in a situation where they would lose their deposit or houses anyway – and gives the buyer an excellent discount. I personally advise all my investment clients to make substantially lower offers – and if the owner doesnt accept then walk away and find someone who will. And at the end of the day we are talking about an investment not a main home.
The art of selling is in the buying – every penny you pay is one less you can profit from.
Dont forget that in the UK there are companies who will guarantee you a sale – they tend to get a valuation and give you below market value (about 20-30% below) but you can sell tomorrow. This is no different.
Personally dont see anything wrong with this – but perhaps you may ut me right on this
Vince
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I agree with Katy, stay away from it, its just glorified Timeshare, the chance of ever selling on your fractions in pretty impossible. I remember a smiliar scheme where there were around 13 fractions per property, and around 300 properties, leaving you with around 4000 fractions in total, imagine trying to sell that on and make a profit!
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