Valley of the Rainbow Newslog

Fractional ownership is shared ownership of an asset, with the associated benefits of ownership, such as proportionate allocation of usage and the rewards of capital escalation.  The concept was introduced in the US in 1986 by Richard Santulli who wanted to purchase an aircraft but could not justify the expense of acquiring and operating his own plane.  He approached other interested parties and devised a shared-use program to manage the operation. This model evolved into what is now known as fractional ownership, allowing users to purchase flight time with guaranteed availability. Before long, the model was adopted by the boating industry and later migrated to the leisure property market.  Often referred to as private club ownership in the leisure property market, fraction ownership offers the benefits of equity based holiday home ownership, together with the status and exclusivity of a private club membership.  Although the concept has been growing in popularity in many parts of the world, it only recently became available in SA. Since this year the concept hit the South African market form several sources for the first time. In keeping with the international model, these were products offering fraction ownership of individual properties with no inter-changeability option. The model is not new from a global perspective but is in the infancy stage as a trend in The Sough African market, specifically when it comes to the ownership of luxury leisure property. Fractional ownership can be compared to a group of people pooling their resources to purchase a property. This can be done in various forms. An example being the purchase done via a closed corporation of which the parties are members with various percentage interest shares in the cc. Most often the asset, such as an apartment, is held in a (Pty) Ltd company, in which shares proportionate to the ownership split are issued. An independent director is appointed, who is under mandate to manage the affairs of the company and not to encumber it in any way. With respect to the utilization of the asset, roles are drawn up amongst the parties involved. One of the major differences between times share and fractional ownership is recognised as an asset, whereas time share is not. Another advantage is that fractional ownership asset usage is proportional to shareholding so their is no over subscription, which is a common problem in many time share schemes.  Although time share products will always have a place for entry level leisure or lifestyle purchases, private club ownership is growing in popularity, especially among individuals looking to buy into lifestyle assets for pure investment reasons. Added to his is the corporate perspective, where companies are able to offer holiday incentives to staff and use the accommodation for business travel purposes. Fractionals are for more exclusive and include may more luxury amenities and services than time shares. They tend to be larger homes, usually two to four bedrooms. Timeshares usually allow you use for just one to two weeks per year, fractional offer from two to 13 weeks and those don’t necessarily have to be consecutive weeks. Pick the weeks you want.  With regard to financing, obtaining a bank or mortgage company loan on a timeshare is difficult. Rates are high, regardless of how good your credit. This is because it’s a well-known fact that most timeshares depreciate over time.  Conversely banks and mortgage firms consider fractionals to be appreciating assets and will often treat them like any other second-home purchase. In high end resort real estate markets, fractional ownership and private residence clubs have emerged a rapidly growing alternative to whole ownership of luxury vacation homes. According to industry statistics, this area of ownership is growing at over 150% per year and is in its infancy. Research shows that while most private club owners could afford a whole owned vacation home, they selected to purchase a co-owned interest because of the logic of owning only the time they will spend at their vacation residence combined the added benefit of service and amenities that would not be available with ownership of a private home.