Just What is Fractional Ownership?
So… Just what is fractional ownership?
Wikipedia defines fractional ownership as “a percentage share of an expensive asset”.
That dry and dusty definition doesn’t do justice to the exciting jet-set world of luxury that fractional ownership brings within your reach.
That “percentage share” can in reality give you a few months of the year soaking up the sun in an exotic luxury villa while the staff pander to your every whim. You could be sailing the ocean in a state of the art yacht. Flying across the world in your personal jet or helicopter. Even enjoying a track day at Silverstone, having driven there in your own Lamborghini Murcielago or Aston Martin Vanquish.
Normally while you’re away on your luxury motor cruiser or yacht, your Cessna Citation is stuck on the ground using expensive storage and maintenance fees. Your Ferrari F40 is locked away in the garage, depreciating and getting flat spots on the tyres.
With fractional ownership however, you can share both the pleasure and the pain of owning these expensive assets with other, like minded individuals.
In short it can be a great way to get the most out of an investment by buying only the shares or time you need.
Individual owners buy shares and then enjoy priorities and privileges, such as reduced rates, priority access on holidays and income sharing. The assets are often managed by a company on behalf of the owners, who pay fees for the management plus variable use fees. Per-hour or per-day, for example.
The management company may well sell rapidly-depreciating assets for the owners, after an agreed time, who can then claim a capital loss and maybe purchase a fraction of a new asset, once the proceeds are returned.
Alternatively, if your shares are in an appreciating asset you’ll still benefit from the increase in value, when or if you decide to sell your share.
Some countries and regions even have tax laws that provide additional benefits for owners, such as capital-loss allowances, although there are others who might penalise ownership over renting.
The most common form of fractional ownership is property, however fractional aircraft ownership, luxury motor cruisers and yachts, supercars and classic cars, racehorses, art, even wine and handbags are becoming more popular!
While property is usually an appreciating asset and the owners can benefit from an increase in equity, fractional ownership can equally be applied to depreciating assets such as luxury motor cruisers or yachts, aircraft and cars where the owners can share the running costs, maintenance and depreciation etc.
Not all cars depreciate though. Classic cars can be acquired fractionally as can that supercar you’ve fallen in love with, which may turn out to be a classic.
Owning a fraction of a property gives all the benefits of ownership at a much lower entry cost and without a lot of the associated problems. Buyers are entitled to a number of weeks use of the holiday home, while maintenance costs are shared.
While researching fractional ownership you may come across the term Private Residence Clubs. These are usually just very high value properties which are often staffed with housekeepers and concierge like a luxury hotel.
A lot of fractional ownership developers now also offer the chance to swap some of your allocated time through a network of fractional property owners.
All in all, it’s no wonder that fractional ownership is set to increase in popularity.
