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Is Fractional Ownership a Good Investment?

Luxury glass modern villa at dusk with green grass and tree in foreground

If you’re planning on buying a vacation home and are looking at various options including fractional ownership to give you the home you want with the best investment, you should read this first.

We’ve all had those vacations that tick the boxes as the best vacations we can remember, so much so that we revisit the following year. The location gets better and better, and we fall in love with discovering more and more of the local scenic gems each time. We become familiar with the hidden beach spots and favorite restaurants, picturing ourselves visiting for years to come.

Fractional Home Ownership

Returning from the second visit and booking ahead for the third is when most people start thinking about what it would be like to purchase a second home. The search begins for a vacation home where we can enjoy spending regular time away with loved ones – a place that encompasses that home-from-home feeling. It is also time we start seeing this bolt hole through rose-tinted glasses. We know there will be the upkeep of the property, repairs, and maintenance in the back of our minds. Yes, there will be purchase taxes involved. It’s somewhere we may not be so familiar with when it comes to the local property laws. Still, it’s a vacation home – everything looks better on vacation, right?

It is about now when the dream often becomes a stark reality. Finding a trusted agent who knows the country’s property laws can be a headache before you buy. Then there are the language difficulties and a long list of numerous other factors to consider.

Why Consider Fractional Ownership?

It’s human nature to opt for flexible, easy solutions over the more convoluted route – this is where fractional ownership comes in. The fractional ownership model has been around for decades. Still, it is due to its simple economic sense catering to those looking for a cost-effective second home that its popularity has started to soar over recent years.

“Why pay to own an entire property that you won’t use all year round?”

People now realize that they can get more for their investment by paying for the actual time spent away. The number of days American workers take for their vacation each year is a lot lower than you may think. According to the U.S. Travel Association, the figure averages just 17.4 days a year!

With this in mind and coupled with the recent shift in lifestyle choices (more prevalent over these last few years), understandably, people are looking to intelligent solutions like co-ownership of vacation homes as smart ways to own a high-end second home. This option takes away a lot of the hassles that go with sole ownership of an entire property, including:

  • Navigating alone the often-complicated legal procedures of a foreign country
  • Refurbishing the property
  • Upkeep and maintenance
  • Renting out your vacation home
  • Worrying about the time the property remains vacant

If you’re wondering if shared ownership properties are a good idea, let’s look at a quick overview. We summarise how buying a vacation home through fractional ownership works and why people are looking at it as a good investment for 2022.

Are Fractional Shares a Good Idea?

Buying a fraction of the property is a logical solution that allows owners to level up to a more expensive property and purchase a share of their dream vacation home. The properties typically sit at the higher end of the vacation home market located in desirable locations worldwide. Each property, divided into a set number of freehold, deeded fractions, will often be sold through a holding company. The buyer purchases their share of the company that owns the property, giving the buyer full ownership of their share of the asset.

Fractional Ownership Real Estate Example

A 5-bedroom exquisitely refurbished stone farmhouse in Italy with underfloor heating, luxuriant furniture and décor, and an outdoor heated swimming pool.

  1. Property is divided into 12 equal shares for sale through the Limited Company that owns the property
  2. Each share gives 4-weeks annual exclusive use
  3. Each deeded share costs €217,000
  4. Complete property management services include repairs, maintenance, and rental facilities, with the running costs shared equally between all owners

The Benefits of Fractional Ownership

As we mentioned, fractional ownership vacation homes tend to be more luxurious and valued at the higher end of the property market. Sharing the cost of the property with a group of like-minded individuals allows buyers to benefit from a selection of premium properties located in more salubrious locations. This is in contrast to investing in an entire property of a lower value due to the available budget.

Is part ownership a good idea? To answer this, we’ve listed some of the benefits of fractional ownership.

  • Lower purchase costs
  • Lower shared ongoing running costs
  • Full property management service
  • Potential to earn a rental yield on unused time
  • Capital appreciation of the asset

So, in the example above, for €217,000, a higher-end second home is available at a much lower acquisition cost. You get to use your vacation home four weeks a year and banish the stressful jobs that go hand in hand with getting your second home vacation-ready. Turn up to a fully maintained, pristine property every time with bed linen laundered, fresh towels, and your personal effects ready when upon arrival. Step into your relaxing vacation the moment you arrive.

Is Fractional Ownership A Good Idea?

If we’re asking, “are fractional ownerships a good investment?” then we need to look at various factors like rental yield and capital appreciation of the asset too. Ownership of a high-value tangible asset can give you capital appreciation over time, just like with any property. With a high-end property in a sought-after area, you are more likely to see this capital appreciation growth than with a lower-budget property in a less-visited region.

The property share purchase through fractional ownership allows you to enjoy a rental income. By renting out any unused time associated with your shares in the property, you profit from rental income on your fractional ownership property. An additional benefit of fractional property ownership is when the time comes to sell. Co-owning your vacation homes means instant access to an initial pool of prospective buyers!

If you’re looking for a second home with that wow factor but don’t want to invest all your savings, then shared ownership through fractional ownership could be a suitable investment. Own a slice of your dream property and share the running costs and property management so you can live your dream vacation every visit!

FAQs

Do shared ownership properties increase in value, and how do I benefit?

Like any property, prices will fluctuate according to the market. And, like all properties, those of a higher standard in sought-after areas of demand are more likely to see an increase in value. As a co-owner of the property, you will benefit from any capital appreciation of the asset over time.

Do I actually have ownership in the property?

Yes, you purchase a share in a Limited Liability Company specific to the property. You own a deeded share of the company that owns the property.

Can I sell my ownership of the property?

Yes! Most fractional ownership developers we feature do not stipulate how long you need to own the property before selling. With the property divided and sold in shares, you have a network of prospective buyers at your fingertips.

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Featured Property

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La Vecchia Masseria

€220,500/share

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