FAQ

As we venture further into the world of fractional real estate ownership, it becomes crucial to grasp its essence and operational framework. This chapter aims to demystify the concept and highlight how it stands apart from traditional real estate investment models.

Definition and Basic Principles

Fractional real estate ownership, at its simplest, is a method where multiple investors share ownership of a property. Instead of one individual or entity holding the entire property, it is divided into smaller, more affordable shares. Each investor owns a fraction of the property, which corresponds to their investment amount. This method is not merely about sharing the cost; it's about sharing the ownership, responsibilities, and benefits that come with the property.

The basic principle behind fractional ownership is collective investment and shared benefits. Investors pool their resources to acquire property that might otherwise be beyond their individual financial reach. This collective approach allows for a diversified investment portfolio and opens the door to more significant, potentially more lucrative real estate opportunities.

How It Differs from Traditional Real Estate Investment

Traditional real estate investment typically involves an individual or a single entity purchasing a property in its entirety. This approach often requires substantial capital, making it less accessible to the average person. The full ownership model also means complete responsibility for maintenance, management, and any financial burdens, such as mortgages or taxes associated with the property.

In contrast, fractional ownership democratizes the investment process.

Breaking down the investment into smaller parts drastically reduces the capital requirement for each investor. This model also distributes the responsibilities and risks among the investors. Each shareholder is responsible only for their fraction of the property, making it a less burdensome investment, especially for those new to the real estate market.

Furthermore, fractional ownership offers a level of flexibility rarely found in traditional real estate investments. Investors can choose how much they want to invest and select from a wider range of properties. They can also decide to sell their shares or buy more in the property as their financial situation changes.

Interested parties enter an ownership arrangement whereby they agree to co-own a property (or another asset) with several like-minded individuals. Let’s look at how the fractional ownership agreement would typically work for co-owning a property through a reputable developer, step by step.

1. The real estate property is usually purchased through a Societe set by a Notary Public

2. The property is divided into equal fractions, with buyers typically able to purchase 1/10 fractions ( number of fractions may vary depending on the property - 1/8 - 1/12 etc )

These fractions are freehold, and each co-owner holds a deeded share of the asset’s title for each share purchased.

3. Investors can purchase one or more shares in the property, dictating the amount of time spent at the property. The exclusive usage per year is generally five weeks per 1/10 fraction, depending on the original agreement.

4. The properties are typically taken care of by a property management company that deals with the property’s upkeep, maintenance, and repairs. The associated and annual running costs are split equally between the property co-owners.

5. You will own the deeded fraction in perpetuity if it is actual fractional ownership. Your titled interest are also be sellable and willable.

No, absolutely not !

Real estate fractional ownership is NOT timeshare. 

Timeshare is what it says—you buy a share of time to use each year. You don’t possess ownership rights to the physical accommodation you stay in each time you visit. You are paying to stay for a set amount of time each year, usually at a resort or hotel. There will be a maintenance fee to pay to the resort where the timeshare is based. There will be no ownership of the physical property asset.

Value of a Time Share DO NOT appreciate over the years whereas Value of a Fractional Share appreciate as any normal property

Fractional ownership has become a fast-growing space and is being seen as a very good investment due to its lower acquisition cost for a higher-value product. Fractional vacation home ownership makes properties in the higher price brackets more accessible and more appealing to anyone looking to own a slice of a luxury second home.

Unless you move permanently to another country and buy a house where you will spend all of the year, the likelihood of using a second home abroad for much more than one to two months a year is pretty slim. This factor, along with getting a more luxurious property for less, raises the question of “why pay for more than you will use?”

Five advantages we see of buying a fractional ownership vacation home are:

1. Enjoy a more expensive property for less investment

2. Less burden by being able to share all the running costs with your co-owners

3. Fewer worries over the property remaining vacant for periods of time

4. Less hassle as the property management company takes care of the running of the property, leaving you to enjoy quality family time from the minute you arrive.

5. Enjoy asset appreciation on your fractional ownership vacation home

As with any investment, you must do some homework to ensure you are dealing with a legitimate company. As you begin your research, ask a few basic questions to help you find the developer or real estate company that is right for you.

Do they have a successful track record of fractional ownership properties ?

Are the fractions freehold and deeded ?

Are the properties purchased through a proper Societe and Notary Public ?

Suppose the location of the fractional vacation home you are interested in is in a country where you are unfamiliar with the language and local tax and property laws. In this case, it is prudent to check out the support offered to you during the buying process to prevent you from becoming frazzled and out of pocket. Remember, buying a fractionalized property aims to eliminate the stresses of owning a whole property and save money!

We cover some of the benefits in 5 Reasons Why Fractional Ownership Vacation Homes Make the Best Second Homes.

Any fractional ownership companies serious about their properties will be able to arrange an Inspection Visit. This gives you an opportunity to check out the location and properties first-hand. And allows you to familiarize yourself with the area while asking questions about the buying process.

We have created a simple, intuitive and equitable scheduling system that allows you to schedule your stays. One 1/10 ownership share gives you access to the holiday home for 35 exclusive-use nights per year, two shares gives you 70 nights, and so on. The system also ensures that all co-owners have equitable access to the home during peak seasons. 

The purchasing process is similar to any property transaction in Mauritius or Europe. The holiday home will be purchased by a locally incorporated Societe – the only real difference is the number of co-owners.