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In the August 2009 Issue of Property Investor News
Fractional Ownership
The current state of the overseas property market has brought a number of different investment possibilities into the frame. One such option, which seems to be attracting more publicity right now, is fractional ownership. So let's look at what fractional ownership is, and address some of the pros and cons for buyers.
Firstly, what is fractional ownership? It's important to realise that there is no precise legal definition of fractional ownership. So it can mean whatever both the buyer and seller want or understand it to mean - underlining the importance of checking the specifics of any proposed purchase carefully. Broadly, fractional ownership is a generic term for a number of legal and commercial concepts where ownership of an asset is acquired jointly by a number of people - and where the costs of, use of or benefits from such property is similarly shared.
Over the years fractional ownership has been applied to boats, aircraft, prestige cars and even race horses. However, the concept of fractional ownership of real estate is believed to have been developed in the Rocky Mountain ski resorts in the USA during the 1990's. Some reports claim that there are over 250 fractional ownership resorts successfully operating in the USA alone, although it is a relatively new and untried concept in most other countries of the world.
Before looking at fractional ownership from a buyer's point of view it might be sensible to look at why it seems to be finding favour with developers right now. For them fractional ownership offers an avenue for growing sales in a difficult market - since property can be marketed both to those who are not interested in full ownership or who are unable to afford it. It can also offer a way of selling a property for more than its single sale market value. There are also opportunities to generate an ongoing income from management of the property.
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