Fractional ownership

Life Hacking
1

As anyone of you purchased fractional ownership instead of a 2nd or 3rd house?

I have been doing some research. There are broadly
a) destination point scheme: you buy from as little as 20-25k into a scheme from large hotel chains like Marriot, ritz Carlton and etc. you get points to use during holidays. Pros: low upfront and vast choice of hotels; Cons: difficult to resell your stake and you pay fees when visiting

b) equity fund stakes: you buy a stake into a fund, whom is managing a set of properties. Here you can sub-divide into:
b1) time limited funds: starting at 200k, have a 10-12 year mandate. After expiry they sell properties and owner get back capital (if not capital loss) and 80% of capital gain. You have here two types again
b1a) those funds that also rent out properties so that you pay 0-4K year in fees depending if you opt to rent out and offset fixed costs. Fees go higher for larger stakes
b1b) those funds that don’t rent out so yearly fees for a proportional 200k investments are 15-20k fees per year

b2) no time limited funds. Here very similar to b1b but you never have a structured exit so you need to resell to someone else. Yearly fees for 200k stake are similar as b1b

c) traditional fractional ownership. You get a stake in just a single property. There are not many nowadays and you are stuck with one location

d) investment into a development/ hotel. You buy a part (as little as 25k up to 1 million). You mostly rent out but you get 3-4 weeks free access during non peak periods. benefit you get return + few weeks free holidays

Personally I am most interested into type b1a) because:

  • there is a liquidation event
  • you can offset fixed costs if you want to
  • you get capital appreciation (likely)

Downside is that most of those funds are US based with US-LATAM- Caribbean properties and little in Europe, which means higher traveling costs. You can use alliance to exchange properties but I heard it’s a little harder to get the locations and time you want.

Is anyone invested into any of these fractional property schemes and / or have any feedback?

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2

I haven’t thought much about this kind of thing but wanted to throw one question into the discussion: where do you see companies such as Vonovia or Deutsche Wohnen in this?

These are companies that own many properties and rent them out.

3

Did something similar with an investment in a hotel and was lucky to get my money back before it went bankrupt (others not so lucky)

Give me your money, I’ll invest it in property and we’ll split the profits. Lesson learned.

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Fractional ownership (like crowdhouse) are all more or less a “scam”.
You are holding all the downside risk, paying huge fees for maintenance, upkeep and for the managers themselves.
Fractal shares are always the second, or third choice over “real ownership”, this will also apply once you try to sell.

You are stuck with a piece of Real Estate, you will pay feed to get rid of it and on top you need to find someone to take over you unfavorable position.

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