Benefits and drawbacks of fractional ownership
A new type of vacation house ownership is increasing in popularity, allowing people to share ownership of a property. Consider this: a full pie may look great, but it doesn't make economic sense to purchase the entire dessert if you're only going to have a few bits. However, if the cost is divided across various clients and everyone receives a piece of the pie, the purchase makes sense.
That is the principle behind fractional real estate ownership, it has been a good option to "own" a high-value asset. Yachts, airplanes, and holiday houses with luxury facilities are just a couple of good assets which has enabled multiple parties to minimize the risk of these large acquisitions.
While fractional ownership is a solid asset investment, there are certain drawbacks.
Benefits of fractional ownership
- Market fluctuations: People sometimes confuse fractional ownership with timeshares, in which buyers purchase a specific amount of time in a vacation house but do not own the property. You own property through fractional ownership, which can be sold, placed in the trust, gifted, or inherited. Owners receive equal deed advantages in case the value increase.
- Portfolio diversification: The money that would have been required to acquire and manage a single vacation property may now be distributed among two or three-holiday homes due to shared ownership. Investing your money across multiple properties reduces investment risk while increasing the possibility of success.
- Equity: You are entitled to co-own your own home in any place and have access to luxury amenities and facilities - plus you purchase yourself the right to a luxury vacation for a fixed period of time every year.
- Rights of use: You own a part of the property with this type of ownership, which immediately allows you usage rights based on the share value. One-half share, for example, entitles you to one-half or six months of use to the residence each year. According to the homeownership agreement, the value of your share decides how long you will have access to the house.
- Income earner: Owners of co-owned homes can sign an agreement to lease out the house either for long-term or short-term projects. In such a circumstance, the co-owners can receive rental money in accordance with the terms of the contract.
- Shared accountability: Buying a home may be fairly expensive, from purchase to upkeep. The entire pressure is placed on one person, which is quite stressful. However, fractional ownership divides this expense evenly among homeowners who own portions of the property. There is a predetermined timetable for a scheduled cleaning, house inspections, and any other repair bills that a single individual will be responsible for. As a result, it provides peace of mind and less load through collective responsibility.
Drawbacks of fractional ownership
- Group Consensus: Reaching a consensus under fractional ownership is difficult since you must consider all parties before making an agreement. Delays in decision-making are a major source of concern since people have varied interests and preferences when it comes to their houses. Some owners, for example, might choose to rent out their vacation house, but others would prefer to use it simply for personal holiday vacations.
- Location concerns: The majority of the time, fractional ownership is tied to a specific property. If you or your family like diversity, this arrangement may be too restrictive. Some properties participate in an exchange program, which allows owners to swap their nights for another location of comparable value. However, most owners find it difficult to match the destination with the time of year they want to vacation.
- Difficult to resell: Selling is not as simple under typical fractional ownership as it is in whole ownership. While it is not as difficult as selling a timeshare, you will need to conduct a study to determine how the ownership is organized and what limits may apply to your right to offer your share.
Dalima’s co-ownership model alternative
There are several types of ownership and investment structures emerging. However, Dalima’s elevates the second-home ownership experience by allowing you to enjoy a luxury home for a fraction of the price and offers you the experience of a 5-stars hotel in your own home.
Dalima turns buying, owning, and selling shares of a second home into an easy and fair experience, thanks to our proprietary technology and impeccable service at every step of the journey.
Our co-ownership model enables you to truly own your home and profit from home value appreciation. Every home is divided into eight shares, and each co-owner can buy from one eight to half of the property. Dalima takes care of the refurbishment, fully manages the home including maintenance, repairs, cleaning, insurance, and taxes splitting the cost among all co-owners. Every co-owner can access our app to book their stay or rent out the days that you won’t use to cover ongoing expenses. Our 24/7 concierge services will be available at all times through our live chat. We accumulate over 20 years of experience providing concierge services, so this is one of the highlights of your co-ownership experience with Dalima.
More information: https://www.dalima.com