Fractional ownership is one of the latest trends to come out of the property industry that’s allowing foreigners and locals to buy a share in luxury properties that they might otherwise never have been able to afford.

Barak Geffen, Executive Director of Sotheby’s International Realty South Africa says, “Fractional ownership differs from time share in that buyers are purchasing a share in the property as apposed to merely purchasing a few weeks of time per year.

“Investors can sell their share in the property at any stage and take profits, should the value of your share increase with rising property prices in the area.

“Fractionalization allows investors to buy into properties they maybe wouldn’t have been able to afford on their own and get to spend several months or weeks per year depending on the type of fractional ownership scheme and the number of other investors.”

Geffen says these investments are typically managed by a realty management company who identifies several parties looking for a certain kind of property in a particular area, establishes the amount each would like to invest and then finds an appropriate property. More often however, sellers of certain properties that lend themselves to fractional ownership, demand agencies competent in fractional ownership to market them.

“Investors, which may be from different parts of the world, need never meet as the management company usually arranges contracts, payment and will even furnish the property and handle all on-going maintenance at a fee of between 3.5 – 4.2% per year.

“The management fee can usually be recouped by individual shareholders by renting out the property to outside parties for a few weeks during their chosen periods of stay.

“The buyers just need to specify beforehand which weeks of the year they would want use of the property before signing the deal and obviously this can be left open to rotation from year to year as well.

“Although the majority of these deals are above board, buyers should always get contracts checked out by a lawyer to ensure that there is clean and legal title and no barriers to being able to sell your share on the open market whenever you choose.

“Fractional ownership is a sophisticated property ownership concept that is far more accepted and in demand in first world countries such as the US, where secondary and tertiary markets for all assets or investment classes have become popular amongst investors”