Glossary

Many people ask "what is fractional ownership?" and the closely related question "Is it timeshare? In this article I will attempt to answer these questions. This article is concerned exclusively with the fractional ownership of leisure/luxury assets. However most of the principles would apply equally to the fractional ownership of a practical item (e.g. for business). Definition of Fractional Ownership In its broadest definition, fractional ownership is any arrangement where a group of people (numbering from 2 to 10 or more) share the ownership of an asset and also share certain rights to use the asset. The use of the word "ownership" in the definition therefore excludes timeshare arrangements, where there is no ownership of the underlying asset. Unfortunately however, some so-called fractional ownership schemes are closer to timeshare than they are to true fractional ownership. When investigating whether to purchase a fraction it is essential to know what your relationship to the asset purchased is. The best arrangement is to be identified as the legal joint owner of the asset (or in the case of multiple assets, the owning organization). Types of Fractional Ownership The most cost-effective form is where a group of individuals decide to purchase an asset jointly. They then decide on the exact asset to be purchased, draw up ownership documents (perhaps with the help of a legal firm) and purchase and manage the asset themselves. This avoids the sometimes substantial profit-margin that developers charge when selling fractional properties. This approach does have disadvantages, e.g. the amount...

One of the most difficult and perplexing problems for realtors and investors is finding current Gross and Net Income Multipliers and Cap Rates. Determining the value of an income property generally involves establishing either the Gross or Net Income Multipliers, or the Cap Rate according to comparables. There are a number of difficulties: Finding comparables and market information Information relating to a sale of a commercial property is often confidential and difficult to obtain. While the sale price can usually be determined, the Income and Expense Statement, Net Operating Income etc. is often not available, making it difficult to calculate the financial measures. Discovering the underlying motives behind the purchase and adjustments that may have been made by the purchasers. The financial measures are simply ratios that have been derived from the purchase price and the financial figures. They reflect the attitudes and the results of the negotiations between the buyer and the seller, economic conditions etc. In some instances, the purchaser may be strongly motivated by income tax considerations, other times; the motivation may be to move money into another country by an overseas investor. Often, purchasers make adjustments to compensate for particular circumstances relating to the particular property. As an example, if a purchaser estimates that there is $250,000 to be spent immediately on major repairs, then the $250,000 will be deducted from...