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Fractional Ownership South Africa - Why Invest?

ver the past year or so it has become virtually impossible to ignore the promise of a lifestyle only the extremely wealthy could afford. A fanciful lifestyle that has now been made obtainable at a portion of the cost these high flyers were paying not too many moons ago! It seems fractional ownership has well and truly landed on our shores, and its benefits are here for all to enjoy.

However, some questions still remain: Why does this make so much sense? What are people looking for and more importantly, what are people buying into? And then last but not least, can someone please explain if this is just clever marketers selling timeshare?

Why It Makes So Much Sense
If you own a holiday home for example, you'd probably only get to utilize the property for a full four to five weeks during the course of a year, not forgetting that you most probably spend the first few days of your well deserved vacation cutting the lawn, cleaning the cupboards and linen, and generally getting your holiday house in good shape for all to enjoy.

One of the benefits of purchasing into a fractional ownership is that it's managed by company that owns the property, therefore owning a share in this company and property entitles you to an exclusive usage in the actual property for four weeks per year. So in essence, you are still investing in property, but you are only purchasing the weeks you actually need for that holiday you so desperately deserve. All this at a fraction of the cost you would have spent if you purchased the very same property outright.

There is also the additional benefits of renting out your property during the weeks that it's vacant to ensure that you don't loose out on what you've already invested, leaving you with the option of possibly using that rental income to offset your portion of the yearly levy contribution. The levy contribution includes the various costs of managing, maintaining and servicing the property. These costs involved are equally divided amongst the various shareholders of the property. In comparison this drastically reduces the monthly cash outlay you normally would've spent if you were to maintain such a property through whole ownership.

Just to put it all in perspective, think of it in this way: If you were to be lucky enough to find a luxury 2 bedroom apartment on the beachfront for under 1.5 million, adding the costs involved to have your new property kitted, you'd probably look at paying closer to 1.6 million. But these costs exclude the monthly expenses involved to keep your new property in tip-tip shape. Expenses like the resort levy, DSTV, security and insurances that could very well add up to over R1500 per month (excluding the golf membership and course maintenance). On a good fractional scheme you could buy a share in the very same property for under R 300 000 and enjoy the benefits of four weeks of exclusive access during the course of the year. Better still is that your levy should come in under R600 per month and who knows, you might even get a daily cleaning service, Plasma screen, PVR decoder, 2 mountain bikes, a golf cart plus access to the resort course, all included in the average R600 monthly due.

What People Are Looking For In a Fractional Investment
If you take into consideration that most fractional ownership formats entitles you a one week exclusive access to the property four times a year, then you would probably want to get there in a reasonable time, especially if you have the car filled with impatient kids. This is why the majority of investors are looking for a fractional property within five hours travel time. Most investors in the Gauteng area already spent this amount of time travelling to work and back, so who wouldn't want to get away for a hassle free week every few months without having to endure more long travelling hours?

Location, Location, Location
The majority of fractional enquiries and transactions in South Africa are from the Gauteng area. The Gauteng market, even more so than others, seek a hassle free luxury property investment that is fairly easy to get to. Within these areas the most popular choices are secure gated resorts that are serviced and managed to a very high standard. These properties tend to be situated in high growth areas such as golf resorts, wine and game farms, as well as sought after coastal resorts, with a mix of golf and beach access.

Currently in South Africa many of the resort brands such as Zimbali, Pinnacle Point and Arabella are predominant in the requests for fractional properties. This is due to the on-site amenities such as golf, children's facilities, health spa's and access to some of the most magnificent beaches which is a pre-requisite amongst families.

The DINK's (Dual Income No Kids) crowd are looking for more luxury serviced apartments in urban areas such as the Emperor in Sandton, Horizon Bay in Blouberg and, in the Cape Town CBD district, Dockside and the Cape Royale. Corporate South Africa is also showing a lot of interest in fractional property which they could invest for business trips as well as staff incentives and hospitality events.

Fractional vs Timeshare
When the concept of fractional ownership was first introduced, many people initially questioned whether it was something similar to timeshare. The answer is yes, the usage rights are similar. However, with timeshare you are purchasing just that, a definable use of time in a resort that is linked to an exchange program. The clear difference between timeshare and fractional ownership becomes apparent when you consider that with fractional ownership, you actually own a share in a property. The usage of your very own fractional property is a benefit to your investment, because your shares can be passed on to family to enjoy or can be sold with a simple sales of shares agreement if you want.

The cherry on top is that over the medium to long term period you are likely to see a fair return on your investment capital as well, due to the fractional properties being situated in high growth areas. Just another reason why investing into a fractional property might just be exactly what you need to enjoy the good life.
About the Author

FractionalOwnership.co.za offers you an array of spectacular fractional properties in South Africa and would welcome any further questions you might have with regards to fractional ownership.