3 tips for buying fractional property ownership in South Africa
Hatched by Dirk Wilson fractionalownership.co.za on Monday, May 24, 2010
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Here are a few things to keep in mind when considering purchasing a fractional ownership property share. there are a few more tips on our website link below.
1. Request a breakdown of the monthly levies for the first year
With all property purchases that are subject to a levy, you need to know what you are liable for each month – and what is being funded and covered by the collective levy. Typically, you are purchasing a share in one property that is looked after by the management company, and so your levy should comprise the management fee, housekeeping, insurances, DSTV, check-in procedures, and possibly a maintenance fund. (Most levies are reviewed at the shareholder AGM and subject to vote, so in essence you have a vote as to which services are rendered as well as the amount spent on them. Levy structure can vary, depending on what is included in the purchase price; for example, some include access to the golf course, so you need ask if that’s for a life time or only for an initial period.
2. Make sure your deposit is held in a trust account
When you have decided on your fractional ownership purchase and are committing to the deal, possibly by making a deposit, make sure that the account you are submitting your deposit to is a legitimate account and held in trust. The last thing you want is to put a deposit down for your dream fractional unit in a resort yet to be competed, perhaps from a company you have never heard of before – and a few days later the company and your deposit disappear. Check the details, scrutinise the contact, ask questions – and if you are still hesitant contact your attorney for their opinion or perhaps VOASA for a reference.
3. Check the date of delivery of the actual unit you are purchasing
Many fractions are being sold in units, property or resorts still to be completed. While there is an opportunity for return on investment by getting into your fractional investment early, you should be aware that the unit you have bought into could take longer to build or be delayed for some reason. Do some research on the resort or area that you are buying into to ensure you are going to get what you have been promised in terms of resort infrastructure and resort amenities, and that the quality of building and interior finishes will be as you have been shown or told. To avoid disappointment, scrutinise the sale of shares contract for the estimated transfer of shares date as well as the occupancy dates of your unit for usage. Beware of open-ended delivery dates. If planning to use the unit close to the transfer of shares date, be ready for possible delays before you book flights for you and your family!
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Comments (4)
These are really great points and seriously need to be considered when you are looking to enter into fractional ownership.
Yes FourEd. There are more tips and advice on our website http://www.fractionalownership.co.za. be sure to keep an eye on the website as we are soon launching our new look website with revised tips, FAQ’s and advice pages.
I have two holiday flats in Port Edward, I am considering selling them on fractionalownership, what would be the best way to do it
Hi Esther. My apologies for the late feedback, I was overseas and recently returned. Esther, I wish the answer was so simple as to say you do X,Y &Z and voila you have fractional ownership product to sell!
There are number of complex factors that make a successful and competitive fractional holiday home that will actually sell. here are a few of these factors for your to evaluate your options……
Location – is the property situated where there is a high demand and low supply of holiday homes? typically fractions sell well where the price of 100% ownership is out of reach for most people or there is simply no whole ownership available and fractional property ownership is a next best or only option, as you can imagine – this creates the demand for shared ownership, as buyers can get into that resort / destination at a lower price point.
Fractional ownership marketers tend to only look at opportunities where there are more than 3 units that can be promoted and sold at ONE overall marketing cost, you will struggle on feasibility if you offer less than 3 units that can all be promoted through the same campaign.
The biggest challenge in creating a successful fractional ownership product is the post-sale owner management, for example: How do you manage and look after all these owners once they have bought from you? You can’t leave them high and dry with no central management team to manage logistics such as check in & check out, usage rosters, rentals and re sales.
Should you have the correct structures in place as just few are laid out above you can look at taking the next step. I hope this is of help?
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