14 | THREE WISE MEN
FEATURES WORDS | Robert Pestello, David Disick, Roy Brazier
ractional ownership has been promoted as the way to own a holiday home and even as a sensible way of buying property as an investment.
Success in fractionals F
We thought we would ask our three experts how they have made a success out of fractionals and for their top tips to help you do the same.
What is fractional ownership and how does it differ from timeshare? The standard answer is that the main distinction between timeshare and fractional ownership is that, with a timeshare, you buy the right to use a property but, with fractional ownership, you are buying the ownership of part of the property: real estate. You get a deeded piece of real estate, just not for the entire parcel.
This answer is not strictly correct. Much early timeshare was sold with a structure that meant the buyers collectively owned the development and some fractionals are sold with a structure that means that the buyers own shares in a company (which, in turn, owns the property) and so they do not, technically, each own part of the real estate. However, the defi nition is, probably, still helpful. What is the truth behind the hype? Some people seem to be selling well, yet for many others the market has been diffi cult.
Can you make a success out of fractionals or have they been irreparably damages by association with timeshare? If you can make fractionals a success, how?
The Questions for our Experts
1. What is the proper role of fractional ownership in the world of international property?
2. Is it suitable for use with investment property?
3. How much of a premium should you expect to pay compared with the same property sold as a conventional 100% ownership?
4. How should management charges be controlled?
5. Who is buying? Which nationalities? Which type of people?
6. Where and what type of property are they buying?
7. Why are they buying?
8. Is an exchange programme important?
9. Why do you think you have made a success out of fractionals?
10. Who should fractional ownership be aimed at?
11. What is your top tip for people wanting to sell fractionals?
12. What is your top tip for people wanting to develop a fractional project?
NEXT MONTH: Can you make money out of China?
Robert Pestello
Robert Pestello is Director of Sales at Beach Republic, Koh Samui Thailand and is a highly regarded fractional consultant. He has been involved in real estate for over 25 years. He can be contacted at
robertpestello@linkedin.com
1. For the buyer, fractional ownership offers owners access to high-end properties at a low price point, while providing for a level of fl exibility and convenience that is simply not possible via sole ownership. For the developer, fractional ownership allows access to a far greater number of potential buyers while allowing for increased overall revenue. 2. In relation to hotels, resorts, and high-end residential real estate, fractional ownership can be a strong fi t. However, investment property in terms of commercial space is unproven. 3. It is fair to pay a premium of anywhere from 1.4 to 2.7 times. However, the premium can fl uctuate greatly depending on many factors: including the quality of use plans, amenities, location, and of course the overall desirability of the project in question. 4. Management charges should be 100% transparent. Period. An annual report with all costs should be provided to owners. Where the amount paid has surpassed the actual cost, the difference should be refunded to the owner or applied to the following year’s charges. 5. As a resort in Koh Samui, Thailand we see interest from Australians, New Zealanders, Europeans, and North Americans. Convincing Asian nationalities of the benefi ts and opportunities of fractional ownership has been more challenging. Most of the buyers at Beach Republic are middle aged, middle to upper class and buy for both use and investment. 6. Around the globe, developments located adjacent to golf courses, ski resorts, and beaches are especially popular. A unique amenity can increase sales dramatically. For example at Beach Republic The Residences, many owners are motivated by the fact that they receive privileged access to the Beach Republic Ocean Club, which has been called a must-visit destination by international media such as The New York Times and
CNNGo.com. 7. More and more people are realising the tremendous advantages of fractional ownership. This includes gaining access to a luxurious asset at a fraction of the normal price, 5-star resort service, worry-free maintenance and security, and hassle free living. 8. While it may be important to certain buyers, in terms of the success of a fractional development, it is not at all necessary. 9. Our fractional product offers the client stunning private pool villas and penthouses, top of the line facilities at Asia’s hippest ocean club, strong branding, and a highly attractive investment opportunity. Our profi le has been raised tremendously by our multiple wins at the Thailand
Property Awards. Furthermore, I believe in a very straightforward and low-key sales approach. 10. This depends entirely on the use plan, price points, amenities, location, and investment potential. 11. Ensure that you work with a reputable company that offers a strong training program. 12. Ensure that you are offering a top-notch product in a high demand
location with an attractive price and a low key and straightforward sales approach.
Slice of paradise | perfect if you want a property to use for a few weeks a year
www.opp.org.uk | JULY & AUGUST 2012
Fractional ownership has been lauded as the best way to own a holiday home – but the concept is still sullied by bad associations with timeshares. OPP asks three wise men who’ve been successful in fractionals to clear the air by asking what fractionals are, what’s involved and how they made it work for their businesses
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