GUIDE TO

FRACTIONAL OWNERSHIP PROPERTY INVESTMENT

THE RICHER RETIREMENT SPECIALISTS

REGULAR INCOME FROM - FRACTIONAL OWNERSHIP

Here is a simple overview of fractional property ownership:

• You own a fraction of the physical property

• Lower financial risk - less initial outlay

• Allows you to spread your property portfolio

• You have deeded ownership, therefore the price you pay is a true reflection of the value of the property

• Many schemes offer both regular income and the potential for capital growth

Fractional ownership property investment

Originally invented as a scheme for owners of jets and yachts, fractional ownership has begun to spread to the property investment market in recent years. Fractional ownership allows you to buy a fraction of a property (or yacht or jet). This gives you rights to use the property for certain periods every year and entitles you to a share of the profits if the property is resold.

Fractional ownership has been big in the US and Canada for some time, only recently beginning to get off the ground in Europe. The increase in popularity has been put down to the turmoil in the economic market. Fractional ownership allows investors to own assets with reduced risk compared to buying a property outright.

As green shoots are being seen in housing markets across the world, now seems a good time to turn money into assets, but at the same time returns are still far from guaranteed. Fractional ownership seems to offer the perfect solution offering guaranteed returns for a set term with reduced risk.

Fractional ownership

When someone purchases a room or part of a property this is called fractional ownership. Like timeshares fractional ownership properties can often be used for holidays. The main difference between them is that a fractional ownership investment is focused on making a financial return, offering the potential for both capital growth and a regular income.

The owner of the fractional share will receive deeds and become a part owner of the property. One example is the purchase of a hotel suite. The owner(s) of the suite will receive a share of the revenue generated by hotel guests who stay in the hotel suite.

FRACTIONAL OWNERSHIP IS A UNIQUE OPPORTUNITY WHERE UNCONNECTED BUYERS COLLECTIVELY AND SECURELY OWN THE FREEHOLD OF A PROPERTY

How does fractional ownership property investment work?

Fractional ownership works by selling portions of existing or new properties to different investors. This means that a property will have between four and thirteen owners, rather than just one. The properties available on a fractional ownership basis are usually luxury properties which many investors may not typically have access to.

A property may, for instance, be worth £1m – but sold off through fractional ownership to eight different owners for £125,000 each. Each owner has a deeded stake in the property and will be able to use it for on average four weeks each year.

Fractional ownership schemes usually have a time limit. At the end of a specified period, possibly seven to ten years, the property will be sold off and the proceeds will be split between the various owners. In this way, fractional ownership can be seen as a long-term investment as profit will be made if the value of the property has increased over time.

How is fractional ownership different from timeshares?

Once popular in the eighties, timeshares now have a reputation that borders on being criminally bad. Timeshares were marketed to working classes as a great way to have access to a personal holiday home. There are hundreds of stories available of people being duped into purchasing timeshares in properties that were either very badly maintained, or in some cases, never even built. People found themselves trapped, unable to sell on their timeshare or make any use of it. Timeshares are seen as money traps, and fractional ownership sounds suspiciously similar.

The good news for investors is that timeshares are in fact quite different to fractional ownership. Timeshares involve buying only the right to use a property for a set amount of time each year, you do not actually own a share of the bricks and mortar the property is built from. Often when buying a time share, you are only able to use the property for 1 week in a year. This means that for the other 51 weeks, someone else is using the property – leading to maintenance issues and very little flexibility.

Timeshares begin to devalue the moment they are purchased and it is highly unlikely you will ever make a profit from one. They are notoriously bad as investments.

Fractional ownership, on the other hand, makes investors into deeded owners. There are fewer owners and each stands to make a profit on their share as long as property values rise. There is a great deal more security and far less risk involved in fractional ownership as opposed to timeshares.

Advantages of fractional ownership

• If you invest in a fractional ownership property, you will receive regular income from the investment, typically 7% - 15%

• You can often sell your share back to the hotel for an agreed price when you no longer wish to own it

• Most investments offer a ‘sell at any time’ policy

• It is cheaper to own a fraction of a property than buy the whole property and you still get a share of the returns it makes

• It is a fully-managed investment meaning that you won’t have to worry about managing or maintaining the property

• Options for personal usage instead of receiving the income are usually available

• Many investments can be held in a SIPP or SSAS

Financing fractional ownership property

It is not possible to get a mortgage for fractional ownership, so finance for properties owned in this manner must either come from personal savings funds or through re-mortgaging an existing asset. Fractional ownership can also be an investment made via a SIPP or a SSAS.

Selling fractional ownership properties

Most fractional ownership schemes have a set time for resale. This can vary from seven years, right up to fifteen years. There are usually exit strategies available if you wish to sell your share in the property before this time is up. The most common option is to offer your share to the other owners and hope one of them will buy you out. Different countries and companies also have various different resale options outside of this.

Fractional OwnershipYou actually own a fraction of the property. You physically own a share of the freehold of the property as an asset – the bricks and mortar. When you’re ready to sell, you can do so at any time and with a realistic opportunity of making a profit.

TimeshareYou purchase the right to stay in a property for a given time period over a number of years (effectively a re-saleable, prepaid booking). This is completely different to fractional ownership – you do not own any part of the physical property.

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THE RICHER RETIREMENT SPECIALISTS

HISTORIC SCOTTISH CASTLE SUITES

HOTELS &

RESORTS

a Invest from £30,000 to £390,000a 7% fixed net returns guaranteed for 1 yeara Personal usage option availablea Historic castle with superior facilitiesa UK based investmenta Available to all investors

WHY WE LIKE IT

“This is the investment you’ll want your grandchildren

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THE RICHER RETIREMENT SPECIALISTS

4 STAR LUXURY HOTEL INVESTMENT

HOTELS &

RESORTS

a Invest from £9,812a 4% fixed during constructiona Projected 8% for 5 yrs 10.2% for yrs 6-10a Option to sell at anytimea Ramada branded resorta Available to all investors

WHY WE LIKE IT

“A class act – Ramada, the resort operator has nearly 1,000 hotels and

resorts worldwide.”

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THE RICHER RETIREMENT SPECIALISTS

BOUTIQUE RESORT & SPA HOTEL

HOTELS &

RESORTS

a Invest From 18,000a Up to 12% fixed net returns for 15 yearsa Assured resale option of up to 150%a Over £1.25 million in rental returnsa UK based investmenta Available to all investors

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“With over £1.25 million in rental returns already paid out, it has a proven track record of success.”

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THE RICHER RETIREMENT SPECIALISTS

CAPE VERDE 5 STAR LUXURY RESORT

HOTELS &

RESORTS

a Invest from £20,000a 7% guaranteed for 4 yearsa 9% projected year 5 onwardsa Partnership with Melia Hotelsa Developer financially stronga Available to all investors

WHY WE LIKE IT

“In partnership with Melia Hotels supported by UK tour operators it’s a

winning combination!”

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THE RICHER RETIREMENT SPECIALISTS

FIVE STAR GOLF AND SPA RESORT

HOTELS &

RESORTS

a Invest from £11,500a Fixed returns 5% during constructiona Projected returns 7% to 18% over 10 yrsa Assured resale option of up to 150%a SIPP and SSAS approveda Available to all investors

WHY WE LIKE IT

“The developer has already completed a number of successful

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THE RICHER RETIREMENT SPECIALISTS

DISCLAIMER

Avantis Wealth Ltd is not authorised or regulated by the Financial Conduct Authority (FCA). This is not a financial promotion or an invitation to invest.

Avantis Wealth Ltd does not provide any financial or investment advice. We provide a referral to a regulated advisor who will offer appropriate advice, or to the company offering an investment who will determine your suitability for the investment prior to any offer being made. We strongly recommend that you seek appropriate professional advice before entering into any contract. The value of any investments can go down as well as up and you might not get back what you put in. You may have difficulty selling any investment at a reasonable price and in some circumstances it might be difficult to sell at any price.

Do not invest unless you have carefully thought about whether you can afford it and whether it is right for you and if necessary consult with a professional adviser in accordance with the Financial Services and Markets Act 2000. These products are not regulated by the FCA or covered by the Financial Services Compensation Scheme and you will not have access to the financial ombudsman service.

This page does not constitute an offer to invest but is for information only. Persons expressing an interest in the bond will receive an invitation document, which they should read and ensure they fully understand prior to making any decision to subscribe. Persons in any doubt regarding the risks associated with investments of this nature should consult a suitable qualified and authorised advisor.

VERSION: FI-2.0 25/06/15

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