Are you considering buying a second home? You may have heard about fractional ownership, but what does it really mean and how could it benefit your second home purchase journey? Fractional ownership is an increasingly popular option for people looking to buy a holiday or second property. From the initial reduced cost of entry, flexible usage rights and access to luxury amenities usually not available in lower-price housing options – read on to discover why fractional ownership could help make your dream of owning a second home come true.
Are you considering buying a second home? You may have heard about fractional ownership, but what does it really mean and how could it benefit your second home purchase journey? Fractional ownership is an increasingly popular option for people looking to buy a holiday or second property. From the initial reduced cost of entry, flexible usage rights and access to luxury amenities usually not available in lower-price housing options – read on to discover why fractional ownership could help make your dream of owning a second home come true.
Foreign owners cannot use their second home in France or Spain for more than six months a year anyway. Why pay in full, then?!
With fractional ownership under one name, you can only purchase up to half the property (4 parts of 1/8th shares). Incidentally, this is also the maximum amount of time that any foreign owner can spend on his/her property in France or Spain (usually in most parts of the world). Even residents of other countries in the European Union are limited to six months a year. Unless, of course, they decide to apply for Spanish or French residency and pay tax there.
British residents, following Brexit, cannot spend more than 90 days in an EU country for any 180-day period (total six months minus one day). With fractional ownership, only buying 1/8th part (the minimum) gives you an average of 45 days/year. Two parts give you 90 days, three parts 135 days or four parts 180 days.
So, with co-ownership, when you buy half the property (four parts), you only pay half the purchase price and half the running costs and taxes on the property. Would that not make more sense than buying 100% of the purchase price and 100% of the running costs/taxes for a second home you can only use six months a year in the best-case scenario?
Also, don’t forget those second European homeowners use their property only 35-40 days a year!
Pros of buying with fractional ownership or shared ownership
1. Reduced purchase price
Fractional ownership provides an ideal option for second homeowners looking for a cost-effective way to purchase a second home property. With fractional ownership, buyers have the ability to purchase a share of a home (deeded ownership), rather than owning the entire property outright. Rather than having to buy a property outright and pay 100% plus legal fees, fractional ownership allows you to purchase a share of the property (unlike Timeshare where you own only “time”), which can be as small as an eighth of the total cost.
Acquire a premium property
This opens the door to significantly lower initial costs while still allowing buyers to enjoy luxuries such as ski-in ski-out access or golf course views. This can make it much more affordable to purchase a second home, especially in desirable vacation areas where property prices can be high like Ibiza or the French Alps.
By pooling financial resources, multiple owners can purchase a more expensive property that may otherwise be out of reach for them. High-end properties appreciate better over time therefore you can resell your part(s) for a profit after a few years.
Example with a ski property in a private residence
Imagine that you want to acquire a luxury property in the French Alps. The property you have your eye on is a beautiful 3-bed apartment in Courchevel that would cost you 1.4M€. With fractional ownership, you could purchase an eighth share of the property for just 175,000€. You get to enjoy it just as much as you would if you had paid the full price.
Not only that, but the fractional purchase price allows buyers to invest further in their lifestyle while staying in their vacation home. Holiday properties in top locations have become unatainable for many in the last ten years. Through this innovative form of property ownership, more people can now realise their dreams of owning a second home at an affordable cost.
Fractional ownership (also called co-ownership) offers considerable savings on upfront costs when compared to traditional home ownership.
The cost of a premium second home in a top location can be hefty, so the opportunity to share part of the purchase with other like-minded owners gives those interested a much greater range of options.
Did you know?
Second homeowners in Europe use their property on an average 40 days a year. One-eighth share gives you more than that.
2. Turnkey experience: renovation, interior design and furniture
Fractional ownership of second homes offers a world of convenience, allowing homeowners to enjoy their property without having to worry about upkeep or finishing touch details. By fractionalizing, you get the benefit of a turnkey experience—many properties include renovation and interior design services, as well as furniture and décor packages. This can be especially beneficial for those who are looking for a second home that is ready to be enjoyed right away, without the need for any additional renovation or decorating work, especially when the property is abroad.
Hassle-free property management
With everything taken care of from start to finish, the entire journey from signing your contract to enjoying your beautiful space is smooth sailing. Fractional ownership packs all the benefits of owning a second home into one hassle-free package that puts your comfort first—allowing you to spend more time in your space instead of managing it.
This means that you can relax and enjoy the process of becoming a second home owner, without having to worry about the administrative details that come with purchasing a property. By the time you receive the keys to your apartment, it will be fully ready for you to move in and start enjoying your new property.”
More amenities
Because you split all the costs, you could decide to fit a hot tub on the terrace should a majority of the co-owners decide to. Often homes sold by our partners include the latest also in home automation.
3. Split the running costs and taxes on the property
The typical running costs associated with fractional ownership of a second home include property taxes, maintenance fees, utilities (such as water and electricity), insurance, and any other miscellaneous expenses. By pooling resources, these costs can be split among the co-owners which results in lower monthly payments per individual. This makes it easier to comfortably afford all of your desired features without sacrificing quality or breaking the bank.
What are the typical running costs of a second home?
Typical running costs of a home in France or Spain are:
-Utilities (electricity/gas and heating/air con)
-Water
-Broadband Internet
-Insurance and content insurance
-Sinking fund for apartments in a building (to cover any emergency)
-Service charges for apartments in a building or complex (urbanizacion in Spain)
-General maintenance inside the home
-Swimming pool maintenance for villas
-Gardening fees
-Fireplace maintenance if any
Overall, by splitting running costs among several owners, it is possible to significantly reduce the financial burden of owning a second home. This makes luxury property ownership more attainable while still minimizing risk and maximizing convenience. Not to mention that the property management company is doing everything for you!
What are the typical taxes paid on a second home?
In addition to shared running costs, the taxes associated with the property will also be split among the owners. In France for example you pay approximately 30 euros per sqm in taxes (property tax and council tax), so for a 200 sqm property you will pay around 6,000 euros/year. With fractional property ownership, you divide by eight if you own one-eighth of the property, therefore you would only pay 750 euros/year.
Do you pay the French or Spanish wealth tax on a fractional ownership property?
In France, the wealth tax applies to second homes over 1.3M. However, as with all taxes associated with the fractional ownership of a property, they will be split among the owners depending on their share in the property and therefore individually no wealth tax will be due.
Overall, by splitting running costs and taxes among several owners, it is possible to make luxury property ownership more affordable for everyone involved. With fractional ownership of a second home, you can enjoy all the benefits of owning luxurious property without having to worry about managing it or bearing the full financial burden.
4. Accessibility and hassle-free convenience
With fractional property ownership, all the hassles associated with owning a second home are taken care of by the property management company. This means you arrive at a home which is professionally cleaned with clean bed linen, towels and everything ready for you to enjoy your home. Fractional ownership also makes it much easier and more accessible for people who are unable to commit to the full time needed to manage a second home abroad.
Fractional owner and rental income
Fractional owners can enjoy both personal stays and rental income from their property. With most of our fractional properties, the fractional owner can have the days that he is not using, rented out to generate income. This is an excellent way to reduce even further the shared costs.
With fractional ownership, you can enjoy all the benefits of owning a property abroad with none of the stress, so why not get started today?
Why the fractional ownership market is probably the next big real estate shaker?
With sky-high prices for top properties (rental becoming also increasingly expensive) and timeshare a very poor alternative, fractional ownership is the perfect solution for anyone looking to enjoy a luxurious property abroad without taking on all of the financial and logistical burdens associated with owning a second home. Fractional ownership is a great way to experience all the joys of owning a second home without the hassle and expense. So why not get started today and make your dream of owning a property abroad come true?
By taking advantage of fractional ownership, you can enjoy all the benefits of owning a second home with none of the stress or financial burden.