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Sharing satellites

| finance, fractional ownership, sharing | August 12, 2010

I was delighted to read about Caneus, which fosters international collaborative aerospace development, has a major project bringing together many countries to share space on satellites.  They are using a fractional ownership model to manage the use of the satellite, with 50+ owners; this will need to be a well written contract.

I think there is enormous scope for sharing much more, enabling people to achieve all kinds of objectives so much more cost effectively.  It’s good to see Caneus taking this on, so many people don’t even consider collaborating or sharing, or if they do, dismiss it as just too difficult.

We have all kinds of assets being shared on yours2share, maybe there’ll be satellites too soon!

Options for sharing property or real estate

| finance, fractional ownership, fractional rent, Property, sharing | May 12, 2010

About a month ago there was a great article in the Daily Mail discussing fractional ownership and private syndicates. Two yours2share members who share more than one major asset were interviewed: Graham Price shares a property and boat in France; and Bill Hosie shares a boat and an aircraft.

This created a great deal of interest in yours2share and I’ve spent a fair amount of time since then answering questions. Many people who are trying to sell a holiday home abroad wondered if sharing was the way forward.

There are broadly three ways in which you can share an asset: joint or fractional ownership, fractional rental and timeshare. The principles below apply just as well to boats, planes, motorhomes, cars and any major asset.

Joint ownership

Two or more people own the property: either they find each other first and buy together; or the existing owner of a property sells shares.

In the latter case, if the property was worth £100,000, the owner might think four shares was ideal and look for partners to buy quarter shares. As it takes time to find people to agree the deal, often they will sell one share at a time. This could mean selling a £25,000 share to each buyer.

However it is important that all the partners are like-minded. So the vendor often sells half to the first partner on board for £50,000. Then both owners look for the next partner. The third partner then buys a third share for £33,333 and the first two partners split this between them. If, and when, a fourth partner joins them, their payment of £25,000 is then split between the three owners.

Fractional rental

One or more people rent the property for several non-continuous weeks a year. The owner often doesn’t want to holiday let, but wants to generate some income and to ensure the property is kept in use.

Some numbers help to illustrate how this might work. For example a £100,000 property might let for £200/week in the low season, £300 in the mid season and £400/week in the high season. The owner looks for a partner that is looking for a holiday home for 12 weeks a year, split between the three seasons. If this was a straightforward holiday let, this would cost £3600 per year.

Most owner/holiday lettings company give a good discounts for this many bookings, but between £2000 and £3000 a year is reasonable for the 12 weeks. Usually this kind of arrangement is agreed annually, with all or most of the payment up front. Generally the weeks are not fixed (although the number in each season should be defined in the contract), but agreed once a year for the following year.

Timeshare

One or more people rent the property for one or more weeks a year and pay for the right to do this for several years in advance. This is similar to fractional rental, except all the rent is paid in advance.

Taking the example above, instead of (say) paying £3000 per year, they may pay £10,000 in advance for the right to use the property for 12 weeks a year for 5 years, or maybe £30,000 for the right to use it for 25 years.

Commercial timeshares are generally sold for periods of one to three weeks a year, and there are usually annual management/maintenance fees. There are strict laws on selling timeshare in many countries because, amongst other issues, the timeshare purchaser has to know that the property will be available and properly maintained for the contract duration. In general, I would advise private holiday home owners to avoid the timeshare model: this is why I rarely mention timeshare. However last week I had several questions about possible sharing arrangements which were effectively timeshare. There are many well run commercial timeshare schemes; I just don’t think it works for private holiday homes.

Sharing a holiday home is a great solution if you can’t justify the cost of full ownership and don’t want to holiday let. Finding like-minded partners, discussing and agreeing everything, getting advice, writing the contracts and dealing with the purchases, can easily take a year, or two, or more. If the property is a long term investment, this is fine for many people; they are looking for long term partners. But if holiday home owners need to raise capital fast or are struggling to pay a mortgage, sharing is less likely to be the solution.

I should make it clear that I am not a professional legal, financial, tax or property advisor. The laws on ownership, finance, tax and property vary enormously from country to country and if you are considering sharing property or any other major asset, you must get independent professional legal, financial, tax and property advice. And I mean “must”. Even within any one country there will be several entirely different ways of setting up an arrangement each with advantages and disadvantages. The best solution will depend upon all the partners’ particular personal circumstances. Sharing is very cost effective, but you do need to invest time and money into ensuring that the arrangement is properly set up.

Reduce the cost of running a boat

| Boat share, environment, finance, fractional ownership, sharing | April 13, 2010

Anyone who has ever owned a boat will tell you that the ongoing mooring and maintenance costs can be considerable.  One of the major advantages of sharing a boat is sharing these costs.

So I read this article in the Wall Street Journal today with a little amusement.  Sunk costs details the running costs of superyachts.  This isn’t for the faint-hearted!  People also often don’t realise that even the very wealthy share assets, they just might not advertise the fact.

Prince Madoc boat share

| Boat share, finance, fractional ownership, sharing | June 29, 2009

Prince Madoc will have identical sail pattern & masts to Vixen II, shown here

Prince Madoc will have identical sail pattern & masts to Vixen II, shown here

An interesting boat share ad was posted on yours2share over the weekend.  The Prince Madoc, a 65 foot stays’l schooner, is being lovingly restored by Dave Denning down in Cardiff, Wales.  The restoration has so far taken ten years, and he has worked on it full time for the last four years, accompanied by a string of students from around the world.

Dave now needs to find some further funding to complete the work, hence the ad looking for investors.

The plan is for the Prince Mado to become a dive-charter vessel sailing around the world so people can sail such a magnificent boat and dive in wonderful waters.

Here’s a link to the ad.

To fractionalise or not to fractionalise?

| finance, fractional ownership, fractional resales, Property | January 24, 2008

People often ask me whether they should fractionalise a property they are selling or not?My response depends upon whether this is a small commercial developer or a private individual.

For small commercial developers with a fairly small number or properties, say less than ten, I usually advise them to speak to consultants who specialise in this area.There are several and I have no experience of any of them, so I cannot comment on them at all. It may also help to contact other established small fractional ownership developments for pointers about consultants.

For a commercial fractional scheme to succeed, the fractionalisation must be suitable for the market in which you want to sell your properties.By fractionalisation, I mean the size and pricing of the shares and the model for allocating time.Successful schemes incorporate ongoing ownership, lettings and maintenance management so there has to be a permanent management team in place.Plus there is the legal and financial set up.This costs a considerable amount of money upfront.

The upside is that if you can sell for a good margin above the value of the property without splitting it into shares, then there is good money to be made.There are a stack of other factors specific to the development and developer that also need to be considered, many of which are the same as marketing the properties for sale as a whole.

Fractionalisation for private individuals is completely different.If they own a property which they find they don’t use enough, and they either don’t wish to holiday let, or are not making enough from lettings to justify the hassle of lettings (a common problem), then selling part of the property may be the perfect option and this is exactly what yours2share was designed for.They can sell one share at a time, (on the basis that further shares will be sold), getting to know each new sharer well before committing to the sale and moving onto the next.Selling two third or three quarter shares may take a year or two to find the right partners and then complete the sales, but this may be preferable to selling a holiday home they love simply because they can’t justify its costs.

Private individuals who think they can sell ten or twelve shares in a property they can’t sell anyway and walk away at the end having made a fast buck are an entirely different case.I try hard to discourage them.Marketing costs and effort are much higher: you have to find ten buyers not one.Professional management and maintenance must be put in place.These simple facts discourage nearly everyone as most are decent people are just trying to see how to maximise the return on their asset.

  • New blog (with all the old posts)

    by on February 13, 2008 - 0 Comments

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    by on January 31, 2010 - 1 Comments

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    by on March 26, 2010 - 0 Comments

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