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.