More ishares hit the market
18 December, 2007GIC’s UBS stake puts Singapore into Switzerland
1 January, 2008NEW PRODUCT
The Redrock Property Investment Fractional Ownership scheme
What is it?
It’s a way for you and several other parties to chip in and share the purchase costs of a holiday home. It’s sometimes referred to in Australia as “tenants in common”.
How does it work?
Let’s say you like the idea of a holiday home, can’t afford to buy one outright, or you don’t want to have the financial and management burden of running a property you are hardly ever in. Several property investors pool their resources to buy a share in the ownership of the property – including a share of the freehold title, which is the key difference between fractional ownership and time share (so in theory you can get capital gains too).
So how do I work out who gets to use it and when?
That all gets spelled out in contracts at the start of the process, along with who pays for maintenance, when the property might be sold, and other important things to think about. The management of the property utself is done by a professional property management company.
How do I sell out?
Redrock says it provides fractional investors with options to exit their investment “every three to six years” – but perhaps a better hope is that a secondary market develops for fractional ownership holdings, in which you sell to other buyers rather than back to the property company.
What are the disadvantages?
One obvious one is if you want to use the property at the same time other people do. Another is needing to be able to plan ahead exactly when you’re going to want to use it. Another is that, until a market really develops, you may well find yourself unable to sell out when you want to. But it does provide a cheaper way of getting access to a holiday home while still benefiting from any increase in its value.
Where can I invest?
Redrock is starting out with Mirvac’s Magenta Shores development on the NSW Central Coast.
