Saturday Brain Storming Thought (102)-27/02/2021



Fractional ownership is a percentage ownership in an asset

Fractional ownership shares in the asset are sold to individual shareholders who share the benefits of the asset such as usage rights, income sharing, priority access and reduced rates

The usage benefits that the fractional owners receive are comparable to those of timeshare owners

Key points of fractional ownership

1) fractional ownership is an investment approach in which the cost of an asset is split between individual shareholders

2) all the shareholders split the benefits of the asset, such as income sharing, reduced rates and usage rights

3) this type of investment split is common in the purchase of expensive assets, such as vacation homes, luxury cars and aircraft

4) several unrelated parties can share in and mitigate the risk of ownership of a high value tangible asset

5) it can be done for strictly monetary reasons, but typically there is some amount of personal access involved

Advantages of fractional ownership

1) shared cost

2) ability to buy a better property in a better community

3) less property vacancy

4) more capital for property upgrades

5) shared duties for rentals

6) HOA (home owners association) or local restrictions

7) clashing plans for vacation homes

8) it’s more affordable

9) peace of mind

Disadvantages of fractional ownership

1) selling can be tedious task

2) consensus can be tough

3) you are tied in one location

4) restrictions may be present

5) could be subject of restrictions, banned outright in certain areas or hit new forms of taxes

6) access is allowed in certain amount of weeks or space occupancy

7) in certain commercial real estate property, they may not have any access right at all

Difference between fractional ownership and timeshare ownership

In fractional ownership the investor owns part of the title rather than units of time which is in timeshare ownership

With fractional ownership, if the asset increases in value, the value of the shares in the investment does as well

In timeshare ownership you buy the right to use a property

Fractional ownership condominium

It is a way that individuals can purchase a condominium jointly with other people

When you engage in this activity, you will own a fraction of the condominium and will use it for a specific amount of time every year

This is similar to a time share arrangement, except that it is with higher end properties

Selling of fractional ownership

1) choose an agent with experience in fractional share ownership, as many potential buyers will be unfamiliar with the concept

2) sign the sale contract

3) perform any contract obligations and attend closing to sign over your financial share by deed in Return of sale price

Creation of fractional property ownership business

1) decide on the type of fractional ownership you will offer

2) set up a legal entity for your business and register your business name with the country in which you set up

3) purchase the property that you plan on selling as a fractional ownership
4) buy the appropriate type of insurance for you’re business

5) you should also get a general liability insurance policy to protect yourself from litigation

6) promote your business

7) you need to make sure that you advertise in areas where your customers will see the ads

Fractional ownership in cloud computing

In a fractional ownership situation, your practice pays a percentage of the price of the physical data infrastructure as well as a percentage of an annual management and maintenance fee, the practice then owns and uses a percentage of the data environments needed

Quarter share ownership

Under a typical quarter-sharing arrangement, each of four owners gets the use of the facility for 13 weeks annually, usually in two week blocks that rotate every year so that each family receives the right to all 52 weeks over a four year period

Fractional amount

A fraction of something is a tiny amount or proportion of it

Fractional distillation

It is the separation of a mixture into its component parts, or fractions

Chemical compounds are separated by heating them to a temperature at which one or more fractions of the mixture will vaporize

Fractional shares of Amezon

Fractional share trading, or money based investing, allows anyone to buy Amezon, because you can simply specify how much money you wants to invest in the stock rather than the amount of shares you want to buy

If your buying power doesn’t afford you a full share, you can buy a partial one

Undivided fractional interest

An undivided interest is defined as an identical fractional or percentage interest or share in each right, benefit and obligation with respect to the subject matter of a contract

Fractional shares

Fractional shares let investors buy a portion of a stock, making it easier to diversify even with small amounts of money

Typically, fractional shares aren’t available from the stock market, and while they have value to investors, they are also difficult to sell

Shares and pay capital gain tax only on the gain or loss

You can buy fractional shares of bitcoin

Fractional appraisal

Fractional valuations involve the valuation of a percentage of a person’s or entitys ownership in a real estate holding company or operating business entity

These interests are not appraised simply as a fraction of the value of the entire business entity or holding company

An appraisal of a portion of a property, such as value of leasehold interest, value of an improvement without land

Fractional interest valuer must see

1) the real estate does not transfer at the date of value

2) its financing

3) its operating arrangements – management, development and other matters

4) other partners if any

5) operating conditions

6) cash flow may be non-market

7) the only hypothetical concerns the subject interest

Fractional interest valuation conclusion

1) professional disconnects are a huge issue – lots of ways to create disasters

2) take advantage of opportunities

3) your access to critical facts is the master key to winning fractional interest vsluatins

4) facts and circumstances drive the entire value analysis and produce holding period and risk measures suitable for connecting

5) model structures are seriously risky, and should be avoided

Process for fractional valuations

1) define value
Determine what value is being sought

2) gather data
historical and projected financial, operational and economic information, companies financial statements, tax returns, history of ownership changes and resumes of current management, Buy-sell agreements, customer & vendor lists

3) determine the value
Analysis of information gathered, decide proper valuation method

4) adjust the value
Factors affecting the value should be considered, ie economic trends, industry factors, competition, intangibles, regulations, market position and internal controls

5) adjustments for non controlling interest

Compiled by:-

Avinash Kulkarni

Chartered Engineer
Govt Regd Valuer
IBBI Regd Valuer