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Fractional property investments – how to buy real estate in bite-size chunks

MAIN IMAGE: Rupert Finnemore, EasyProperties CEO

Staff Writer

Starting from as little as R1, anyone can now access real estate investment opportunities usually only available to wealthy people through fractional property investments.

Fractional property investing is an affordable way to build wealth as a collective. Through this platform, capital to purchase multi-unit property investment opportunities is raised through crowdfunding.

Private Property describes fractional ownership as the joint ownership of any asset by more than one individual or legal entity. It can be seen as a structured syndication method whereby several shareholders own shares in a particular company which in turn owns an asset.

The most used form of fractional ownership on a global scale is when a luxurious leisure property is purchased by a group of shareholders. The ownership is usually structured in a company whereby the property is the only asset. Shareholders thus own the property together and usage and all costs are shares in relation to percentage shareholding. Usage of the property is usually allocated to the shareholders (owners) by means of an ownership usage roster and running costs are divided amongst the shareholders. The management and maintenance are usually taken care of by one party, the fractional ownership company/provider.

Conventionally there are 13 shares and thus a maximum of 13 shareholders. Shareholders may purchase more than one share but in certain cases, no one shareholder may own more than 25% of the shares.

This is another digital option property practitioners should be able to present to prospective buyers, especially those contemplating investing in real estate as a means of saving for retirement.

“EasyProperties launched an accessible online platform that enables property investments to be treated like listed stock portfolios. Focus is on asset allocation, without property management hassles as in traditional buy-to-let investments,” says Rupert Finnemore, EasyProperties CEO, in biznews.com.

The growing investment product was launched two years ago and already is fast gaining traction with investors.

It has attracted nearly 10,000 people, with the oldest investor being 90 years old. Finnemore says 69% of investors are predominantly male and young investors aged between 21 and 36 years.

He notes that Lightstone recently reported that single women are the largest group of property buyers in the market and that his company hopes to attract more female investors into its community.

Gap in market

Lack of access to property investment opportunities and funding remains a hindrance to property investing, says Finnemore.

Property is a good investment asset for a discerning investor looking for income and diversification. Through tech, the company created an accessible platform for investors from all walks of life. It has facilitated the investment and purchase of 48 units valued over R50m. Located in Foreshore Cape Town, Sandton and Boksburg in Gauteng, these sectional title properties offer the live-work-play lifestyle.

How to invest

South Africa citizens and registered companies can buy shares in fractional property investments. Once-off investments into a new property collection can start from as little as R1. However, there are additional opportunities to invest through the buying and selling of shares, says Finnemore.

“Diversification across multiple units and investment opportunities means you end up owning a fraction of many properties.”

According to Private Property the main benefits of owning a share in a Fractional Property include:

  • Any increase in the value of the property accrues to the shareholders. This is the major differentiating factor between fractional ownership and timeshare
  • Better value for money – you only pay for your utilisation and not for the remainder of the year
  • Affordable ownership in exclusive destinations
  • The most exclusive addresses in South Africa normally increase in value faster than other residential properties
  • Ability to rent out your un-utilised weeks
  • Lower maintenance costs as it is shared between all shareholders
  • Less security concerns because of higher occupancy and high estate security

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