The advantages of fractional for developers

Background information on FOC Fractional Ownership Consultancy is leading the way in helping developers increase profit and sales by selling homes in fractions.

The Fractional Ownership Consultancy (FOC) has a range of options and services to help developers ‘fractionalise’ their projects. The incentive for a developer is two-fold: profit and an increase in the pool of available buyers.

“A developer can sell more property, more quickly, for more profit," says Nick Hannah, director of FOC. "If a unit costs €500,000 a developer can, through our company, divide this into lots of four and offer these fractions for sale at €150,000 each. The villa sells for €600,000, an uplift of 20%. There are more buyers around who are willing to invest €150,000 for 13 weeks usage a year instead of €500,000 upfront. We are also finding that investors, in these uncertain times, like to spread their ‘risk’. By fractionalising, they can invest in four separate properties for the price of one.”

The unique FOC system helps developers as it removes all the administration previously associated with this type of ownership and solves any title issues.

Nick continues: “Developers can offer four unconnected buyers an equal share of a property that can be sold, gifted or bequeathed at any time without affecting the other investors. We also remove the need for lawyers to be notified in the country of sale which had to be done previously.”

The main stumbling block to fractional ownership used to be the availability of finance, with banks reluctant to lend a fraction of the amount (as the whole property must be used as a guarantee, encumbering the other investors). The other option was to secure the fractional mortgage against the investor's UK property, which few are happy to do.

Nick Hannah says: “The Fractional Ownership Consultancy has partnered with the Manchester Building Society to offer unique fractional mortgages to investors. This is a great selling point for developers. We can offer a 60% LTV fractional mortgage that is secured against a certificate of ownership as opposed to the whole property. We also have a 95% LTV mortgage but this will need to be secured against the investors UK property.”

FOC also wants to work with agents who can refer the firm to its developers. “This means an agent will have two income streams. One from us for a referral and the commission a developer pays for the sale of its properties,” noted Hannah.

For further information, visit fractional.net.