Fractional ownership schemes are marketed using the advantage that fraction valuations are underpinned by the value of real estate. However as soon as real estate is put into a fractional ownership scheme it will no longer be valued in the same way as it would have been as a complete unit.
When is Real Estate Not Valued as Real Estate?
Answer: When it is part of a fractional ownership scheme!
This is not always a bad thing, because resale fractions could (and sometimes have) been valued at more than their fraction of the original real estate value. However a proper exit strategy is required to cope with the possibility that the fractional valuation may be less than the value suggested by the underlying real estate.
Why is Real Estate a Good Long-Term Investment?
Real estate has proved such a reliable investment over the long term (ignoring the last year or so) because:
1. It is “produced” using a scarce/finite resource – land. This has a greater effect in crowded countries like the UK but is true to a greater or lesser extent with all locations.
2. It has an enduring utility value. Everyone needs a...
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