If you’re looking to buy an apartment, you may have come across the term ‘fractional ownership’ in Paris.
But what does this mean, and what does it involve? And more importantly, is it something you should consider?
In this blog we explain the system, and lay out the pros and cons you will need to weigh.
What is fractional ownership?
In short, fractional ownership is a way of purchasing a share of a property, in partnership with other buyers. The group is usually put together by a syndicator or developer.
Collectively, you’ll each get to use the property for a set period each year.
So if there are 12 owners, you’ll probably get to use it for one month each year. 24 owners and it’ll be for two weeks a year.
This system began in the USA in the 90s. But since then, it’s gained popularity in France and many other countries in Europe.
If this sounds similar to a timeshare, that’s because it is in many ways. But there are some important differences.
Benefits of fractional ownership in Paris
Unlike a timeshare, with fractional ownership you will usually own actual bricks and mortar, and have deeded ownership of the property. This is in the form of shares.
Think of it like buying shares in a company, but one where your investment exists in real estate. It’s an asset that you own and that you can sell.
The benefits? Firstly, it’s far more affordable than purchasing an entire apartment in Paris.
As your money is stretched in a pool with others, it can also open up luxurious apartments beyond your budget. Plus, your purchase could still serve as a financial investment.
You’ll have a defined period in which you can stay in the property, living the Parisian lifestyle and all the wonderful attractions of the French capital.
If all this sounds too good to be true, that’s because in many cases, it is.
Downsides to this arrangement
As you would expect, there are quite a few downsides to fractional ownership in Paris.
These are the same issues those with traditional timeshares might experience.
For example, deciding who has access to the apartment at which times can get complicated. The other owners will usually be strangers who you never actually meet, which can make communication difficult.
Everything from the beds to the bathrooms will be shared by these people when they visit, and suffer an increased amount of wear and tear throughout the year.
These are all points you will want to carefully consider.
Fractional ownership as an investment
Going into this sort of arrangement and expecting to make a substantial profit is not a given, for several reasons.
The developer controlling the syndicate will require payment. This will be from the outset, along with ongoing fees every year. This has the potential to increase costs until the property can’t be sold at a profit.
Many of these properties are purchased above market rates, then renovated to high standards at equally high costs. This means they simply will not recoup their costs when the time comes to sell.
Overall, a Parisian apartment owned this way is also harder to sell than a privately-owned property, as only those looking for a fractional arrangement will consider it.
When it comes to tax, there are virtually no benefits either, as fractional shares purchases aren’t usually deductible.
For these reasons, we would not recommend using fractional ownership purely for investment reasons.
It’s more of a personal lifestyle decision than an investment one.
Final thoughts about fractional ownership
Before entering into this sort of agreement, reflect on what you expect to get out of owning a Paris apartment.
Think about your travel schedule. How often do you plan to use the property? Will you be happy with a limited and inflexible period every year?
Then there’s your lifestyle. Are you comfortable sharing an apartment that’s constantly used by other people?
Finally, think of the financial risks. This is not as fluid as having your own apartment.
Have questions about buying or renting in Paris?
If you want to talk to our real estate experts, please get in touch with the team at 56Paris.
All information given in this blog is current at the time of writing and is a guide only. At 56Paris, we always recommend consulting a legal and/or finance professional for advice on your own personal situation.