advertisement
Personal Finance

How to own luxury assets without breaking the bank

 

There have been a lot of promotions for the ‘timeshare’ and fractional ownership concept of owning homes and assets. This concept allows people to own very expensive luxuries like yachts and planes at an affordable price.

However, before investing in such assets, one must be careful as there a lot of dubious deals in the global market.

All the articles I read about purchasing global fractional properties called for caution.

Not because the concept is a bad one but because some people are taking advantage of the high-end want to sell misrepresented concepts.

Therefore, before investing in a fractional ownership please do your due diligence and that includes a site visit even if the asset is abroad.

advertisement

There are a few timeshare holiday concepts in the Kenyan market, especially at the Coast and the Rift Valley where Kenyans like to go for holidays. Is it, therefore, worthwhile for you to invest in such a concept and how does the concept work?

These two concepts are one way of being a part owner of luxury assets without breaking the bank.

Fractional ownership is where a number of individuals each own a percentage of the asset and the rights given to them are granted on a prorated rate.

On the other hand, timeshare grants you a certain number of days or hours to access the asset prorated to your investment.

To further explain the concept, using the example of plane fractional ownership — also known as fractional jet share — as an investor in this concept you would be a part owner of the plane and you would be allocated prorated hours to use the plane.

The higher your investment the more access hours you have to use the aircraft.

However a fractional jet share is a very specific concept of plane ownership where aircraft leasing companies enter into this concept with investors. Jet shares have minimum investment requirements and the period is usually a minimum of five years.

This is a concept that a corporate with a lot of international staff travel can consider. It may even be cheaper in the long run to invest in a fractional jet share than commercial airline ticketing.

There are specific contractual documents that go with this concept.

The purchase agreement governs the terms of your investment, since many users own the plane. They all have to sign an agreement regulating usage. A management company runs the aircraft that would deal with issues like operations, technical care, staffing — including pilots and cabin crew, hospitality, hangar fees and so on.

Fractional yacht ownership appeals to those who love to frequently travel and take cruises round the world. For a one-off fee you are guaranteed a certain amount of weeks each year on a luxury yacht.

The main benefit of these concepts is that they allow you access luxury assets that you otherwise cannot afford.

The beauty is if you want to exit, you can transfer your share to a third party just as you would a listed share or stock.

In the long run these concepts may cut costs spent on travelling and holidays or may even increase them. Therefore, it is important to engage a financial expert to do the math.

The downside is you cannot have access to the asset when you want and have to follow a rigid schedule — a small price to pay for owning that plane for 200 hours a year!

advertisement