What Are the Different Types of Fractional Ownership?

Fractional ownership is a type of arrangement in which several parties each acquire a percentage of the ownership of an asset. This approach can be utilized in a number of situations, allowing each owner to in turn have access to the use of the asset involved. At times, this arrangement is used in order to purchase assets for investments, allowing each of the partial or fractional owners to receive a return on the investments, while at other times fractional ownership is focused more on shared use of the asset for personal or recreational purposes.

One of the more common types of fractional ownership is seen in the purchase of real estate as vacation or holiday residences. With this arrangement, all of the property owners involved have the opportunity to work out a schedule allowing each one use of the property over the course of a calendar year. During those periods in which none of the owners wish to make use of the property, it can be rented or leased as a means of generating income for all the partial owners. Properties such as condominiums, beach houses, and lakeside cabins may be purchased with a partial ownership arrangement, with the use of the property arranged through means of a contractual agreement between the co-owners.

Another common type of fractional ownership arrangement has to do with the acquisition of assets such as boats or planes. For example, two or more people may choose to purchase a yacht or other type of pleasure boat together, sharing in both the benefits and the responsibilities jointly. Even two corporations may choose to purchase a company jet together, sharing the costs of upkeep and maintenance while also working together to plan when each partner has access to the jet for business use.

There are even situations in which investors may choose to purchase assets with the intention of holding them for the mutual benefit of all partners concerned. When this is the case, the fractional owners share in any profits that are generated as the assets increase in value while also sharing any losses when and as the value of the assets decrease. This arrangement can be used in some nations to purchase shares of stock, but is more often utilized with alternative investments such as artwork or jewelry.

With any type of fractional ownership arrangement, the co-owners share the burden of any operational and maintenance expenses as well as taxes owed on the assets involved. At the same time, the owners will also each receive a portion of the profits or returns generated by the assets, with the individual returns based on the percentage of ownership. For example, if three owners are involved in the fractional ownership arrangement, with one owning half and the other two 25% each, then both the profits and the costs of ownership will be shared based on the proportion of ownership.