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The IPS fractional ownership, or shared property investment scheme “SPI” Our fractional ownership
scheme Geared property investment has in the past only been available to clients that have significantly more capital to work with. A simple explanation of a geared property investment is when a small deposit is used to secure the purchase of a property in construction, usually 20% to 30% of the purchase cost. With capital appreciation, the total value of the property increases during the two or three year build time, even though we have not paid the full cost. With this type of investment, as with most off plan investments, the longer the construction period the better, as we do not have to worry about funding the balance until the construction has been completed. On completion a mortgage is used to fund most of the balance and the property can be rented to cover the loan interest. As the additional costs from the mortgage are covered by its rental income, we can retain the original geared investment ratio. SPI works by bringing smaller investors together to share the deposit required, for a fixed term, usually between five and six years in total. Using their extensive experience in this field, IP Spain selects the best unit from those available in an exciting new development, with superb potential and the three or four partners invest in this property together. This is achieved by creating a new, Spanish limited company (S.L.) to purchase the property. This company is equally owned by the three, or four partners involved. An accountancy company is employed by the limited, or S.L. company to administer the running of it, its bank account and its taxation. Initial share capital, management and accountancy costs, as well as the deposit for the chosen property, are all shared equally between the partners. When the property has been completed and the keys handed over, the balance of the purchase cost is funded proportionally, usually using a mortgage provided by the development’s funding bank. All further costs and the annual running expenses are divided equally between the owners, as is the use of the property. Each group of co owners can agree to undertake the care of the property, or alternatively the co owners can elect to hand the property over to a property management company that can arrange its rental for them. If a rental scheme is available for the project and private use is not a pre requirement, the property can be used solely as an investment vehicle and should be able to produce an income in the first year after completion, this income will grow steadily as rental yields increase. To protect the partners the company is incorporated with a set of rules and regulations, all owners mutually agree to these conditions that are set out in the SPI, shared ownership agreement. This agreement has been carefully drawn up by Investment Property Spain, together with our solicitor and accountant, ensuring peace of mind, as the investment will not be subject to any misuse. The investment and ownership term is fixed. The initial contract for a SPI property is usually a 5 year term. However the five year term starts after contracts have been issued if the project is purchased pre licence. This procedure is explained fully within our guide. In this instance the initial capital required will be negligible, as the deposit is not payable until the licence is issued. When the 5 year period has finished, the co-owners can agree to sell
the property, or if they all agree, renew the contract for a further
term. All of the shared property Investments that IPS offer units in, are genuine investment opportunities, aimed at individuals that wish to invest in the Spanish property market, in an affordable way, as well as investors looking at the possibility of building a varied investment property portfolio, by spreading their available capital between several SPI projects. Questions and answers
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