Questions and answers about
fractional ownership, or the IP Spain shared property investment scheme
called "SPI"
Q & A about our Spanish
fractional ownership scheme
What is a shared property investment or SPI?
It is no different to a normal property investment except you are
investing with other people in a property to reduce the deposit or
investment required and share all costs involved. A company is created
to purchase the property and shares in the company are equally owned
by the investors. The company is managed with a set of rules that
all share owners agree to abide by and the property is contracted
to be sold off in 6 years time after which all profits are divided
equally and the company is closed. Use of the property is shared equally
and the schedule of use is built into the company rules.
Why buy a share in a property?
SPI suits many different strategies. For example it can enable you
to purchase a share in a property that would be outside your budget,
or you might wish to spread your funds and invest in several projects
instead of one, or you fully understand the idea of a geared property
investment but do not yet have sufficient capital to invest in a property
on your own.
Is SPI as good as an investment as a straightforward property
investment?
Yes, there are some more costs incurred running the limited company
and the property has to be fully managed, but there are also some
benefits. Because the property is fully managed you don’t have
to worry about cleaning, for example, all of the bills will be settled
by the property management company. You only have to ensure that your
share of the costs are paid into the company bank account. Everything
else will be taken care of. Taxation on the capital gain is also different.
When the property is sold all costs incurred during ownership, maintenance,
for example, will be offset against the profit.
Who will the other owners be?
Normally they will be made up of other like minded investors, although
if you wish and have friends, or family that would like to purchase
a share in an investment property also, we can set up a SPI scheme
on a property of your choice.
When can I use, or have access to the property?
If a property has been completely handed over to a rental management
company, for example the SPI units in the Fortune Spa development.
No use is included for the co owners.
If the unit is intended for individual rental and use by the co owners,
it will be available immediately on completion, as per the calendar
of use.
Can I rent out the weeks that are allocated to me?
Again with the exception of properties that are handed over completely
to a rental management company, yes, you can rent out your allocation,
either privately, or through a rental management company of your choice.
How much do I need to invest?
This depends on the property selected and the deposit required. As
a general rule we select properties with a value of around 130,000
Euros, in projects that entail a deposit of 20%, or 30%. There are
usually three or four co owners purchasing together, therefore investments
can start from 5% of the purchase price, plus provisions for a pro
rata percentage of the sales tax on the deposit, as well as funds
to set up the company that owns the property.
Can I sell my share?
Yes, although as shared ownership is a relatively new concept, it
will be some time before we have a share to sell. Your share can be
sold before the end of the agreement. However this should currently
be looked on as an escape route only.
In the future we believe that property shares will be an alternative
option in the holiday home market as the market at these reduced price
levels is huge and it will be possible to buy and sell SPI shares
freely either through our company, or any estate agency. Finding buyers
will only become easier as the concept becomes more familiar. Over
the length of the ownership agreement it will increase in its liquidity
significantly.
How do I sell my share?
Again as this type of property ownership is relatively new, not all
estate agents will be comfortable with the concept, in our view this
will change in the future as more and more people choose to purchase
property shares. Any willing estate agent will be able to handle the
sale.
When do I receive the return on my investment?
If the property is handed over completely to a management company
for use with a rental scheme, profits will be paid to the partners
on an annual basis after the year end tax returns have been made.
As the main gain is from geared capital appreciation of the property,
this obviously can not be realised until the end of the investment
term when the property is sold. If the co owners are all in agreement
however, it would be possible to arrange a re-mortgage of the property
before the end of the term to withdraw some of this gain.
Who looks after the property?
In the case of a fully rented unit the property management company
will be responsible for the property. If the property is intended
for use and rental by the partners, a management company will be employed
by the co owners and this company will employ the cleaner as well
as organising any property maintenance that is not taken care of by
the community of owners for the development.
How and when is the property furnished?
When the property is completed the management company will select
a suitable package for the property in question, the cost for which
will be invoiced to the SPI company and shared by the co owners.
How long is the investment term?
This is set at the start when the property shares are first offered.
The investment term is usually between five and six years in total.
At the end of the term the property is sold and the profits are divided
between the partners. This is explained in greater detail within the
rules and regulations. If the co owners are all in agreement the investment
term can be extended.
How much profit can I make on my investment – what
is the expected return on my investment?
Profit is mainly made on the capital appreciation of the properties
value which is maximised as the investment is geared, usually using
a 20%, or 30% investment, providing a 5 to 1, or 3.33 to 1 ratio.
In this case we can project using past performance as a base and estimate
the expected gain. This information is usually provided within the
property description.
Who is responsible for damage to the property, or its contents?
The co owner accountable for damage to the property, or its contents,
is the co owner that was responsible at the time of the incident.
This is documented within the calendar of use that has been incorporated
into the company. The cleaning company will be responsible for reporting
any damage found.
General information
The
IPS fractional ownership, or shared property investment scheme “SPI”
