Dear Lauren

There are quite a few forms of property ownership, and the two that you have asked about are among the most popular.

Property syndication is generally viewed as an investment opportunity in high income, low-risk commercial property. However, if you and, say 3 friends decided to buy a holiday home together at the Vaal Dam, then this could also be viewed as an informal property syndicate. In order to effect a combined purchase, you could form a trust, a company, a close corporation or even purchase jointly in your personal capacities. Take into account that the maximum number of shareholders in a company is 50, members of a close corporation is 10 and beneficiaries of a trust are unlimited.

Irrespective of what method you choose to purchase the property, you could all:
- decide how to split up the years worth of time at your shared holiday home
- provide funding for any levies, services, insurance etc.
- decide how to furnish the home and what would be necessary to maintain and clean the property. Either each personally take on the responsibility for all of the upkeep or “outsource” all these duties. The syndicate would need to decide this as a group and apportion the costs accordingly.

As a result of this hands-on approach where no management services are used, and the group making use of only the services it deems warranted, running costs are generally lower.

Property syndication (or joint ownership) allows you to invest in, and enjoy property, that perhaps would normally be out of your reach financially.

Generally in the case of fractional ownership, a private company owns the holiday home. A 13th share (or other multiple of 52 weeks) of the property can be purchased. This 13th share equates to a 4 week allocation to you per year at your holiday home – this could be 2 weeks in the summer and 2 in the winter. A professional management company is responsible for the upkeep of the fully furnished property. In some instances luxury and professional services are provided to fractional owners e.g. butler, chef, travel etc. which obviously attracts a far higher levy.

Fractional ownership does offer flexibility - if you decided not to use your allocated time, you could give it away or sub-let it. The management companies often administer a rental pool into which all the unused time is placed.

The risk associated with fractional ownership is if the price of the shares of the company which owns the property, is over-inflated to begin with. The shareholder might then not realise the return on their investment if they decided, for whatever reason, to leave the scheme.

Both forms of property ownership – syndication and fractional – appeal to different markets. The most basic questions you need to ask yourself are: “What are my needs? Which location would fulfil my holiday requirements? What ownership scheme best suits my financial status?”

Hope this helps