Savings And Investments Tristan on 24 Jul 2008 08:32 am
Fractional property investments
I noticed that we recently had a post from a chap at World 16, who offer fractional property ownership clubs. I had a look at their website and contacted them to find out more.
It’s an interesting concept. They get together a group of investors who want to invest in property, but either don’t have enough money to put down a deposit or simply want to limit their exposure by only investing a small amount.
How they achieve this is by setting up a company that buys and holds the property, with each investor owning an equal share in the company and World 16 acting as the company secretary and management of the company.
Typically they get sixteen investors together, take £3,000 from each investor, subtract their management fees, and then invest the remainder into a good investment property, with the company taking on a mortgage to pay for the rest of the purchase.
I think it’s a great idea. It opens up property investment to a much wider market, as the entry price is the same as a cash ISA.
The real benefit they have however, is that unlike a cash ISA, they have the power of leverage, and a typical £3,000 investment could double within a few short years, unlike a cash ISA which would just about keep pace with inflation.
I don’t know if there are any more companies out there that do this, I’m betting that it’s going to become more popular, since mortgages are harder to get hold of, unless you can find a 25% deposit. I suspect it will become very popular for the “armchair” investors, who simply want to write a cheque and see a return in two, five or even seven years.
