You don’t have to be a listed company to invest in property. You can start with only R20 000.
While most people don’t like the concept, Fractional Property ownership has been in the market since 2005 when it became a new buzz word in the time shared holiday market, but since the introduction of points-based indirect time shares, this segment has lost traction as an investment vehicle.
At The High Option, we make the best use of what the law allows us to do.
Our Fractional Ownership schemes allows from 4 to 100 people to own a fraction of a specific property with two intended purposes. These are:
Capital Growth Investments.
Fractional Ownership in a capital growth plan is ideal to buy a property, and let it lay there until a specific point in time, when it can be sold for a profit. At 1/1oth of the selling price, a property of R5 million can be scooped up by 10 people, each investing R500 000. It can then be used for a specific purpose, or sold at a predetermined price somewhere in the future.
We do however offer the same plan, with lower end properties. For instance, a normal plot in a sought after development is selling for R350 000. If 10 people pull resources and buy it in a company, each only contributes R35 000. Capital growth is around 8% per annum, exceeding most bank’s interest on fixed term investments and notice deposits.
However, we offer a further discount in that you do not have to invest in a new company. All you need to do is buy a specific share in our portfolio to gain the benefit of Capital Growth. An allocation is made from our authorised preference shares and we buy the property once the allocated shares have been taken up.
Each shareholder receives a contract which will highlight the transaction and its benefits as well as the term and exit strategy.
Allocations starts at R12 000.
Rental Income Investments.
Another allocation of our authorised shares goes toward the acquisition of rental income properties. Rent can be derived as a common asset or as a individual asset. In both cases, the rental income well exceeds the prime-linked savings rate, and has the added benefit of capital appreciation over a medium to long term.
An example of a common asset rental income property, would be something like a shopping centre, where every shareholder shares the nett income derived from the leasing of retail space.
An example of an individual asset rental income, is for instance a lodge with 5 chalets. Each shareholder gets to rent out the Chalet for his / her own account, while all the shareholders share in the common areas of the property, like the restaurant, or the picnic area as example.
Rental income is thus determined by the individual owner and would not influence the income of others. Using a platform like Airbnb, the owner has full control over the rental income and the availability, leaving it open to self-use anytime of the year.
None of these plans are based on a points system, but might be subject to the Share Blocks Control Act or the Collective Investment Schemes Act applicable in South Africa.
As all investments are for the purpose of acquiring a specific asset, Capital Gains Tax will be applicable on the company that owns the asset.
The Collective Investment Schemes Control Act, Act No. 45 of 2002 regulates the administration, management and sale of collective investments. The 2002 legislation replaced the Unit Trust Control Act of 1965 and makes provision for various types of collective investments, including hedge funds, open ended investment schemes, exchange traded funds and others.