Why invest in BC real estate...
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Why invest in BC real estate... |
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Insights Please select from the links below: › Non Resident Buyers and Sellers of Property in BC › Immigration & Buying a Business in BC as a Non Resident › 100 Best Things About BC › Getting Ready to Sell - CMHC › Home Buying Tips - CMHC › 15 Ways to Get a Better Mortgage Faster - by Ozzie Jurock › Investments & Tax Advantages › Fractional Ownership › Rental Pool › Third Party Representation › Strata Implications Investment & Tax Advantages
Return to Top  Fractional OwnershipHow would it work? Well, take a typical, whole ownership property and split the title into fractions so that different people could each own their share of the property. A legal structure would be put in place that defined when each of the owners could use the property so it was clear and easy. Then an outside third party manager would be put in place to manage the property on behalf of all of the owners to make it convenient and hassle free and to make sure that when each owner arrived to use their property that it would be perfect and ready for them to simply come in and enjoy. The property would typically come fully furnished so that there was no argument by the owners on the furnishings. Each owner could purchase the amount of, or fraction of the property that they wanted and that was a fit for them financially. Because each owner essentially has their own title for their fraction of the property, they can put a mortgage on their share of the property (although there are some complications), sell their share or leave their share to someone as part of their estate, all without having to talk to or impacting the other owners in the property. In fact, if you don't want to, you never have to meet, see or talk to the other owners. When you're there it is your property and it feels like you own the whole thing. So if you want to own a resort property but you know that you'd never use it very much and you either can't justify or afford to purchase the whole property, you now have a great option. Why purchase the whole property if you aren't going to use it all the time. The fractional concept lets you purchase the amount of ownership and use that is right for you. It is much different than a time share which loses value every year, fractional ownership appreciates over time. To enhance the benefits of fractional property ownership, the fractional property often comes in a project that offers additional amenities and staffing as well as a fabulous location. In addition there might be an exchange program put in place for the property so that the owners can exchange their property for use of resort property in other areas. In terms of use there are a variety of different programs. Some are very straight forward and the time is either fixed or rotates on a fixed basis with other owners. Other programs allow for flex time or some fixed time and flex time. All of the programs work, you just have to make sure that the program works for you. Common fractions in resort property would be: one half, one third, one quarter, one sixth, one seventh, one eighth, one tenth and one twelfth. It gives you lots of options to choose from to find the perfect fit for you. The most common fraction in British Columbia is one quarter. Fractional property has been available in North America for over 20 years, but it's really started to take off at a blistering pace in the last seven or eight years. We are now seeing fractional property available in most major resort areas, in golf setting, ski resorts and at the lake and ocean. It's working in houses, condominiums, townhouses and villas. Contact a Realtor for further information about the risks and benefits of owning fractional Real Estate. Return to Top  Rental PoolMany recreational developments and properties offer owners the opportunity to include their unit in a rental pool even without being part of a fractional arrangement. In some cases the income will totally cover the cost of ownership, in other cases the tax implications, combined with the wrong product for the market or oversupply will result in poor income flow opportunities. Understanding the local tourism market can give you a good idea of how much revenue can be expected. The zoning can have a major impact on the taxes. Commercially zoned real estate has much higher tax rates than residential. These are important questions to ask and research on your own. Often the property management company will contact you prior to the season and ask when you expect to use the property or when you will not be using the property. If you change your mind, you can still look into using your unit as long as it has not been rented. Or you can have a previously reserved date entered into the pool if you decide not to use the property, but remember the more warning they have the better the outcome. The income earned on a given night is usually shared by all of the unit holders who at that time the income was earned had their unit up for rent. For example on Friday night, if there were 100 units in total and 75 units were being used by their owners, only the 25 units who were available for rent (not necessarily rented) would share all of the income earned on that night. A 2 bedroom unit would receive a larger portion that a 1 bedroom. A portion of the income goes to the property management company, and a portion goes to the owner. 60/40 is a common split, but the important thing is what is included. For vacation rentals, having more amenities, more marketing and better service will result in better income in the long run than a more favorable split that has little to offer. These are all important considerations, and should be understood fully before purchasing. Return to Top Third Party Representation When making any important financial and emotional transaction it is very important to attain third party advice. Remember when you are enquiring about a recreational property straight from the developer or a sales representitive from that particular project they are not working for you and do not have to be licensed Realtors. Of course 99% (if not more) of sales reps are honest, trustworthy, and capable, but their job is to sell you that property. The information you are hearing will always be somewhat biased. By using a third party, either a Realtor's representation, a lawyer's legal opinion, or some other experienced third party source, you ensure that your interests are taken care of. For more information check out our buyer services and see how we can help you attain the property you desire with total confidence. Return to Top Strata Implications Many people ignore or do not understand the important role of strata corporations and property management. When you buy a strata unit (condo, town home) and you are essentially becoming a part of a multi-million dollar corporation. There are risks and benefits. It is possible to be sued and it is also possible to make a significant financial gain. But the most overlooked factor is the emotional side and the time and effort required. The strata fees you pay every month go towards operating the strata corporation and maintaining the property and its value, money well spent, you hope! Does the average person know how to service a large complex? No. You want to be 100% sure the people in charge are qualified to do so. For a small development, maybe the owners can arrange this, but often the best arrangement is for professional property management companies to be hired. This way you are assured that your investment, emotions and home are taken care of properly. New developments have regulations to follow and the developer must set up the Strata Corporation and a preliminary operating budget for the development; after which it is the responsibility of its owners. It is a major investment, do the right thing and have qualified people manage your property and do your own research into the concept. In a nut shell, the old saying that fences make good neighbors can be adapted for Strata Corporations to "professional management makes even better neighbors". Return to Top |
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Matt Cameron Recreational Real Estate Professional |
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