|
|
FAQ
|
- What do I own?
- Can I buy more than one share?
- Can I buy a share with someone?
- How much time will I get each year?
- What if I cannot use my month?
- What if I want a month allocated to another owner?
- Can I rent out my weeks of ownership?
- Is maid service available?
- What about smoking and pets?
- How is the home managed?
- What do I have to pay annually?
- Can I sell my share of the home?
- Can I finance my purchase?
- Can the purchase satisfy 1031 exchange requirements?
- What happens if there is damage to the home?
1. What do I own?
With Fractional Ownership through smartfractions.com, you own an "undivided fractional fee simple interest" in the property. You receive a deed to an interest in real property similar to the purchase of other real estate.
An owner is able to resell, gift or will this fractional ownership interest in real estate, subject to an agreement with the other owners, similar to if it was a whole ownership interest in real estate.
The documents require that an owner offer to sell the fractional interest to the other owners prior to listing or marketing their interest for sale. This simply gives the other owners the right of first refusal. This is not required in the case of estate planning.
2. Can I buy more than one share?
Yes; you can buy as many shares as you like.
3. Can I buy a share with someone?
Yes; you can buy a share with a friend, family member or business associate. Each of your names would go on title, and you would be treated as one entity by the management company and other owners. It would be up to you how to split the use and responsibility.
4. How much time will I get each year?
You are entitled one month per year to use the home.
A calendar will be attached to the sale documents governing use for the first six years, after which the calendar can perpetuate.
Once we have a majority of owners ready to purchase, we will poll them on the reasonableness of the calendar. If the group wants to change the calendar, we will.
5. What if I cannot use my month?
Should you not be able to use one of your weeks, you can let friends or family use your time. You could, but are not required to, offer it to the other owners.
6. What if I want a month allocated to another owner?
It is common that usage time is swapped among owners of real estate owned fractionally. The calendar is published, so you can figure out who has a particular time slot that you want. Simply contact them to arrange a swap.
7. Can I rent out my weeks of ownership?
Currently, the documents do not permit renting of the home. The luxurious level of quality furnishings in the home are above the standard usually seen in rental properties. Renting could potentially diminish this level of quality.
8. Is maid service available?
Yes; the annual budget includes weekly cleaning and an annual 'deep-clean' service. A maid will clean the home after your visit. Should you desire maid service during your visit, that can be arranged directly with the maid service.
9. What about smoking and pets?
Currently, the documents do not permit pets or smoking. Should the owners collectively want to permit pets or smoking, the documents can be modified.
10. How is the home managed?
There is no requirement for third party management. The owners may manage it themselves or contract with a management company.
We will interview area management companies, and will recommend a firm. They will collect the money quarterly from all of the owners, pay all of the bills, arrange for maid service and maintenance on the property, and ensure that the property is properly maintained.
11. What do I have to pay annually?
The annual amounts to be paid are based on an estimated annual budget. Currently the budget includes all items required to maintain the home. Budgeted expenses include taxes, insurance, association dues, swimming pool dues, utilities, telephone, cable, alarm monitoring, property management fees, maid service, and maintenance reserves.
Each owner will be responsible for 1/12th of the annual budget to be paid quarterly.
12. Can I sell my share of the home?
Yes, just like any other real estate. The documents provide for offering a right of first refusal to all other owners before selling your share. You could offer it for sale yourself or list it with a realtor of your choice.
13. Can I finance my purchase?
Yes; owners may finance their respective interests. This does not encumber the whole house, only the individual interest being financed. While financing is usually obtained with home equity loans on a primary residence, other financing is available. We can put you in touch with lenders that have visited the property and agreed to lend on fractional interests.
14. Can the purchase satisfy 1031 exchange requirements?
While you need to check with your attorney and accountant, real estate owned fractionally can fulfill 1031 exchange. In March, 2002, the IRS issued Revenue Procedure 2002-22 which rules that undivided fractional in real estate will be considered an interest in real estate and not in a business entity.
15. What happens if there is damage to the home?
First of all, the property management company will ensure that any damages are repaired in a prompt manner by qualified local professionals, so that there is no interruption to the enjoyment or use of the property. The owner, within whose sixtyñday interval the damage occurs, is fully responsible for all charges. If damages were caused by a vacation renter, it is that interval ownerís responsibility (or the vacation rental manager's, if applicable) to collect for all damages. The other homeowners are not responsible for any portion of the damages whatsoever.
|
|
|
|
