Posts Tagged ‘apartment’

The 7 Questions You Need to Ask Before Buying a Fractional Ownership

January 5, 2009

DO YOUR DUE DILIGENCE

BEFORE YOU BUY

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1.  Who is the Developer?
Before you entrust your money to someone, check out their experience and track record.  It may sound like common sense, but many people are swayed by a slick website with fancy graphics and photos, without a clear understanding who they are dealing with.  Does the developer have the legal, technical and financial strength and experience to complete the project as presented?  What is their track history?  Do they provide the ability to speak with past clients?  These are important questions to ask.
2.  What are the annual costs of ownership?
As a part owner, one would reasonably expect that annual operating costs would bear a close relationship to the annual assessments. Of course, if concierge and hotel-like perks are part of the package, this can raise the annual costs dramatically.  Look at the true per diem cost of ownership (annual fee divided by number of days use) to determine if this is truly a good value. See if these costs are disclosed publicly on their website.  If they aren’t, there may be a reason.
3.  Who manages the property and at what cost to the owners?
Some developers encourage and train the owners on self-management; others have a management contract with sister companies.  This is profitable for the developer, but not always a good deal for the owner.  Find out ahead of time what the annual costs of management are, and whether the management contract is able to be canceled or renegotiated.
4.  How much markup does the Developer charge?
Most developers do not like to disclose their profit margins, sometimes for good reason.  It is not reasonable to expect a Developer to work for free, nor to expect that a fractional interest of a property that has been completely renovated and furnished, is somehow the same as the market value of the same apartment times that percentage.  It costs a lot of money to find, acquire, renovate, furnish, market and complete a fractional project.
Having said that, Paris property prices per m2 are published every quarter and are well known in the local industry, down to each neighborhood.  Anything over 140%  of current market value divided by the number of shares is, in my mind, excessive. Some developers have a markup in excess of 300%. (4 times market value). What can I say, except that, when it is time to sell, knowing this information before you buy can mean the difference between enjoying a profit and taking a major financial hit.  The real estate market is not kind to overpriced property.
5.  What is the legal structure of the Project?
Ask this question upfront if it is not disclosed.  Buying a property in a foreign country is fraught with risks and complexities. A simplistic legal structure may be easier to understand, and inexpensive to form, but could be extremely costly down the road.  Remember, France is not particularly friendly to foreign companies as a general rule, and foreign companies that do business in France without the annual filing of required disclosures and payment of any requisite taxes are dealt with particularly harshly.
6.  Does the Developer offer a rental program for unused time?
This is a harmless question if the property is located in the US, but a deadly one if the property is located in France.  All I can say is, if the Developer is not aware of, or ignores French law pertaining to rental of property, it is the Owners that will pay the consequences.  See my commentary in the FAQ section of this site.
7.  Can I reasonably expect to use the time that I have purchased?
The whole reason behind fractional ownership is that you can purchase just the amount of time that you would reasonably expect to use.  Don’t buy more time than you need, and never buy excess time for the possibility of rental income.
Some developers require that you take your time in 2 different time periods each year (usually high season and low season).  This is fine if you expect to travel to Paris twice each year.  Otherwise, factor in the additional cost to travel to Paris just to be able to use that extra time.
Summary
If you get the answers to these questions and feel comfortable with the answers, then you have done your homework.
Reprinted from the Paris Home Shares website at http://www.parishomeshares.net/7 Questions.html
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Chez La Tour Update

May 6, 2008

As many of my readers know, we are in the process of renovating our latest fractional ownership offering in Paris which we have named Chez La Tour.  Things are moving along according to schedule, and our goal is to have the unit ready for occupancy on July 1, 2008.  There are lots of photos of the work in progress on my website, and you can watch as the work unfolds and things to to take shape. To see the photos, just visit www.parishomeshares.net/chezlatour.html and follow the links to the renovation photos.

Our first annual meeting of the Owners will be held on May 31st at our home in Denver, CO.  At this meeting, we will be ratifying the Operating Agreement for the Partnership, voting on our annual budget, and passing out keys to the apartment for all of the Owners.  This has always been one of the fun parts of what we do, and it is equally exciting for each of the Owners to meet each other and to swap stories of their adventures in Paris.

In addition to the work on our apartment, the building itself is scheduled for a “ravalement” or exterior stone cleaning, this summer.  This is a mandatory requirement of all buildings in Paris to help combat the cumulative effects of pollution, and is the primary reason why so many of the buildings in Paris look as good today as the day they were built a century or two ago.

Renovation Update – Chez La Tour

March 12, 2008

We are halfway through Week 2 of our renovation of our newest fractional ownership apartment in Paris which we fondly call Chez La Tour.  At this stage, the kitchen has been completely removed, all of the tile and marble floors removed, as well the separating wall in the bedroom.  Following a run to the trash dump, we have removed at least a mile’s worth of piping that was run all across the walls of the apartment.  Some of the more classic radiateurs are being stored for the moment, and the rest are history.  We will be completely re-piping all of the domestic water and drain lines, discretely hiding them from view for a much cleaner look. High efficiency sleek low profile radiateurs will replace the existing units.

Piping on walls in Entry

Tomorrow, Rich has promised updated photos of the apartment.  Our schedule is to meet with the marble installer and electrician on Friday, to lay out how everything will be done and installed.  Next week, framing will begin on the new walls.  Already, the apartment is feeling even bigger and more spacious than before.