Posts Tagged ‘fractional ownership’

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 Owners Meeting

June 3, 2008

This past weekend, Sue and I were able to host the 1st annual Owners meeting for Chez La Tour LLC at our home near Denver.  The weather was bright and sunny, and the Owners traveled from both coasts and points in between to attend. This is always one of the pleasures of my job, to meet so many of the Owners and to share our common love of Paris.  We shared lots of stories, had some good laughs, and of course, conducted some business.  Our annual dues were determined, everyone was updated on the progress of the renovation work at the apartment, and the best part was handing out keys to the apartment to each of the Owners.   It was a wonderful day, and by the end, we were hugging each other, saying our farewells, with the knowledge that all of us had found a new family of friends.

TWTWTW – This Was the Week That Was!

May 16, 2008

I am probably dating myself, but a long time ago, there was a TV show called “That Was the Week That Was”, a parody on the week’s recent events.

Well, for me, this was the week that was, and simply because of the convergence of two articles regarding our company, Paris Home Shares LLC, and what we are trying to accomplish with fractional ownership in Paris. It was mind-boggling.

First, our company was highlighted by longtime journalist and Paris newsletter publisher, Adrian Leeds, on her weekly newsletter called Parler Paris.  She focused on our development of an apartment in the Marais, which coincidentally, her property team had found for us 8 months prior.  With the renovation of the apartment complete, and only a few shares remaining to sell, she said many nice things about us to her readership, and we were barraged by e-mails expressing interest in the property.

The next day, Wednesday, the NY Times ran an article on Paris Home Shares LLC, again doing a photo feature on the same property, which we call Jardin Saint-Paul.  Instantly, my e-mailbox gained 50 pounds, and the barrage became a steady avalanche of requests.  Clearly, there is a lot of pent up demand for quality property at a reasonable price, particularly in this economic climate, and especially in high priced cities like Paris.

It is now Friday afternoon, and my ears feel like cantaloupes and my fingers are sore from responding to all of the inquiries.  Yet, this weekend, I feel a little happier that a lot more people know and like what we are trying to accomplish.  On top of that, Jardin Saint-Paul is now sold out, with 12 happy Owners, and Chez La Tour, our newest project, rapidly appears to be heading in the same direction.

If you would like to read the NY Times article, just click here.

Now, I am waiting for the next shoe to drop, as our company will again be featured in the top British travel magazine Homes Overseas in their June issue.

Pending Price Increase – Chez La Tour

May 6, 2008

As is my usual policy, upon completion of Chez La Tour on July 1, 2008, we will be increasing the price of a one month share to 115,000€.  Paris Home Shares has always been the low cost leader in Paris fractional ownerships, offering more time and larger units for substantially less money than any of our competition.  Even with  the pending increase, we remain priced substantially below units offered by our competition on a per square foot basis.  In addition, our annual dues are still the lowest in the industry, reflecting our continuing efforts to provide true value and cost transparency to our Owners.  Please do not hesitate to contact me for a list of available months at steve@navaro.com.

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.

It’s Been a Long Time Gone

May 5, 2008

For those of you wondering why there have been a dearth of postings here lately, well… I’ve been in Paris for the last month busily purchasing furnishings for our latest fractional project, Chez La Tour, overseeing the renovation work, and trying to squeeze in the odd afternoon to play tourist. However, I am back home now, with lots of stuff to comment on, so hopefully my posting frequency will increase.

I can tell you without a doubt, that visitors to Paris this summer will have to definitely deal with sticker shock.  And it is not just that the dollar is lower against the euro.  Food prices have climbed between 10-20% in euros since I visited last November.  I would attribute this (mostly) to the recent dramatic rise in food costs worldwide, although some recent European reports on the phenomenon have indicated that only about 50% of the price increase can be attributed to actual increases in the cost of materials and supplies.

In November, one could easily find “fixed prix” menus throughout town in the 15-17€ range for lunch.  Today, 19-22€ is the price for the same lunch.  Dinners are more expensive by the same ratio.  Wine, which used to be a relatively cheap beverage in paris, now will set you back 5-7€ for a 14cl glass of house wine, and trust me, there isn’t 14cl in the glass.

The saving grace for us was that we could afford to stay a month in Paris because we were staying in our 1 bedroom fractional ownership apartment, which cost us 890€ for an entire month (read $47US per night). If we had rented a similar apartment (with lesser quality furnishings) it would have cost 200-250€ per night and a similarly equipped hotel room would have been 400€ per night (if such a thing existed).

Yes, you may say, but look at what you had to invest to get that. True enough.  When we bought that fractional in 2006, the dollar was at $1.28/euro, not $1.60.  And Paris prices were 22% lower.  How many people can say that their American real estate (or stock) investments have fared that well? Not many.

 

 

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.

Great News!

February 28, 2008

This morning, after months of waiting, we finally closed on Chez La Tour, our laterst fractional project in the 7th arrondissement.  What lies ahead is 3-4 months of renovation work, moving plumbing lines, adding a new kitchen and removing the old, and the most fun of all; furnishing the finished apartment with beautiful antiques, artwork and other accoutrements to make it truly feel like a Parisian home for its Owners.

Pending Price Increase – Chez La Tour

February 2, 2008

We plan on closing on Chez La Tour on February 28th.  As is tradditionally my policy, we will be adjusting our price on remaining shares available in this apartment to 109,900 euros, effective March 1, 2008.  Our pre-closing price of 99,500 euros will no longer be available at that point.

On Chez La Tour, we have introduced a new Owner usage scheme, whereby Owners are allowed to pick their month of usage on a permanent basis from those months available.  Not surprisingly, the late spring and summer months were the first to go, although there is still a good selection of autumn months at this moment.

Chez La Tour is our largest and most elegant project to date.  This 88 m2 2 bedroom 2 bath fully furnished apartment is located in the ritzy 7th arrondissement, just steps from the Seine, the Metro, and the Eiffel Tower.  To learn more, just visit our website at www.parishomeshares.net and click on “Available Properties.” 

Jardin Saint-Paul – Renovation Complete!

January 23, 2008

Finally, after months of hard work commencing in August, all of the niggly details that go into renovation of a home have been handled, and our work is done!  In fact, 95% of the work was done early in December, when the first of our Owners decided to give it a go. Our only major delay was for the granite counters that would replace the existing counters in the kitchen.  After weeks of waiting for delivery, we learned that the granite company was on the verge of bankruptcy! So we hastily pulled our order and started all over with another company.  Fortunately, they delivered the product as promised, and the new countertops were installed this past weekend, even while Owners were staying in the apartment! 

New Granite Kitchen Counter

Today, we finally worked the kinks out of our Wifi connection with the help of a company technician, who admitted that the problem lay with Free.com and not us.  Fancy that.  Of course it took over 30 calls and 2 months to get a technician to come out and fix the problem.

All that remains is to find 3 more Paris lovers who would like to call Jardin Saint-Paul their home during their stay in the City of Light.  And then, we can put out the “SOLD OUT” sign for our 2nd successful fractional ownership project.