Posts Tagged ‘Paris Home Shares’

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

Chez La Tour – Work Finishes!

July 14, 2008

After a little over 3 months of renovation, Chez La Tour opened its doors to it first Owner for the month of July.  In a race against the clock, the construction dust was swept up, tools hauled out, pictures hung, furniture placed, and a myriad of small details tackled.  There are still some details to finish, but the apartment was fully functional and ready to go when our first Owner arrived on the 4th of July.  Here are a couple photos.  To see all of the photos, go to our website at www.parishomeshares.net/cltphotos.html.

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.

European Interest in Fractional Ownership

October 26, 2007

The International Herald Tribune ran an interesting article today on the European interest (or lack thereof) in fractional ownership.  The link is:

http://www.iht.com/articles/2007/10/25/properties/refraction.php

This corresponds roughly to the trend that I am seeing as well.  I am sure that part of this reason is that my marketing efforts for Paris Home Shares are directed to the English speaking world, and most of my enquiries are from The US, Canada, Australia and New Zealand, with a few from Ireland and the United Kingdom. Part of this is due, I am sure, to the familiarity and exposure that many here in the US have had with the concept over the last 20 years.  Secondly, I think that at least in the real estate market, Europeans tend to be more conservative, and are less apt to quickly embrace a new concept.  The mortgage industry in Europe is just now adopting some of the loan products that have been around in North America for decades.  (Of course, the European real estate market isn’t paying the price that we are for some of the crazier lending practices adopted in the US in the last 5-10 years either!).

 Where are we headed in the future?  I am not sure, but I do think that fractional ownership is a concept that just makes good sense for those who would like to have a 2nd home somewhere without the complications of debt service or rental management.