BUYING EQUITY SHARES
ALSO KNOWN AS FRACTIONAL OWNERSHIP
Purchasing an equity share is not the same as buying a time-share.
- A time-share owner does not actually purchase title for real estate. Purchasing of time-shares only buys the right to block out time to use a property.
- An equity share owner actually buys rights to real estate! Fractional ownserhip means you own a share, or percentage, of the property's title. You can resell your portion at any time and as the home's value increases, so does the value of your share.
What proves ownership of my property: A law passed in 1993 permits foreigners to acquire Mexican coastal property through a bank trust (known in Mexico as a Fideicomiso). As a beneficiary of this bank trust, you have the right to use, sell, transfer or will your share of title ownership as you please.
Why would I purchase an equity share: Equity share ownership allows you to own a fully furnished, high quality vacation property for a fraction of the cost! And sharing expenses with the other owners means you spend much less on maintenance, property taxes, HOA fees, etc. Plus, you don't have to worry if the property is being maintained when you're not there. A property manager works for the collective owners ensuring the home is always in good repair and cleaned between stays, among other tasks. All you have to do is arrive for your allotted time and enjoy yourself!
How does the schedule work: So if you purchase a 1/4 share of a home, you would be scheduled to stay in and enjoy your home for 1/4 of the year. This would usually be parsed out as 1 out of every 4 weeks, but the collective owners decide how schedules are arranged. Time swaps with your fellow owners should never be a problem.
What are the costs: Aside from the initial cost of purchasing the property, equity share owners pay what's usually a monthly or quarterly fee. This fee covers absolutely everything (taxes, cleaning, repairs and maintenance, utilities, management, etc). The only other cost you may see are 'special assessments' if the collective owners agree that a large repair or upgrade needs to be made. But if there is a significant expense, you only have to pay a fraction of the cost compared to owning the entire home!
What else should I consider:
- What's important to you about your allotted time: Is it imperative that you can bring your pets with you? Do you want the ability to rent out the property if you're unable to come for scheduled time? Every property has a unique operating agreement.
- Are you comfortable with the Operating Agreement, Property Manager and Co-Owners: You should certainly have a conversation with the Property Manager and preferably one or more of your prospective co-owners as well. Review the operating agreement and ask lots of questions. You always want to feel confident that you've found a good match before investing in property!