How to live like a millionaire – even if it's only part-time

Be honest. Given half a chance you'd jump at living the lifestyle of a millionaire. For most of us, however, this will never be any more than a pipe dream. Disposable incomes have fallen by 5 per cent over the last decade, according to price comparison site uSwitch.com, thanks to, among other things, soaring tax bills, rising housing costs and increasing utility bills.

But you may not need a winning Lottery ticket to get your hands on a red Ferrari or Swiss chalet. If that must-have item is just out of reach, why not follow the example of a racehorse syndicate and simply buy a portion of what you want?

This is the glamorous 21st-century world of fractional ownership, the gateway to luxury for those of us without seven-figure bank balances. You can now part-own just about anything, from a home in Cape Town (www.fractional ownership.co.za) to a French truffle tree (www. truffle-tree.com).

But utter the sullied words "time share" at your peril. The difference here is that fractional ownership usually affords you a percentage ownership of the possession in question rather than just a piece of time with, or in, it. If you bought part of a New York apartment, for example, your legal agreement would probably mean that you had a few weeks allocated to use it every year, but you may also hold deeds that can be bought, sold or inherited as you wish.

As the concept has begun to attract interest, websites facilitating fractional ownership have begun to pop up all over the place. Some, such as www.synergyyachting.com, offer a specific type of part-ownership deal, in this case of yachts. Others, such as www.fractionallife.com, provide access to a network of sites from across the fractional ownership world.

Be warned, though: along with the legal wrangling and investment considerations, you really will have to share your toys.

Cars

Car clubs, along with racehorse syndicates, occupy the traditional corner of the fractional ownership world. Standard car clubs are all the rage in large UK cities, where owning one is often impractical. Companies like Streetcar (www.streetcar. co.uk), or Whizz Go (www. whizzgo.co.uk) offer paid-up members the use of bog standard vehicles for hours, days or months, after which they are simply left parked up with a full tank of gas. These schemes typically cost anywhere between £25 and £250 a month.

But the more traditional supercar clubs are also enjoying a surge in popularity. "These clubs allow people to get behind the wheel of true supercars without the cost or hassles of full ownership," says Piers Brown of Fractional Life. "People who have owned one tend to join a supercar club because they know the hassles and costs of ownership first hand."

Supercar fractional ownership company 12th Share (www.12thshare.com) gives its members 28 days or 5,000 miles a year. Members pay around 8 per cent of the purchase price of the car on day one and get back 7 per cent of the sale value when the car is sold after one year. For example, to buy a Bentley Continental GT outright, you would have to part with £120,000 on the open market. Through this scheme, your management fee plus four weeks' drive time for a year would be £14,639. You would get some money back with the resale, but at the end of the year you would be down around £8,390.

Bear in mind that, along with jets and helicopters, which also depreciate over time, this is one of the only aspects of fractional ownership that is typically a timeshare agreement – you buy time with the car rather than owning a piece of the machine itself. There also tend to be age limits for members – minimums of around 30, and maximums of around 65.

Private Jets

The private aviation market has shown huge growth due to terrorism threats at major airports and the fact that, with private flying, check-in and security are much easier, plus there's more flexibility about destination. NetJets (www.net jets.com) offers its clients a five-year plan allowing them 50 hours' flying time a year. "Clients are in effect buying a portion of the plane, with a number of hours in it every year," a spokesman says, but adds: "There are membership fees and an hourly fee for flights, and there is no ongoing ownership after the five years."

The prices range from £201,000 for a 1/16th share in a seven-seater Hawker 400XP, worth around £5m to buy outright, to just over £5m for a half share in a Gulfstream G550 worth around £25m.

Handbags

Not everything available to the fractional owner has to have an engine or its own postcode. Bristol-based Handbags from Heaven (www.handbagsfromheaven.co.uk) offers designer handbags from the likes of Chloe, Prada and Jimmy Choo. This is a slightly different deal in that you don't buy part of a specific bag, but in effect rent one for a weekly cost on top of a £9.99 monthly membership fee. Many clients are those who want the bag to go with a specific outfit at a one-off occasion, perhaps a ball or wedding. Mulberry's Elgin handbag, for example, would cost around £20 per week to rent (this is reduced if you are a member), whereas it retails for around £500.

Art

Despite the huge influx of professional companies in the fractional ownership market, you can still find more traditional, small-scale operations like ARTvest in Glasgow (www.artvest. co.uk). A maximum of 25 members pay £1,500 every year for three years into the syndicate's own bank account, and meet every quarter to discuss, with a team of advisers, which pieces or artists to invest in.

At the end of the three years, the accrued collection is split between the members. Around 80 per cent of the group's assets are allocated to the works themselves, with management and advice costs coming in at around 20 per cent, compared with anything up to 40 per cent for individual collectors.

Alternatively, you could think about sharing a piece of artwork by a big-name artist with a gallery. This is tax efficient and cuts the cost of owning a work of art dramatically.

Does it add up?

The catch with fractional ownership is that, as some of these costs imply, the company doing the selling can earn far more from dividing the item up than by selling it whole. Some suggest that the profit on the fractional sales alone can earn the seller around 20 per cent pure profit on top of the value of the item. That said, it's not the only way to get what you want: you're more likely to get a better deal with a group of individuals like www.yours 2share.com than with a commercial company.

This may not necessarily be an issue, simply because you're more likely to be making a lifestyle choice than looking for a bargain, but it does mean that you should be a cash buyer: securing financing is likely to be very challenging, and though you may be offered financing through the seller company it's wise to be extremely cautious about this, and to investigate other alternatives.

The reality of sharing

If fractional ownership sounds like the solution for you, do your research, says Eric Gummers, a partner for the legal firm Howard Kennedy. "This is often an emotional decision and it is easy to be too hasty about buying into these arrangements," he warns. "Be absolutely clear about what you will and won't get for your money. You have to do the same research as you would with any significant purchase. Be sure that you will either use it or that you will get good returns."

Potential buyers should thoroughly investigate any annual costs on top of initial payments. Are they reasonable, and what will they get you? What happens if one of the partners sells up or dies? What happens to your money if you do not receive ownership deeds as part of the deal and the holding company folds?

"Go in with your eyes open," Gummers adds. "As with any long-term investment, make sure you know about the individuals or, more often, the company you are dealing with. What is their track record like and can they deliver what you are expecting?

"What agreement will you make about the time you use your yacht, car, jet, or vineyard. It doesn't matter what it is, not everyone can use it for the August bank holiday every year."

Time team: part-owning property

The part-ownership of property is one of the more complex aspects of fractional buying, and depends on your budget and investment aims.

One example at the affordable end of the market is Penhaven Cottages (www.penhavencottages.co.uk). Each cottage is divided into 10 equal shares, entitling you to one tenth of a 999 year lease, and five weeks' access every year. Prices start at around £19,500.

But many investors use multiple ownership of property as an alternative way of getting property exposure without the risk, says Piers Brown of Fractional Life. "With the current economic climate, people are looking at purchasing the best they can afford using fractional ownership as a defensive 'financial play' to retain exposure to the property market while maximising their lifestyle."

Mark Nichols, 44, a solicitor from London, bought into the Rocksure Property Alpha Fund (www.rocksureproperty.com) in 2006, by buying one of 36 "units" for £170,000. The fund then bought six properties worldwide. The owner of each unit gets a total of four weeks a year in any of the properties. After eight years, the properties are sold and the capital divided between the unit owners. "We like to go abroad as a family, but not always to the same place," he says. "This arrangement worked because it has taken us to fabulous villas in places we would not otherwise have gone, and the division of time seems very fair."

If you are considering buying a share of a property, you must be happy not only with the property itself but also with the surrounding infrastructure, facilities and local region. Eric Gummers of legal firm Howard Kennedy adds: "Be realistic about the contractual relationship with your co-sharers."

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