Understanding Half-Share and Fractional-Share Properties

What is a "Half-Share Property"? How is it different from a "Fractional-Share Property"?

• Half-Share Property: A unit is divided into two ownership shares (commonly 50% each), classified as "tenancy in common." One party can sell their 1/2 ownership share without the other party's consent.
• Fractional-Share Property: Ownership is divided into three or more shares, such as 1/4, 1/8, etc., making it more fragmented.
• Common characteristics of both: buyers only purchase a "share" rather than the entire unit, requiring shared use or rental arrangements with other co-owners.

Entry Price and Financing Arrangement

• Transaction Discount: Market price -40% to -70%, due to poor liquidity and difficulty in obtaining bank mortgages.
• Mortgage Options: Banks hardly accept applications; buyers mostly pay in full cash or rely on finance companies with high interest rates of 15–20%.

Main Advantages of Investing in Half-title Properties

• Low Entry Barrier: Significant discounts allow acquiring assets in prime locations with less capital.
• Greater Room for Negotiation: Smaller pool of buyers means sellers are often willing to accept lower offers.
• Potential for Consolidated Appreciation: If the remaining ownership shares can be acquired, there's an opportunity to simultaneously increase property valuation and secure standard bank mortgages.

Core Risks

• Difficulty Exiting: Few buyers in the market; may require selling at a low price to exit when necessary.
• High Interest Erosion: High financial costs can easily diminish long-term IRR.
• Co-owner Disputes: Rent distribution and maintenance decisions can easily lead to conflicts, resulting in costly and time-consuming litigation.
• Valuation Gap: Even after consolidating the deed and applying for a mortgage, bank valuations may still fall short, requiring additional funds to cover the difference.
• Legal Defects: Hidden burdens such as freezing orders or maintenance orders require professional title searches to confirm.

Although fractional ownership properties are cheaper, the costs are significant: expensive interest, low liquidity, and high risk of legal disputes.

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