Understanding Half-Title and Fractional Deed Properties

May 14

2 minutes

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What is a "Half-title Deed Property"? And how is it different from a "Fractional-title Deed Property"?

Half-title Deed 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-title Deed Property: Ownership is divided into three or more shares, such as 1/4, 1/8, etc., making it more fragmented.
Common feature of both: Buyers only purchase a "share" rather than the entire unit, requiring shared use or negotiation of rental arrangements with other co-owners.

Entry Price and Financing Arrangements

Transaction Discount: Market price -40% to -70%, due to poor liquidity and difficulty in securing bank mortgages.
Mortgage Options: Banks rarely 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 Deed Properties

Low Entry Barrier: Significant discounts allow acquiring assets in prime locations with less capital.
High Negotiation Flexibility: Smaller pool of buyers often makes sellers more willing to accept lower offers.
Potential for Consolidated Appreciation: If remaining ownership rights can be acquired, there's an opportunity to boost property valuation at once 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 financing costs can easily diminish long-term IRR.
Co-owner Disputes: Rent distribution and maintenance decisions can lead to conflicts, resulting in costly and time-consuming lawsuits.
Valuation Gap: Even after consolidation, bank valuations may still fall short, requiring additional funds to cover the difference.
Legal Defects: Hidden burdens such as freezing orders or repair orders require professional title searches to confirm.

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