When Frank and Anne Humphry decided to invest in a holiday home, the options
seemed endless. The only trouble was, they didn’t want to end up going on
holiday, with their three children – Edward, 7, David, 6, and Erica, 5 – to
the same place every year. So when they came across a scheme run by Rocksure
Property that offered a stake in six £1m properties around the world, it
seemed ideal.
Last year, the Humphrys paid £189,000 for a single unit in Rocksure’s Alpha
Fund, allowing them to spend four weeks each year in a variety of locations,
from Phuket, Thailand, to Breckenridge, in the Rocky Mountains, Colorado. In
return for their money, they get a share in the specially created company
that owns the properties, which means they benefit from any capital
appreciation. And, if they don’t want to use any of their weeks, they can
rent them out privately or through Rocksure.
In March 2015, the properties will be sold and the proceeds distributed among
investors. Rocksure calculates that if the value of the portfolio has risen
by an average 3% per year in the meantime, this will give an annual return
of 7.22% once the market value of the four weeks each year is factored in.
If it has gone up by 9%, the return will be 10.53%. You can get out earlier,
provided a buyer can be found.
“The fact that we can invest in a property fund while at the same time having
a damn good laugh – it’s a bit of a win, really,” says Frank, 40, who has
just returned from 10 days’ skiing in the Rockies with his family, staying
at Rocksure’s five-bedroom house. “Granted, it’s an investment, so it could
go down as well as up, but I look at where the properties are and I don’t
think that’s going to happen.”
Rocksure is now setting up its second fund, expected to include properties in
Breckenridge, Phuket, Marrakesh, the Algarve, Buzios, in Brazil, and the
Adriatic coast.
“It’s an investment that appeals to successful people who have made money and
want to have fun,” says David Rogers, formerly chief operating officer at
the luxury travel company Abercrombie & Kent, and one of Rocksure’s
founders. “It’s boring having shares in Cadbury, where the dividend goes
straight to your bank account, Gordon Brown takes 40% and you get zero real
pleasure. With us, you’ve got capital appreciation and a visible asset you
can have fun with.”
The scheme is the latest twist on fractional ownership, a form of buying
pioneered in America, where several people buy a stake in a property
together. Unlike time-share, with which it is often confused, it gives
owners a share of the title.
Rocksure’s scheme is not the only one out there. Worldwide Private Residences,
an offshoot of Pure International, a sales and marketing company that
specialises in high-end overseas development, has 30 houses in 20
destinations around the world, grouped by four themes: golf, beach, ski and
city. Investors pay £160,000 for five weeks’ usage a year; there are no
annual running costs and the fund is wound up after 10 years. The properties
are all valued at about £1m, and can be rented out if you wish. You are free
to sell after three years.
The Hideaways Club, which has big business names such as Mike Balfour,
chairman of Fitness First, and John Lovering, chairman of Debenhams, among
its founders, has a slightly different model. It has levels of membership,
such as Premium, which requires an initial stake of £200,000, as well as an
annual fee of £12,000, and allows four peak weeks, six off-peak ones or a
combination of the two.
Unlike the others, this fund does not have a time limit – although you must
commit to a minimum of three years’ investment, and, if you want to sell,
Hideaways Club will charge a 5% sales fee and take 20% of any profit you
might make, even if you sell privately to a friend.
There are other catches. Because each fund has a limited stock of property,
there is competition for the best times: with Rocksure, for example, each
shareholder is entitled to two high-season and two mid-season weeks each
year, so you can forget booking every Christmas and half term away.
So, are such schemes the best solution? Or would you be better off with a
conventional fractional scheme, buying a property outright and renting it
out, or simply putting your £200,000 in the bank and using the interest to
buy conventional holidays?
“It doesn’t stack up,” says Bill Blevins, managing director of Blevins Franks,
a specialist financial adviser. “Solid real estate is always going to give
you a better quality of return than a shared-ownership scheme. You will
always make better money on a property purchase than a small share of a
larger portfolio, because you’ve got total control over when you buy and
sell.”
Eric Gummers, a partner at the solicitors Howard Kennedy who specialises in
fractional schemes such as these, is also sceptical. “It’s a relatively
illiquid investment,” he says. “If you bought today and wanted to sell
tomorrow, the likelihood is that you wouldn’t be able to. It’s what I would
term a discretionary spend – although it’s quite a neat way of effectively
prepaying your holiday accommodation.” Even if it does mean putting down
£200,000.
Rocksure Property, 01993 823809, www.rocksureproperty.com;
Worldwide Private Residences, 0845 050 0146, www.wpr-m.com;
The Hideaways Club, 020 7664 8860, www.thehideawaysclub.com
Want to join the club?
How Rocksure works
Forty investors put in £189,000 each
Rocksure buys six properties around the world, each valued at about £1m, over
nine months
Investors are allowed to spend four weeks a year in any of the six (although
they must also pay a £1,800 annual management fee)
After seven years, all the properties are sold and the money is split 40 ways
Pros
It takes away the hassle of shopping for overseas property and booking a
holiday each year
You own a share of the homes, so, if they increase in value, you benefit when
they are sold
Unlike other fractional schemes, it allows you to stay in different properties
You get the comfort of a luxury hotel, combined with the advantages of a
private home
Cons
You’re sharing the properties with 40 other families, so there is no guarantee
that you will be able to have the one you want when you want it
You have to wait seven years for your money – or find a buyer if you want to
bail out early
You may earn higher returns by buying an equivalent property with a mortgage
and renting it out
