One of the main motivators for a fractional purchase is the ability to share the costs of maintaining an asset that will not be used full-time by one owner.
Additionally, each owner pays a portion of the annual management fees and maintenance, relative to the percent of ownership.
In return, the customer receives a predetermined number of hours in the aircraft of their choice, based on the owner's needs and the amount they are willing to pay.
[1] In addition, the management company provides all scheduling, flight planning, staffing, catering, maintenance, communications, and insurance services.
A fractional owner simply picks up the phone, calls a dispatcher, requests a flight, and drives to the airport.
Richard Santulli of NetJets pioneered the concept of allowing businesses to purchase shares in a jet to reduce costs.
Two common reasons are to allow transfer of shares without the need to reflect changes on the title or deed to the property, and for tax benefits.
Another type of fractional ownership, not part of a securitized business plan is Tenancy in Common, which is grounded in the real property laws of most, if not all states.
As with whole ownership, fractional owners can sell whenever they deem necessary or prudent, releasing the capital growth from their "bricks & mortar" investment.
In 2018, the most common fractional size available for purchase in North America is a one-fourth ownership, giving owners three months of total annual visit usage.
These syndicates operate as private member groups with small numbers on a non-profit basis, generally just sharing expenses and usage.
These groups can involve assets ranging from modest apartments or condominium-type properties to multimillion-euro / dollar properties, and leverage their ability to make collective purchases of additional assets such as boats or vehicles as additional facilities while retaining control entirely within the membership of the group.
[citation needed] The popularity of the term fractional ownership has caused extensive rebranding in other industries where similar concepts, such as real estate timeshares, were already well established.
A few private owner-groups have developed highly sophisticated usage allocation schemes and other features based on the principle of attempting to get as close as possible to the flexibility of individual ownership, and only compromising this to the minimum extent necessary to accommodate multiple owners.
The research firm Ragatz Associates defines a private residence club as a fractional property that sells at a price of US$1,000 per square foot or higher.
In addition to luxury private residence clubs, single "stand-alone" vacation homes and condos can be converted to fractional ownership.
The benefit of fractional home conversion includes the ability of the homeowner to keep a portion of the ownership for themselves, pay off debt and reduce expenses.