Fractional Property Investment: A Step-by-Step Guide

Welcome to our comprehensive guide on Fractional Property Investment. If you’ve ever dreamt of venturing into real estate but found the traditional route daunting, fractional property investment offers a compelling alternative. This guide will help you understand what fractional property investment is, its importance, features, and more; we’ll walk you through the process, making it simple and accessible.

What is Fractional Property Investment?

Fractional property investment involves purchasing a small share of a property with other investors, enabling the collective pooling of funds to invest in properties that would be too expensive to acquire individually. This can be achieved by participating in a real estate crowdfunding platform, where a group contributes to purchasing a property.

Another avenue for fractional property investment is investing in a real estate investment trust (REIT), a company that owns and manages multiple properties and distributes profits to its shareholders.

The concept has gained popularity through online platforms, simplifying finding and managing investments and providing liquidity by trading fractional shares.

Importance of Fractional Property Investment

The fractional real estate investment model offers a convenient way to earn passive income without the need for active involvement in day-to-day operations or management. It also enables investors to diversify their real estate portfolio without making a large financial commitment. This is particularly useful in a diverse market like India, where property prices can vary significantly by location.

Fractional real estate investment has the advantage of lower entry costs, allowing investors to participate in high-end properties with smaller investments. Furthermore, it allows for portfolio diversification across different properties and locations and access to luxury properties that would otherwise be out of reach.

Furthermore, it streamlines management with the help of a professional team, encouraging collaboration among a diverse group of investors, and improving liquidity, allowing for easy share sales on certain platforms.

Key Points of Investing in Fractional Properties

Fractional real estate properties provide the individual with liquidity, diversification, and a lower minimum ticket size, increasing accessibility and allowing investors to allocate funds and diversify portfolios. So, before getting into fractional property investment, you need to understand some key points.

Parameters	Fractional Real Estate
Liquidity test	The Liquidity test considers factors like trading ease, secondary market presence, platform policies, market conditions, and historical trends for high investor liquidity.
Diversification	Diversification in fractional real estate entails spreading investments across multiple properties, thereby reducing risk by avoiding reliance on one asset.
Control over the property in which you want to invest	In fractional real estate, investors share control of the property, allowing for collaborative decision-making with co-owners.
Property types for investment	Fractional real estate provides a variety of investment options, including residential, commercial, under-construction, and ready-to-move properties
Where to invest?	Investors can look into fractional ownership opportunities in a variety of real estate properties through reputable online platforms.

Features of Fractional Investing in Real Estate

Fully Digitised

Fully digitised fractional real estate investing offers a more streamlined approach, allowing investors to invest and track their portfolios through online portals. This added benefit over traditional real estate investment methods improves accessibility and transparency when managing fractional ownership.

Minimum Ticket Size in Fractional Investing in Real Estate

The minimum ticket size in fractional real estate investing refers to the smallest investment required to participate in fractional ownership of a property. Typically ranging from Rs 25 lakhs to crores. This amount may vary with properties despite the investment is done within the same company.

Returns in Fractional Investing in Real Estate

Fractional real estate investing generates returns through rental income and potential property appreciation, providing investors with a passive income stream. Across platforms, a common listing indicates an 8% to 12% return.

Expenses in Fractional Property

Expenses for fractional property investment, including acquisition, operational, management, reserve, transaction, property tax, legal, compliance, and marketing costs, are critical considerations for investors.

It is important to note that expenses such as property tax, insurance, and day-to-day management are deducted from gross rental yields rather than collected separately. This awareness is critical for making investment decisions and accurately assessing the total financial commitment of fractional property investments.

Fees in Fractional Ownership

Fees in fractional ownership include charges for acquiring and managing shared property interests, as well as potential transaction fees. These fees cover various aspects of the fractional ownership process and add to the total cost structure. Understanding these fees is critical for investors to assess the overall cost structure and make informed decisions.

Tax Deducted at Source

Tax Deducted at Source (TDS) is the process of deducting a percentage of tax by the payer prior to making a payment, ensuring consistent revenue flow and preventing tax evasion.

The rental yield, which is considered gross interest income, is reduced by management fees, property taxes, and other expenses to produce net interest income. This net income is subject to a 10% TDS.

Fractional Property Investment: Factors to Consider

Research and Background Check

Before investing in fractional real estate, conduct extensive research. Analyse local market trends, demographics, and rental yields. Consider economic indicators and the relevant legal regulations. Evaluate the developer’s track record and the property’s condition.

In addition, compare the property to recent sales to gain pricing insights. Comprehensive study ensures an informed decision and helps to reduce potential risks.

Permissions and Legality

Ensure that you are in compliance with local regulations, zoning laws, and securities regulations. Draft legally binding agreements, disclose information in a transparent manner, seek legal advice, consider tax implications, obtain necessary permits, and develop clear exit strategies.

Recognise that dealing with large sums of money increases the risk of fraud. This comprehensive approach reduces risk and provides a solid legal foundation for your investment.

Tech-Enabled Environment and Easy Exit

Investors benefit from a tech-enabled environment and easily accessible exit options in their investments. Technology streamlines processes and provides real-time data, while simple exit options allow for quick withdrawal when necessary. These characteristics are perfectly compatible with the dynamic nature of modern financial landscapes.

Investors should look for fractional investment opportunities employing technological advances and online tracking. Clear exit options without hidden clauses make it easier for investors to proceed.

Get the Best Deal

Before investing in fractional real estate, key factors to consider for the best deal include developing a strategic negotiation approach, exploring alternatives, and carefully timing negotiations. Thorough financial research, understanding exit strategies, and reviewing legal aspects are critical.

Select transparent management with online tracking, be cautious of hidden costs, and practice effective communication. Addressing these factors improves your chances of getting the best deal and making a profitable fractional real estate investment.

How to Invest in Fractional Real Estate

When investing in fractional real estate, use a reputable platform and do extensive research on the investment opportunity, including property details, location, structure, and fees.

1. Choosing a reputable platform or company:

   It’s crucial to research and select a reliable platform or company. For managing fractional real estate investments, opt for established platforms like Fundrise and prioritise transparent operations such as RealtyMogul. Arrived Homes offers a user-friendly interface, positive feedback from PeerStreet, and diversified opportunities with Percent. Learn about exit strategies from Fundrise and explore technological innovations.

2. Conducting due diligence on the investment opportunity:

   To invest in fractional real estate, thorough research is necessary. This includes examining the property’s condition, location dynamics, investment structure, fees, legal documentation, historical performance, and market trends. It’s important to stay informed about available exit strategies and seek professional advice if necessary to make informed investment decisions.

Who Should Invest in Fractional Real Estate?

Fractional real estate is ideal for first-time buyers, those looking for non-primary properties, and well-informed investors who have done their homework.

1. Individuals looking to break into real estate investing

   Fractional real estate is an excellent starting point for those new to real estate investing, as it requires less capital, provides diversification opportunities, and simplifies property management through platforms.

   It provides a viable entry point for individuals facing market challenges while also serving as an educational experience with the potential for passive income and flexible investment amounts.

2. Buyers looking for a non-primary property

   Buyers looking for non-primary properties, such as vacation homes or investment properties, prefer fractional real estate due to its shared ownership model. This enables individuals to participate in property ownership without incurring the full financial and maintenance responsibilities associated with owning a second property outright.

3. Investors who have done their homework

   Investors who are skilled at conducting extensive research and investigation are best suited for success in fractional real estate, with anytime thorough understanding of specific opportunities, associated risks, and facilitating platforms.

   When researching fractional real estate, it is critical to examine various websites for information on areas and locations is critical. Despite the lower entry barrier, extensive research is required to identify the best company.

How Fractional Property Investment Works?

Fractional real estate investment entails working with a group to collectively own a property, which provides more comprehensive ownership rights than timeshares, allowing for selling, gifting, inheriting, and putting the property in a trust.

Purchase

In fractional real estate investing, multiple investors purchase property shares through online platforms, often held in structures such as special purpose vehicles or REITs, resulting in proportional returns. Sponsored properties provide real estate exposure at a low cost. Investors should be cautious of risks, conduct due diligence, and appreciate the low financing requirements due to the low entry point.

A special-purpose vehicle, such as a limited liability company or limited liability partnership, allows for co-ownership without the need for financing, making it a low-cost model. You then become a co-owner of the real estate property, sharing the benefits of ownership in proportion to the number of shares you own.

Maintenance

Property management involves managing and administering rental properties, which includes tasks such as tenant screening, rent collection, maintenance, and eviction. It involves marketing open positions, conducting background checks, drafting leases, performing regular inspections, and communicating with tenants.

The best property managers protect their client’s investments while also providing tenants with a comfortable living environment. Keeping up with local landlord-tenant laws is critical for successful real estate investing. Property managers also help property owners protect their investments and create a comfortable living environment.

Sale

Property sales in fractional real estate investing typically occur when the investment sponsor decides to sell the underlying property. Several factors can influence the decision to sell, including market conditions, investment goals, and the end of a predetermined holding period.

While fractional real estate, like any other real estate asset, is a long-term investment, you can sell your stake in a property at any time. This requires a reevaluation of the property value so that your share can be calculated correctly. Collect your share of rental income and enjoy the benefits of a passive investment.

Types of Fractional Real Estate Investment

Fractional Ownership

• Fractional ownership is when a group of investors combine their funds to purchase a property together, allowing for shared passive ownership of a valuable asset. This approach reduces the financial burden on individual investors while allowing them to earn returns on their investments.
• Recently, the concept of fractional ownership has been extended to corporate-leased assets such as vehicles, equipment, and furniture, with a minimum investment of Rs. 20,000.
• For commercial properties, the minimum investment for fractional ownership can be as low as Rs. 5 lakh. This model is best suited for assets that are less liquid, difficult to manage, or prohibitively expensive for small investors.
• The appeal of fractional ownership derives from its accessibility and the variety of models available, which include joint ownership, cooperative models, company structures, and trust structures.

Real Estate Crowdfunding

• Real estate crowdfunding raises funds from a wide range of investors using online platforms, enabling real estate projects to be funded. This approach allows investors to contribute less capital than is required for traditional real estate investments.
• Real estate crowdfunding has grown in popularity because it offers investors an alternative way to access real estate opportunities while also providing developers with additional funding sources for their projects.
• Real estate crowdfunding is divided into two types: equity-based and debt-based. Equity-based crowdfunding allows investors to purchase ownership stakes in real estate projects. Debt-based crowdfunding allows investors to provide loans to fund real estate developments.
• Real estate crowdfunding provides several advantages, including increased investment opportunities, lower costs, portfolio diversification, and increased liquidity.
• The real estate crowdfunding process begins by selecting a platform that aligns with investment goals. Investors then select specific real estate investments to support, which are funded, allowing contributors to participate in the project. Continual monitoring ensures investors are aware of their investment’s performance.
• Real estate crowdfunding carries inherent risks such as lack of regulation, market volatility, default risk, and limited control over investments.

Real Estate Investment Trusts (REITs)

• REITs are companies that own income-generating real estate and must adhere to regulations before distributing earnings to shareholders. They are traded on major stock exchanges and provide investors with access to real estate that includes dividends and potential capital appreciation.
• REITs, which combine dividend income with long-term capital appreciation, offer competitive total returns and are effective portfolio diversifiers. Their low correlation with other assets lowers risk and increases returns, making them appealing for real estate investments.
• REITs provide for various investment needs, including equity REITs managing income-producing properties, mortgage REITs providing financing through mortgages and securities, public non-listed REITs (PNLRs) registered with the securities and exchange commission but not trading on major exchanges, and private REITs exempt from SEC registration with shares not trading on national stock exchanges.

Real Estate Funds

• Real Estate Funds pool funds allow you to participate in the real estate market without the difficulties of direct property ownership, with the potential for both income generation and capital appreciation.
• Real estate funds appeal to a wide range of investors, including those looking for diversification, income-oriented individuals, busy professionals, small-scale investors, and those who value risk-averse investment strategies.
• Investing in real estate funds offers numerous benefits that make them an appealing option for many investors, including professional management, income potential, accessibility, and transparency.
• While real estate funds have many advantages, investors should be aware of the associated risks, which include market risk, interest rate risk, liquidity risk, management risk, regulatory risk, and credit risk.

Real Estate Syndication

• Real estate syndication involves pooling funds from multiple investors to invest in specific opportunities, like commercial office buildings or apartment complexes. Sponsored by experienced professionals, these syndicates allow investors to participate in larger, collaborative investments among typically unrelated investors.
• Real estate syndications typically use a one-class or two-class structure, with one class consisting of only one equity class owned by the manager or sponsor and the other having a separate class owned by the manager or sponsor, serving functions like preserving distributions and segregating fees for tax benefits.

• There are three types of syndicates: Equity Syndications, Debt Syndications and Hybrid Syndications:

  1. Equity Syndications: Equity syndications in real estate involve investors collaborating to fund opportunities and share risks and returns.
  2. Debt Syndications: Debt syndications involve multiple lenders working together to provide loans, spread risk, and facilitate large-scale financing for real estate or corporate sector borrowers.
  3. Hybrid Syndications: Hybrid syndications combine elements of equity and debt syndications to create a flexible financing structure.

Real Estate Partnerships

• Real estate partnerships form when people or companies join to invest in and manage a property project together. They share the investment’s costs and gains. These partnerships can be classified into various types, such as general partnerships or limited liability companies, each with its own set of rules and financial requirements.
• To form a real estate partnership, potential partners must be identified by assessing their skills, expertise, financial capabilities, compatibility, and trust. A partnership agreement outlines financial contributions, decision-making processes, profit and loss sharing, exit strategies, and dissolution plans.
• The advantages of real estate partnerships include more investment capital, risk diversification among partners, the sharing of expertise and experience, increased negotiation power, and the realization of economies of scale.
• Some of the risks in real estate partnerships include partner conflicts, legal and financial liabilities, unequal distribution of workload or profits, difficulties in dissolving the partnership, and the need for a well-defined exit strategy.

Real Estate Exchange-Traded Funds (ETFs)

• ETFs are exchange-traded funds (ETFs) that invest most of their assets in high-dividend equity REIT securities and related derivatives. The ETFs are passive, tracking an index of publicly traded real estate owners.
• ETFs frequently invest in income-generating properties such as warehouses and apartments, serving as key stakeholders in real estate transactions.
• REIT ETFs give investors easy access to the real estate market while reducing the complexity of property management. These funds provide diversified exposure to various properties, reducing reliance on individual REIT performance. With high dividends, they are an appealing option for real estate investors.

Fractional Real Estate Investing vs. REITs

Fractional ownership allows investors to invest in a specific property, whereas REIT investors gain exposure to the REIT’s entire portfolio of properties.

Ownership:

• Fractional real estate investing provides direct ownership of specific properties, giving investors tangible connections and decision-making power.
• REITs on the other hand, provide indirect ownership through shares, which provides diversification and liquidity but gives the investor less direct control over individual properties. The decision between the two is based on investor’s preferences for involvement and control in real estate ownership.

Property Types:

• Fractional real estate investing offers investors the ability to create a customized portfolio by selecting specific property types, allowing them to focus on residential, commercial, and other property types, unlike Real Estate Investment Trusts (REITs).
• REITs offer diversification across property types in a single investment, reducing risk but limiting investor control over specific types. The investor’s preference for individual control versus broad exposure and diversification determines which investment to make.

Volatility:

• Individuals who invest in fractional real estate directly own a portion of the property, resulting in lower capital requirements and greater control over investment decisions. The volatility of fractional real estate is frequently linked to specific properties and local market conditions.
• REITs involve owning shares in a managed real estate portfolio, offering diversification and liquidity but exposing investors to economic and stock market volatility. They require investors to weigh the control and stability of fractional real estate against the diversification benefits.

Models of Fractional Real Estate Investing

Fractional real estate investing has revolutionised the traditional landscape of property ownership, introducing innovative models that enable investors to participate in real estate ventures without the need for substantial capital. The diverse models of fractional real estate investing cater to a range of investment preferences and risk profiles.

Crowdfunding:

• Fractional real estate crowdfunding allows for collaborative online investment in various projects despite liquidity constraints and regulatory changes, promoting active investor participation and property ownership.
• Real estate crowdfunding enables retail investors to become fractional property owners with small contributions, providing diversification without large payments. This model distributes risk, improves accessibility, and reduces financial barriers.
• It promotes a sense of community and collaborative decision-making, which improves knowledge sharing and may lead to better investment decisions.

Property Syndication:

• Property syndication is a key model in fractional real estate investing, involving the pooling of resources for fractional ownership and access to larger properties through professional management and structured agreements.
• It provides tax advantages, liquidity, and diverse market access while ensuring transparency in real estate transactions.

Co-ownership:

• Co-ownership in fractional real estate involves joint ownership, financial contributions, and decision-making, which encourages flexibility and collaboration in real estate investing. This model enables co-owners to manage property responsibilities and overcome challenges.
• Co-ownership offers benefits such as sharing associated costs like insurance, fees, or taxes among co-owners. It also involves a shared management arrangement where responsibilities related to an asset are divided among multiple parties, promoting a collaborative approach.

Vacation Home Rentals:

• Vacation homes, distinct from primary residences, serve as a real estate property model, offering potential income through non-personal use rentals, making them an attractive investment opportunity for owners.
• Vacation properties are risky investments because rental income fluctuates, so owners must plan for potential cash flow shortfalls and implement financial management strategies.
• Owning a vacation home comes with financial responsibilities that are similar to those of a primary residence. Mortgage payments and interest, property taxes, repair and maintenance expenses, consumables, and insurance are all major operating costs for vacation properties.

Benefits of Fractional Property Investment

Lower Barrier to Entry

Fractional real estate investing reduces the entry barrier, allowing diverse investors to participate with less capital. It provides access to premium properties, promotes risk mitigation through diversification, and allows for investment size flexibility.

With shared responsibilities and the potential for passive income, fractional real estate investment is an accessible, diverse, and potentially profitable investment strategy.

It enables you to divide the cost of property among several investors, reducing the need for a large down payment or mortgage.

Access to Higher-Value Properties

Investors who invest in fractional real estate gain access to premium properties, allowing them to diversify among high-value assets. Professional management and upgraded amenities increase the appeal, reducing market volatility and providing liquidity opportunities.

Individuals can invest in fractional real estate by owning a smaller portion of a high-value property rather than a larger portion of a low-value property. This frequently translates into higher returns in property types such as commercial real estate, houses of multiple occupancies (HMOs), and luxury homes, which may offer a higher rate of return than traditional single-occupancy homes.

Guaranteed Second Property

Fractional real estate investing offers access to desirable locations, shared maintenance costs, flexible usage, potential rental income, and professional management. It provides the advantages of owning a second property without the full financial commitment and responsibilities of single ownership, along with the prospect of property appreciation.

While shared ownership may involve some compromises and conditions, fractional real estate can be a great option for individuals looking for a vacation home with the freedom to visit whenever they want. Those who hold a portion of the property have the right to use it however they see fit.

Lower Capital Requirements

Fractional real estate investing, which requires less capital, provides numerous advantages, including increased affordability, change, and investment size flexibility. This strategy makes property investment more accessible to a broader audience, lowering financial risk and making it an appealing entry point for new investors.

Sharing management responsibilities among fractional owners fosters a collaborative and inclusive investment environment. The potential for higher returns adds to the appeal of fractional ownership in the volatile real estate market. Fractional real estate broadens the investor base by requiring a lower initial investment than traditional property ownership.

Passive Income

Fractional real estate investing generates passive income through rental earnings and profit distribution, supported by professional management services.

This strategy enables investors to own property without any operational responsibilities, resulting in predictable returns, tax breaks, and access to higher-yielding properties. Professional agencies handle daily property duties, simplifying the process and deducting fees before payment.

Lower Investment Burden

Fractional real estate investing is a strategy that offers a lower initial investment, provides access to high-quality properties, and increases availability. It lowers entry barriers, generates income through rental yields, and promotes capital appreciation.

Professional property management reduces maintenance responsibilities, which aligns with modern investors’ desire for streamlined, convenient processes delivered via technology-driven platforms.

Arrived, Ember, and Fintor enable investors to begin investing in fractional real estate with little capital while still growing the financial benefits of ownership. Other platforms may have a higher upfront cost, but they also offer lower upfront costs and the option to live in the property.

Flexibility

Fractional real estate investments offer more flexibility compared to traditional approaches. Investors can diversify their portfolios by selecting multiple properties that match their investment objectives and preferences. Buying and selling shares is easy, increasing liquidity, and allowing investors to respond to changing market conditions.

Fractional ownership also enables experimentation and risk management at a scale not possible with single-owner investments. Investing in a fraction of a property allows investors to test the waters, gain valuable experience in the real estate market, learn how to navigate property ownership risks, and refine their understanding of personal risk tolerance.

You’re Not Doing It Alone

Fractional real estate investing involves sharing property ownership with others, leading to shared responsibility, collective decision-making, and reduced financial burdens. This approach benefits from the expertise and resources of a group, resulting in efficient management, informed decisions, and diversified perspectives on the market.

The shared ownership model creates a sense of community and support, making property investment a more enjoyable experience. By splitting responsibilities with others, you can invest in real estate without taking on as much risk or burden.

Drawbacks of Fractional Property Investment

Fractional real estate investing is a popular strategy that offers numerous benefits to investors, such as lower initial investment, diversification, and access to high-value properties. However, it’s also essential to understand the potential drawbacks that come with this investment approach to make a more informed decision. Some of these drawbacks include:

Harder to Finance

Securing financing for fractional real estate investments can be challenging due to limited options and lender resistance. The ownership structures, shared decision-making, and higher risk associated with fractional ownership can result in less favourable terms.

Financing a property with multiple investors differs significantly from financing a single-family home, which is typically intended for one or two people. While purchasing fractional real estate outright with cash is straightforward, seeking financing through mortgages or other arrangements involving multiple investors can lead to complications.

A Loss of Risk or Damage to the Property

A potential disadvantage of fractional real estate investing is the loss of individual control over risk management and property damage responses. Decisions require collective agreement, resulting in delays, disputes, and challenges in addressing issues promptly.

This collaborative approach differs from traditional ownership, which may impact the effectiveness of risk mitigation strategies. Despite the inherent risk of property damage or loss in real estate investments, fractional ownership distributes the entire burden among multiple owners.

Risk of Conflict

Fractional real estate investing can lead to conflicts due to different risk perspectives, timelines, and investment objectives among co-owners. To avoid these conflicts, clear communication channels, shared goals, and structured decision-making processes should be established upfront. This helps align owners’ interests and maintain a harmonious investment environment, which is critical to the success of fractional real estate ventures.

Potentially Unknown Co-owners

Fractional real estate involves unknown co-owners, which can lead to communication issues, divergent goals, and potential decision-making conflicts. To navigate these complexities, it’s important to conduct due diligence, maintain clear documentation, and establish open communication channels.

However, when using a fractional real estate company, dealing with unfamiliar co-owners may lead to future disputes over financial responsibilities and other issues that require careful consideration.

Costs

It’s important to keep in mind that fractional real estate investing has various costs, including initial investment, management fees, transaction costs, legal fees, operating expenses, financing costs, opportunity costs, potential tax implications, exit costs, and due diligence expenses.

It’s crucial to comprehend all fees and potential liabilities, especially if you plan to hire a professional to manage the property. Asset managers may charge a one-percent commission on property sales or dispositions, in addition to ongoing asset management fees. Therefore, it’s vital to understand the fees and expenses associated with investing to make well-informed decisions.

Less Control

Fractional real estate investing involves less individual control, with decision-making shared among co-owners, which may lead to compromises, usage restrictions, and limited autonomy in property management.

One of the advantages of purchasing your property is the ability to choose what is best for you. When you share property with others, you lose some of your control.

Types of Investors in Fractional Property Investment

Individual Investors

Individual investors are increasingly opting for fractional real estate ownership to diversify their portfolios. This approach allows them to own a portion of high-value property with professional management, eliminating the day-to-day responsibilities of sole ownership. It’s a convenient and affordable option for private investors seeking diversification and premium property ownership benefits.

High-Net-Worth Individuals (HNWIs)

HNWIs are individuals with high net worth, meaning they have liquid assets that do not include durable goods, primary residences, or collectables. While there is no official definition, this criterion helps to identify individuals in this financial classification. HNWIs have access to unique opportunities for capital appreciation, income generation, and ownership of high-end properties, which adds to their prestige and financial resources.

Institutional Investors

Institutional investors, representing mutual funds, pension plans, and insurance companies, manage investments on behalf of others. They are referred to as Wall Street whales because they frequently trade large amounts of securities. This group is considered more experienced than retail investors and operates under simpler regulations. Institutional investors conduct extensive research and have a significant impact on the securities markets, accounting for over 90% of all stock trading activity.

Real Estate Syndicates

Real estate syndicates mean multiple participants provide fractional ownership of properties without individual financing or management. Managed by professionals, they offer diversification, access to larger properties, and a passive investment strategy.

Foreign Investors

Foreign investors involve capital flows between countries, having ownership and influence over domestic businesses and assets. This reflects the trend of globalization, with corporations investing in different countries to diversify their portfolios or access specific real estate markets without owning entire properties.

The 5 Best Fractional Real Estate Investing Platforms

If you’re interested in finding a real estate platform that can be customized to suit your investment objectives, you may want to consider the following options:

Fundrise

Fundrise offers a range of investment opportunities, and you can receive quarterly dividends as well. The platform also features a secondary marketplace which provides you with increased flexibility. However, if you sell your shares within five years, there are penalties. Fundrise caters to a variety of goals, making it an attractive choice for many investors.

Yieldstreet

If you’re a qualified investor, you might want to check out Yieldstreet. It’s an online platform that offers alternative investment options such as real estate, art, and structured notes. By diversifying your portfolio with Yieldstreet, you can earn higher returns while enjoying transparency, low fees, and a streamlined investment process. Yieldstreet is open to qualified investors, including those interested in commercial and multi-family properties.

Arrived Homes

If you’re interested in investing in residential real estate, consider Arrived Homes. This online platform specializes in single-family homes and offers easy investment options with a low barrier to entry. The average returns range from 3% to 7%. Regardless of your investor status, accredited or not, Arrived Homes is an excellent choice for those looking to start investing.

Percent

If you’re an accredited investor looking for an alternative access point to real estate with significant returns, Percent is an online investment platform that offers private credit investments. With an average annual ROI of 13%, it provides diversification and consistent performance, making it a compelling option for those seeking consistent performance in real estate investing.

RealtyMogul

RealtyMogul democratizes real estate investment by offering fractional home ownership for institutional-grade properties. With a low investment minimum and transparent fee structure, their user-friendly interface simplifies browsing, selection, tracking performance, and regular updates. This means you can invest in commercial real estate without making significant initial investments.

Conclusion

What is Fractional Property Investment?

Fractional property investment entails purchasing a small share of a property with other investors and pooling funds for high-end properties through real estate crowdfunding platforms or REITs, which provide lower entry costs and portfolio diversification.

Importance of Fractional Property Investment

• The fractional real estate investment model generates passive income without requiring daily operations, allowing portfolio diversification in markets such as India.
• It provides lower entry costs, access to high-end properties, and collaboration among investors, thereby increasing liquidity for easy share sales on specific platforms.

Key Points of Fractional Property Investment

• Individuals benefit from fractional real estate because it offers liquidity, diversification, and lower entry costs. Key considerations include determining liquidity, diversifying across properties, sharing control for collaborative decision-making, and investigating various property types. Investors can look into fractional ownership options through reputable online platforms.

Features of Fractional Investing in Real Estate

• Fully Digitised
• Minimum Ticket Size in Fractional Investing in Real Estate
• Returns in Fractional Investing in Real Estate
• Expenses in Fractional Property
• Fees in Fractional Ownership
• Tax Deducted at Source

Fractional Property Investment: Factors to Consider

• Research and Background Check
• Permissions and Legality
• Tech-Enabled Environment and Easy Exit
• Get the Best Deal

How to Invest in Fractional Real Estate

• When investing in fractional real estate, select a reputable platform and conduct thorough research on the investment opportunity, including property details, location, structure, and fees.
• Investing in fractional real estate requires selecting a reputable platform or company and conducting due diligence on the investment opportunity.

Who Should Invest in Fractional Real Estate?

• Fractional real estate is ideal for first-time buyers, those looking for non-primary properties, and knowledgeable investors who have done their homework.
• Individuals looking to get into real estate investing, buyers looking for non-primary properties, and experienced investors.

How Fractional Property Investment Works

• Working with a group to collectively own a property, fractional real estate investment provides more comprehensive ownership rights than timeshares, including the ability to sell, gift, inherit, and place the property in trust.
• Its activities include purchase, maintenance, and sale.

Types of Fractional Real Estate Investment

• Fractional Ownership
• Real Estate Crowdfunding
• Real Estate Investment Trusts (REITs)
• Real Estate Funds
• Real Estate Syndication
• Real Estate Partnerships
• Real Estate Exchange-Traded Funds (ETFs)

Fractional Real Estate Investing vs. REITs

• Investors with fractional ownership can invest in a specific property, whereas REIT investors gain exposure to the REIT’s entire portfolio of properties.
• Ownership, property types, and volatility have distinct properties and functions in fractional real estate investing and REITs.

Models of Fractional Real Estate Investing

• There are various models of fractional real estate investing, such as crowdfunding, property syndication, co-ownership, and vacation home rentals.

Benefits of Fractional Property Investment

• Lower Barrier to Entry
• Access to Higher-Value Properties
• Guaranteed Second Property
• Lower Capital Requirements
• Passive Income
• Lower Investment Burden
• Flexibility
• You’re Not Doing It Alone

Drawbacks of Fractional Property Investment

• Harder to Finance
• A Loss of Risk or Damage to the Property
• Risk of Conflict
• Potentially Unknown Co-owners
• Costs
• Less Control

Types of Investors in Fractional Property Investment

• Individual Investors
• High-Net-Worth Individuals (HNWIs)
• Institutional Investors
• Real Estate Syndicates
• Foreign Investors

The 5 Best Fractional Real Estate Investing Platforms

• Fundrise
• Yieldstreet
• Arrived Homes
• Percent
• RealtyMogul