All You Need to Know About Fractional Investment in Real Estate
Nov 29, 2023
Fractional investment is a revolutionary concept in the real estate world. It is to make investing in real estate easy and accessible.
Particularly, the concept of fractional investment benefits small investors and investors with low-risk appetites because the minimum investment required is quite low. However, anyone can do fractional investing to diversify their portfolio and yield high returns.
To learn more about this interesting concept, get into this blog right away:
Understanding Fractional Ownership
For those who are newbies to the concept of fractional ownership, do not be puzzled. Understand the basic meaning of fractional ownership explained below, and then we may dig deeper into this concept:
What is fractional ownership?
Fractional ownership in real estate means breaking down properties into shares to allow various investors to collectively come, buy, and own a piece of real estate property. This concept works just like the share market: each shareholder owns a particular company up to the percentage of investment he or she makes in it via investing through shares.
How does fractional ownership work?
Fractional ownership is extremely simple. To begin your journey of fractional ownership in commercial real estate, here are some steps you must follow:
Research and Selection
You may research and select commercial properties on your preferred investment platform. The property selection decision depends upon various factors, including market trends, location, minimum ticket size, risk, and potential returns.
Contributing Funds
After selecting the property, the next step is to make the financial contribution to acquire it. You may make a lump-sum contribution or opt for installments; the choice is completely yours.
Legal Documentation
The next step is reviewing and signing legal documents that outline ownership details, profit-sharing mechanisms, and exit strategies. This document is necessary to check through thoroughly and gain clarity on your investment.
Property Acquisition:
Once you confirm the payment and legal documentation, you become the owner of the property. A professional management team on your chosen platform oversees the day-to-day operations of the property you have acquired.
Rental Income Distribution:
The rental income on the property you have invested in is distributed among all the investors. The distribution is proportional to the ownership percentage of each investor.
Decision-Making Participation:
You are invited and hold the right to engage in key decisions related to the property you have acquired. The decisions may be in relation to property improvements or potential sales, based on the agreed-upon governance structure.
Continuous Monitoring
Apart from decision-making, you are advised to keep an eye on your investment. Monitoring performance, staying informed about market conditions, and adapting strategies are crucial for the success of your commercial real estate investing strategy.
Exit Planning
If you ever want to exit from the investment you made, you can easily do so by selling your property share. Selling your fractional ownership is similar to selling shares; everything is smooth and effortless.
Benefits of Fractional Ownership in Real Estate
Fractional investment is a recent but booming concept in the world of investment. The below-mentioned benefits highlight the reasons for its quick success:
Affordability and accessibility
The most compelling benefit of fractional investment in real estate is its affordability and accessibility. These are the two pillars strengthening the success and popularity of the real estate investing concept in India.
Earlier, commercial investment was seen as an opportunity only for big investors and companies. But now fractional investment has changed this concept. It opened the doors for small and medium-sized investors to enter the real estate world and reap its advantages.
Diversification of Portfolio
A diligent investor always longs for ways to diversify their portfolio. If you are also one of them, then fractional investment in India is the best way to do so.
Investments in commercial properties diversify your portfolio to a great extent and effectively mitigate the risk associated with the most common form of investment, i.e., shares.
Flexibility in Investment
Usually this benefit is least noticed, but it is significant. The fractional investment allows investors to enjoy flexibility in their investment.
You may better understand this concept with the help of the given example:
Suppose there’s an investor named “A” who has 10 lakhs of funds to invest in real estate. Also, there are three different properties he has shortlisted that suit his preferences, and each property costs 10 lakh INR. Now, with the traditional real estate investing method, he could only buy one investment property with the limited funds he had. However, with fractional investment, he may break the total funds of Rs 10 lakhs into three different parts to invest in all three properties.
Hence, fractional investments give investors the maximum flexibility in investing their funds.
In The End
Fractional investment is a booming concept in the Indian economy that you must explore. It holds the potential to make you good returns, provided you make research-based investment decisions and the market trends are in your favor. Since the market is unpredictable, you can’t do anything related to it. The best thing you can do to protect your funds is to invest in rental properties through a reputed investment platform like Sampati Nivesh.
