Real Estate

What is Fractional Ownership and How Does it Affect the Commercial Real Estate World

fractional ownership in real estate

According to a report, Fractional Real Estate Ownership is estimated to grow to $5 Billion mark in the coming years! Well, that’s huge. In this article, we will discuss every minute detail regarding fractional property investment and how it affects the real estate world. 

What is Fractional Ownership?

Investing in real estate properties is considered highly prestigious and high-end. People with high income invest their money in lavish properties. Being a class symbol, investing in real estate properties has grown tremendously over the past few years. However, people with limited income and money tend to look down whenever the question of real estate comes in front of them. Why? Because purchasing a real estate property is always considered a high-end investment opportunity and can be afforded by only a few blessed people.

No, even a middle-class person can buy a high-end commercial real estate property. How? Through fractional property investment. In Fractional Property Investment, a person purchases a commercial or a residential property in a similar fashion like the regular investment opportunity. The only difference is that the property is bought in a group. There are multiple buyers of the property, each holding a significant share in the property according to the capital shared. The rental income is distributed​ among the buyers in the ratio of individual shares. 

Significance of Fractional Property

  • You don’t have to go beyond your limit.
  • People with similar savings and income can come together to buy a certain high-end property.
  • The benefits or profits are shared equally among all the buyers with no hidden charges or conditions. 
  • It is a huge opportunity for people with limited income sources but still wants to invest in real estate.
  • The pandemic has led everyone to wonder about the situation of all the real estate investors. 

Does Fractional Property Investment Support Liquidity?

Liquidity is the process of converting an asset into money. In liquidity, the market price of the asset or property is not harmed. While looking at investing, liquidity is an important criterion to be considered by the investors and company owners. In a broad sense, metals are considered more liquid than commercial real estate properties. 

However, with the unveiling of Fractional Property ownership, commercial real estate can be liquidated without difficulties by the individual owners. For instance, if a person who has partly invested in real estate wants to sell the owned shares, he can then quickly transfer that part of the property to another investor. Also, keep in mind that exclusive or complete ownership does not give the owner the liberty to sit between investments from one investor to another.

Advantages of Fractional Property Investment

Fractional Property Investment has many benefits over conventional or complete property investment. Some of the advantages of Fractional Property Ownership are as given below-

  • Choice- In the Fractional Property Investment, the investor can look for the property of their own choice and can personally visit the property to check it out. Now based on the market price the property is divided into equal shares containing a minimum amount called tickets. The investor can pick up any number of tickets and become the owner of the shared​ property. For instance, a CRE property is divided into 10 equal parts and the investor decides to buy 3 tickets then he/she becomes the owner of 30% of the property. 
  • Diverse- Investing through Fractional Property Investment allows the person to invest in multiple properties. This is a higher advantage over other ways of real estate investment where the person is allowed to buy a fixed set of assets only. 
  • Liquidity- By investing in Fractional property real estate, one can convert the owned property into cash at any moment by transferring the ownership to another investor. Other investing methods such as REITs don’t allow this.
  • Ownership of Unused Property- Fractional Property Investment allows purchasing properties that are not yet built or in use. This is not the case with other platforms of buying commercial real estate property investment. As per SEBI rules, REITs should have essentially 80% of their investment in income-generating properties.

Things to Ponder Before Investing in Fractional Property Investment

Putting resources into CREs is viewed as an astute decision because of the great number of advantages such as transparency, safety, and complete straightforwardness. In any case, there’s not a viable alternative for experience with regards to Fractional proprietorship land speculation. However, there are a few components or points that you are required to ponder over before investing in Fractional Property-

  • You must do rigorous market research and personally visit the property before investing.
  • You should look for a property that has high ROIs. Without returns and benefits, investing is fruitless.
  • You must consult a company with high customer-orientation nature. You should look for proprietor companies with high yields and capital gains. 

So we have observed that fractional property investment is definitely worth your time and money. However, you must ensure that you are investing in something good and the property yields high returns. In the present time of financial crisis investing in real estate is certainly a prudent decision that will ensure a stable income source for a very long time. With the introduction of fractional property investment, it has become very easy for middle-class people to invest in real estate properties. 

About the Autor: Yield Asset

Yield Assets is one of the best commercial property investment companies that provides the best real estate investment platform. Investing in pre-leased commercial property is one of the best investments that one can rely upon.

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Jenniferkim is a General Blogger & writer who has been extensively writing in the technology field for a few years. He has written several articles which have provided exciting and knowledgeable information on Finance, Business, Tech, Travel, Sports in Italy.