Is Fractional Investment the Future of Real Estate?

Author : Marketing Team | Published On : 13 May 2021

In simple words, fractional ownership in real estate happens when many investors jointly invest in a real estate property so as to benefit from the income from that particular asset. To put it another way, fractional investors can procure percentage ownership in an investment quality asset.

In this manner, every participating investor receives income, directly proportional to the individual investment. The income could be through rental yield or value appreciation. Also, every individual associated with the investment is entitled to exit the asset at the current market rate. Globally, active real estate markets such as Canada, USA, Hong Kong, Singapore, etc, are witnessing significant affinity towards fractional real estate investments.

This sort of fractional ownership is expected to find significant traction in other countries and people across different groups and can enjoy a great chance to invest in lucrative properties. Earlier, the real estate sector faced the dilemma of such premium deals being accessible to only top investors.

Key Aspects of Fractional Investment

High Diversification in Currency

Through fractional real estate investment, all investors can access different ways of generating income, going beyond rental income or capital appreciation of the concerned property. Besides, as people can invest across locations, returns can be obtained in different currencies.

Finance Ceases to Be the Prime Concern

Fractional investors can be part of huge deals by investing small amounts of money. Real estate had to deal with restricted access to supreme deals for decades as only top investors enjoyed access to top deals. Availability of finances was a huge concern for small-scale investors. Fractional investments have brought in a radical effect here. Here, investors are able to be part of impressive deals with investments based on their affordability.

The process is quicker as well. After buying the intended portion of the concerned property, the investor has to sign a document and all procedures are over.

Illiquid to Liquid Conversions Are Easier

Certain assets, such as real estate, may involve long processes to be converted into cash. It enables an easier conversion of illiquid into a liquid that real estate assets are tokenized so that they are sold fractionally. Through tokenization, rights to the particular asset are converted into digital tokens. The need for intermediaries gets eliminated.

Diversification of Portfolio Is Made Easier

In simple words, fractional investments enable easy access to real estate assets that are not easily accessed under normal circumstances. Further, investors can diversify their portfolio beyond ETFs, stocks or bonds with less effort and at a highly affordable cost.

Fractional ownership is typically enabled in real estate through property management firms so that investors can deal with overseeing issues regarding the legality and returns from the property.

Conclusion

Fractional real estate investments are slowly gaining traction across the world. Fractional investment addresses some of the long-standing concerns of the real estate sector. Besides, this type of investment seems to be ideal for the future requirements of the real estate industry. Therefore, it could be concluded that fractional investments might define the future of the real estate sector.