“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” -Franklin D. Roosevelt
Investing in real estate is a great way to add to your passive income and earn from your investment over the years. Whether it’s a house, a flat, a commercial building, or a plot of land, any kind of real estate make a reliable investment. One of the reasons why a lot of people avoid purchasing real estate is because they need to spend a huge amount of money initially and over the years, for taxes and maintenance. However, if you are interested in real estate, but don’t have a huge amount to put down, check out fractional investments in real estate.
What is a fractional investment?
Just as the term states, this type of investment allows you to put in a small amount of money on high-return high-value real estate opportunities. This mode of investment is commonplace today in places like Europe, the USA, China, Australia, etc. The best thing about fractional investment is that you have the option to decide how much you want to invest and on what kinds of assets you want to invest in. Let’s take a scenario, imagine you have always wanted to own a commercial property. But then, you may have thought that investing such a large amount of money is not practically possible. With fractional investment, you can invest the possible amount and get returns based on the amount that you have calculated based on your investment size. So, your initial investment is greatly reduced. At the same time, your expenses related to maintenance of the property as well as taxes are also reduced. The risks involved in this type of investment are also less as you only invest a fraction of the property value.
How is fractional investment different from Real Estate Investment Trusts (RIET)?
RIET is more like the mutual funds of real estate investment while fractional investment can be compared to stock trading. In RIET, the agency collects funding from various investors and invests them in properties, which they identify as high-income generating. The investors get the returns from the rents collected from the properties. In fractional investment, the middle man is eliminated. An individual investor or a group of people can get together can invest their money in a property. There are pros and cons to each kind of investment. Evaluate both and identify the best kind of investment that works for you.
What are the benefits of fractional investment in real estate?
There are many benefits of fractional investment in real estate. The top benefit is that you don’t have to make a huge investment. You become a partial owner of commercial property like an office, warehouse, retail, etc. The risks involved in fractional investment are minimal when compared to the risks involved in completely investing in property. A market study states that in the next three years in India, the fractional investment will go as high as $5 billion. So, if you’re looking for medium or long-term results from your investment, fractional investment in real estate is definitely a great option. Investing via this mode also helps an investor diversify their investment across different asset classes and markets, thereby reducing the associated risk.
The pandemic has changed the course of the real estate market with fractional investment gaining an edge over traditional investment methods. So, even if you find it difficult to make a huge investment in property, make a fractional investment in real estate now and reap the benefits in the future.