One of the tried-and-true ways to get rich is to invest in real estate. The average millennial millionaire owns three properties, according to a study.
Previously, it has never been easy for the average person to get into real estate. People like you can now invest in real estate through crowdfunded or fractional property ownership. And you only need a dollar to do it.
What Is Fractional Real Estate Investment?
Real estate that is owned by more than one person is called “fractional real estate.” Timeshares are a great example of a type of real estate model called “fractional.”
People own a certain week of the year at a vacation property through timeshares. But owning a timeshare is not even close to being an investment. Some people may think that owning a timeshare is more of a liability than an asset because of the ongoing fees and low resale values.
But fractional ownership India isn’t just limited to timeshares anymore. The fractional model is used by a lot of online crowdfunding sites to let more people invest in high-cost projects. A typical wage earner might never be able to buy an apartment building with 50 units or a retirement community.
Benefits of Investing in Fractional Real Estate
It’s easier to get into than traditional investments in real estate.
In the past, it was very hard for people to get into real estate investments because they needed good credit and a big down payment to buy a property. Plus, investors needed to know how to buy and finance the property, which was a complicated process. Fractional real estate investment, on the other hand, can be much easier to do.
Diversification within an asset class.
Many people who own property also own at least one property that is not their main home. If the property doesn’t make enough money or goes down in value, they don’t have any other properties that do better to make up for it. After all, most college students and young professionals may not be able to afford even a 5% down payment. If you are lucky, your parents might be willing to help you buy a house.
If an investor chooses fractional real estate, they may be able to build a diverse portfolio of real estate with a small initial investment. Smart investors can also make sure that their portfolio is spread out across different countries and types of investments.
Use “leverage” without taking huge risks with your own credit.
Most of the real estate crowdfunding sites use leverage (or debt) as a way to invest. On any of these sites, debt can be used to pay for 50–75% of a typical investment. This is less risky than buying a primary home, which usually only needs 5% down or less.
Most people who invest in real estate have to take on the risk that comes with that debt on their own. But fractional investors don’t take risks with their own credit. If an investment doesn’t work out, the person who put money into it may lose some of it. But they won’t have to pay for debts that aren’t paid, and their credit will not suffer.
No worries about taking care of real estate.
People may not want to invest in real estate because they don’t want to deal with problems like a clogged toilet at midnight. With fractional real estate, property maintenance is taken care of by professionals, and both management and investments are completely hands-off.
Diversify outside of the financial markets.
Real estate has been a good way for investors to keep and grow their wealth for a long time. Most of the time, investors buy real estate as a way to “balance out” the risk of the stock market.
Even when the stock market is in a bear market, real estate can often still bring in money. You can diversify your passive income portfolio by holding real estate, stocks and bonds.
Fractional real estate investment may reduce the complexity and danger of traditional real estate investing. But before you buy fractional real estate, you should know what role it will play in your portfolio.
