Real estate investing holds appeal for many different reasons:
- It tends to be a good hedge against inflation
- It historically appreciates
- It offers unique tax benefits
Despite the compelling advantages of real estate investing, some people watch from the sidelines without ever getting in the game. Why? It can be overwhelming to start investing in real estate, and for sole investors, the responsibilities of owning a property can be daunting. However, this is changing thanks to technology and an emerging investing tactic called fractional real estate investing.
Fractional real estate investing indicates significant changes in the real estate industry. One of the most notable changes is the necessity of coming up with a substantial sum to get started on your real estate investing career is no longer a burden, letting new investors get started in real estate.
Is fractional real estate investing the right strategy for you? Keep reading to find out more and how you can start today.
What is fractional real estate?
Fractional real estate is a method of real estate investing where investors own any number of shares instead of holding the entire property, not unlike a publicly-traded company on the stock market (though it isn’t traded on the stock market). Just like shareholders who likely don’t know each other and live anywhere globally, a fractional real estate investment property is co-owned by multiple investors who live in the legal jurisdictions of ownership.
How fractional real estate works
A fractional real estate investment property is usually owned by a management firm that may or may not exclusively deal in these deals. This company oversees operations of the property, including repairs, tenant vetting, and general property management. Most companies will vet and analyze properties in addition to performing due diligence, running all financials so that potential investors can be apprised of the possible return for their investment. Once the financials are run and the building is acquired, potential investors can offer to buy property shares.
Once someone invests their money, they can receive disbursements from rental income. The frequency of disbursements will vary from company to company. Another way the investors make their return is when the property appreciates. Most fractional real estate investing companies will either suggest or require a minimum holding period, so investors’ chances of receiving an appreciation-related payout increase.
How to start investing in fractional real estate
Buying fractional real estate is relatively simple, but you must find a trusted platform and company that performs extensive due diligence and strong real estate analysis skills. Research the markets that properties are being offered in and take a look at:
- Population growth
- Unemployment rates
- Job growth and industry opportunities
- Median household income
- Median household value (and how much it’s increased over the past decade)
- Median rent
You’re off the hook for property management headaches with fractional real estate investing. Still, it’s strongly recommended that you do your homework not only on the market but the company as well. Learn the basics of property analysis and investment terminology to go into any transaction feeling empowered.
Also, be aware of fee structures and disbursement schedules; be sure the company you select has policies and programs that make sense for your finances. It’s standard to administer disbursements to investors minus property operating costs.
Once you’ve found the company you trust, you’ll set up your profile and connect your financial information. When your financials are verified and secured, you’re all set to start buying shares in properties.
And voila! You’re a real estate investor.
Fractional Real Estate Investing: In Conclusion
Fractional real estate opens the door to the exciting world of real estate investing to anyone who’s always wanted to diversify their portfolio but is gunshy about taking on the responsibilities of being the sole owner of a rental property.
At Ark7, we eat, breathe, and live the power of fractional real estate investing and are currently offering properties in cities that are positioned to grow. Every property we offer has been extensively analyzed by a group of obsessed real-estate experts who are proud to be on the ground floor of a real estate revolution. Thanks to fractional real estate, you can start in this world and continue to make it whatever you want to be—no need to crash upon the rocky shore.
Create your account for free to buy fractional real estate today!