Introduction to Fractional Real Estate Investment

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In the last few years fractional ownership has become more popular amongst business ventures and investors. This concept is not new by any means, as it stems back to the early 90s where timesharing or co-ownership was more prevalent. People were looking for shared ownership of properties such as, holiday homes that they could utilise for fixed parts of the year or on flexible usage terms. A major reason why fractional ownership came into existence was to reduce the financial burden for a single real estate owner or investor. At present, with the help of modern technology, we have seen how fractional ownership has been rebranded into a more sophisticated concept.

What exactly is fractional real estate investment?
First off in real estate investments, fractionalization is the act of dividing a property into segments for individuals to invest into. Once a property has split into segments, it takes a group of like minded people coming together to raise the required capital and become fractional owners. As you can imagine, purchasing an asset and sharing the cost with others opens up new opportunities for retail investors to participate in investments at the fraction of the cost. Once an investment has been fulfilled, each investors will earn their income from rentals as well as any capital gains when the property is sold, depending on the amount of fractions they own. In this day and age, with inflation, high cost of living and rising property prices, fractional real estate investment is a real breath of fresh air for millennials seeking investment opportunities.

What are the benefits of fractional real estate investment?
Entering the real estate market can be very daunting and there is usually a lot involved when investing for the first time. Fractional investment comes with many benefits, aimed at helping retail investors overcome the hurdles that comes with real estate investments starting with low entry costs. Unlike traditional real estate investments, investors do not need to take out big loans or save up for big deposits, making fractional investments almost immediately accessible to everyone with less monetary stress.

Another benefit of fractional real estate investment is that it offers liquidity. Traditional property investments is firstly a heavy commitment and exiting from the investment could take a prolong time to complete. However in fractional investments, investors can cash out of their investment at any time by selling their shares to another investor and may even gain a small profit out of it. With the help of modern technology, trading of fractional shares has been made much more convenient for investor through digital certificate, which we will dive into the details later on.

Opening up opportunities in commercial real estate is another benefit that is otherwise unobtainable for the retail investor. What was once reserved for highest caliber of investors, has become accessible for the retail investors to invest in real estate worldwide through fractional investments. This does not only benefit the retail investors but it also allows institutional investors to provide liquidity for their property.

Finally, diversification is another major benefit of fractional real estate investment. Portfolio diversification is important for investors as it enables them to spread their risk out and limit their exposure to any one type of asset. Retail investors will find it difficult to have a diversified portfolio, but with fractional investment, investors are able to enter multiple investments at the fraction of the cost, making portfolio diversification achievable and allowing them to control the volatility of their portfolio over time.

A last word…
With fractional real estate investments, investors now have options to explore opportunities that otherwise would be out of reach for most and also provide possibilities for obtaining a diversified portfolio. Modern technology has enabled platforms such as ‘The Rainmakers’ to provide fractional real estates investment through digital certificate and at the same time ensuring investors with integrity, transparency and efficiency.

There is evidence of a prosperous future for fractional real estate investments and from where it began to where it is now, the popularity and trend leans towards the positive. More and more platforms will emerge in the comings years, and ‘The Rainmakers’ will be at the forefront of this industry.

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