Fractional Real Estate Investing
Fractional Real Estate Investing
Fractional real estate investing is a strategy savvy investors use to get into high-value real estate deals. It’s actually a pretty simple concept, and if you’ve ever dreamed of becoming a big-time real estate investor, but just haven’t had access to the huge cash investment it typically requires, you might want to take a look at fractional real estate opportunities.
Let’s look more in-depth at how fractional real estate investing works - including some benefits and potential downsides. We’ll also take a look at how you can get into commercial real estate through fractional investing. If you’ve ever thought you’d love to get into the world of real estate, now may be the perfect time.
What Is A Fractional Real Estate Investment?
The strategy of fractional real estate investing involves buying into a piece of a (usually high-value) investment property. Generally, you’d partner with other like-minded investors and combine your resources. This way, you have the opportunity to purchase interest in substantially higher-valued properties than you would if you were to invest on your own.
Many investors who haven’t heard of fractional real estate investing before tend to have a similar reaction at first. They’re simply not sure if it’s a good investment strategy. But the concept is actually fairly common for high-value assets. Think: resorts and hotels, large upscale apartment buildings, vacation rentals, residential developments, stadiums and other various commercial projects. If you’ve been looking for ways to diversify your portfolio, fractional real estate ownership can be an avenue to do just that.
But fractional real estate isn’t always a perfect deal. Yes, there are plenty of up sides to it, but there are also some serious cons, as well. Let’s look at each.
Benefits Of Fractional Real Estate Investing
By now you might be wondering: is fractional real estate a good investment? With most investment strategies, there usually seems to be one clearly obvious benefit. In the case of fractional real estate, it’s that you will have the opportunity to invest in substantially larger real estate projects than you likely ever could gain access to on your own. But there are other benefits you might not have considered, too.
- More opportunity: It’s not hard to see the upside of an opportunity to own a stake in a real estate asset that would simply be out of your reach on your own.
- Minimize upfront costs: The ability to get into some of those higher-value properties stems from sharing the usually grossly large upfront costs.
- Own multiple real estate assets: You have a better chance of owning multiple pieces of real estate when you have a smaller stake in each one.
- Portfolio diversification: We briefly touched on this - it means you can have a more balanced portfolio, which is great in terms of whole protection.
- Liquidity: Fractional real estate tends to be more liquid than traditional real estate investments. Of course you’d need to reference how your agreement is structured, but it’s not uncommon to be able to sell your shares at any time, potentially making a deal a bit less risky.
Downside to Fractional Investing
Usually, especially when we are talking investments, if things sound too good to be true, they probably are. So while there are several upsides to fractional real estate investing, it’s important to understand the downsides as well.
- Complexity: Fractional ownership involves relationships, and that can tend to be more complicated than when you invest in real estate on your own. You’ll need agreement among all investors, which can prove challenging.
- Difficult to get financing: Securing financing can be difficult (though not necessarily impossible) when you’re dealing with multiple partners.
- You may need (an expensive) lawyer: You may want to consult with a real estate attorney, which is another added cost. Despite the cost, it can be well worth it, as he or she will be able to help you draft an agreement that protects your financial interests.
Fractional Investing in Commercial Real Estate
Investing in commercial real estate can feel out of reach for most people. But if you’re interested in getting into commercial property ownership, fractional investing can be a great way to do so.
When you’re pooling your money with other investors, new opportunities can quickly arise (translation: better cash flow which offers a cushion that allows you to do things like hire professional commercial property managers). With the right deal, you can go from signing an agreement to suddenly experiencing virtually immediate income, all without having to deal with approving leasing applications, overseeing tenant compliance or fixing drywall, just to name a few perks.
Connect Invest & Fractional Real Estate Investing
Connect Invest offers investors a unique opportunity to get into real estate that they may have once thought was out of reach. If you’ve been searching for a path to get started on your real estate journey, we can help. Our high-yield investment opportunities have short terms, offer fixed income and carry no overhead. Best of all? They’re accessible to virtually anybody. If you have $1000 to get started, you can get into the online real estate investment world through Connect Invest. Our spin on fractional real estate ownership that’s supported by crowdfunding is opening the world of real estate to people just like you. Reach out today to learn more.
Disclaimer: The material contained herein does not constitute an offer to sell or a solicitation of any offer to purchase these securities, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful. Offers for the sale of these securities will only be made to investors, who meet certain suitability standards, pursuant to the Connect Invest Corporation Confidential Private Placement Memorandum (the “Memorandum”). Investments in these securities are not suitable for all investors. Investments involve a high degree of risk and should only be considered by investors who can withstand the loss of their entire investment. Prior to purchasing any of these securities, prospective investors should carefully review the Memorandum, including the “Risk Factors” section, and any supplements thereto. Investors should perform their own investigations before considering an investment in these securities and consult their own legal and tax advisors.