A Comprehensive Guide To Help You Capitalize on Fractional Investing

February 12, 2021 – Real Estate Investing

Fractional investing refers to the partial purchase rather than the whole purchase of a property. In this case, like-minded stockholders pool their capital together and invest in highly-valued properties. The fractional investing technique is practical for investors who want to acquire assets on a bigger scale and assurance of a worthwhile investment.

When used smartly, fractional investing could unlock 8-figure deals. The power of fractional investment improves financial fortunes by combining new common stock under the predetermined ratio scale.

Learn more about what you can make out of fractional investing and how such a method can change the game of property investment.

Fractional Investing in Stocks

Fractional shares and stock investing is an incredible way of making money. Stocks are lawful documents that represent ownership or investment in a company. That is why business people and other investors can utilize stocks to own a percentage of a company.

Fractional investing is common in the stock market and can be replicated in the real estate market. So how does stock investing work? A share or stock is paper security representing partial/fractional ownership in a corporation or company.

Fractional share investing is when investors pool their resources to purchase partial shares of a company or asset. Rather than owning one or more full shares, the investor owns a fraction or portion of one.

Comprehensive guide to fractional investing

Fractional Investing in Real Estate

Fractional real estate investing is a trendy business model that is starting to gain traction. Imagine owning a 10% stake in a high-value investment property and share in the risk of ownership with other unrelated parties. The market dynamics are changing as more people become willing to embrace the sharing economy.

Thanks to the opportunities that come with this type of investing, many people have discovered fractional investing’s hidden potential and see their financial returns markedly improve.

The potential to realize substantial capital appreciation and double or even triple their investments has further increased fractional investing popularity.

But most individual investors still face the same age-old question: Is it better to be an active or passive real estate investor?

  • Active Investing: Active real estate means that you are in charge and make most of the decisions. At the very least, you’re making buy-sell decisions, creating budgets, determining renovation plans, and working with the property manager.
  • Passive Investing: If you don’t like the idea of being a landlord or don’t have the expertise and experience to turn a profit, active real estate investing may not be for you. Therefore, it’s essential to be extremely cautious and learn how to invest wisely. Many investors prefer the passive real estate investing approach.

Fractional Investing in Commercial Real Estate – Syndication

Fractional investing in commercial real estate is referred to as syndication. It describes the pairing of investors and a sponsor to acquire a property.

Real estate syndication allows you to invest in high-value properties and prime areas that are not within your price range. That’s the most intriguing aspect of fractional real estate investing. It opens up new possibilities to own a share of multimillion-dollar properties without being a millionaire.

Syndication fractional investing is a collaboration of interest between:

  • A group of investors that offer capital to acquire properties
  • The real estate professionals who have high knowledge and experience in operating and acquiring profitable and good performing properties.

Real estate syndication opens opportunities for investors interested in putting a capital prime location and the best properties that are impossible to get along with.

Key Advantages of Fractional Ownership

  1. Expands capital for property upgrades: Vacation homes are types of properties that need proper monitoring and management. Thus, sharing the cost with other property owners can help you make more upgrades. Fractional ownership expands your options and lets you execute the necessary improvements since you have enough budget and resources.
  2. Shared cost: Investing in a property is a practical option if you are looking for an outlet to grow your money. However, if you do not have the cost, it’ll be hard for you to manage the property and pay your expenses. Shared cost is a top advantage because owners can split the carrying price for maintenance issues and other essentials.
  3. Less property vacancy: Since you are part of the pool, other owners and their families can rent the place even when you’re not there. You can also check online for exclusive platforms to upload your listing for free and attract renters.
  4. Shared duties for rentals: Investors have one common goal: to have higher revenue. Management tasks can be divided among the owners to speed up the growth and worth of the property. Others may be in charge of guest relations, while some investors are in charge of talking to prospective renters.
  5. Ability to buy better property in a better community: Entering a fractional ownership agreement increases property investors’ chance to get a bigger house to purchase in the most desirable spot. In real estate, the essential rule that all investors must bear in mind is location.

Fractional investing guide

Disadvantages of Fractional Ownership

  1. HOA or local restrictions: Some HOAs limit the privilege to a singular or two owners. This can be a challenge if you have a full group of investors interested in a certain property.
  2. Clashing plans for vacation homes: You may be a pool of like-mind investors, yet clashing plans are inevitable between the team. Make sure to finalize everything with a lawyer before the agreement is effective to avoid circumstances.
  3. Hard to sell: Fractional investing is not for buyers who can only work with friends and family. The majority of the buyers are hesitant to use fraction investing to partner with someone they barely know.

Is Fractional Investing Right for You?

Fractional real estate investment is a great way to build and accumulate wealth. However, not all investment strategies are the same. It’s crucial to understand each investment strategy’s pros and cons to ensure you choose one that will set you up for success.

That’s where we come in. Our core mission is to leverage our industry experience to provide valuable information to existing and potential investors. We will become familiar with your investment goals to ensure you make the right investment decisions.

Want to start your journey in multifamily real estate investing? Call Yankee Capital today at (781) 400-8778 to speak to our experts and become an investor.

LEARN HOW TO BECOME AN INVESTOR WITH US

We welcome inquiries from domestic accredited investors as well as international investors seeking multifamily investment opportunities.

Schedule a call

Related articles

investing in real estate

The Hunt for Yield

September 14, 2021

Interest rates are low, inflation is rearing its head and equity markets are at all-time highs.  This puts many investors at a crossroads and in need of a strategy that can generate income, hedge against inflation, and is largely secular to the equity markets, and our recommendation would be to look at investing in commercial […]

Read more »

Top 10

The Top 10 Reasons to Invest in Multifamily Real Estate

August 11, 2021

We all know we should be investing in real estate, so what is holding you back? Our team has put together the “Top 10 Reasons to Invest in Multifamily” as a guide for you.     We highlight some of the many benefits that come with investing in multifamily real estate gathered from our years […]

Read more »

Webinar on Multifamily Execution and Adaption – A Case Study

July 22, 2021

Now available: If you’re considering investing in multifamily properties, this webinar will illustrate how our strategy and execution make our investments a success. We show you the numbers and explain how we’ve delivered value creation in our first fund.   A replay of the live event can be found HERE     As always, please feel […]

Read more »