Fractional Ownership: How this investment is unlocking real estate opportunities
Investors looking to enhance their wealth face a variety of competing economic obstacles right now. For starters, rising inflation puts pressure on investors to purchase assets that will increase in tandem with it, or at the very least closely track it. Failure to do so would result in a decline in real-term wealth, which is antithetical to the goals of every would-be investor. Indeed, it is critical for investors intending to expand their wealth during this moment of instability. But how exactly? Through fractional ownership.
Great strides in fractional investing platforms like Assetmonk are allowing retail investors to engage in institutional-grade investments that they would not have qualified for in the past, as well as gain the benefits of direct property ownership without the accompanying frictions and difficulties.
An Elusive Asset Class: Real Estate
Real estate, as an asset type, is famously expensive. Property investing has always been a successful vehicle for financial gains, but it remained unavailable to ordinary people until recently, owing in large part to the initial cash necessary to join. Real estate, on the other hand, is one of the most historically proven asset groups.
Its unblemished track record of capital appreciation and market stability is difficult to argue with.
Property’s capacity to hedge against inflation is especially important at the moment, as the rental market has a strong link with inflation and sometimes even surpasses it.
This provides investors with unique protection, since they may be confident that the real-terms worth of their assets will not be decreased by inflationary pressures.
However, for far too long, ordinary investors have been hampered by entrance obstacles – industry expertise and upfront funds – that limit participation in the lucrative property development business.
Fractional Ownership Explained
As the name implies, fractional investing allows investors to put money into an asset without having to put up enough money to buy the asset altogether.
This simple yet groundbreaking strategy allows investors to benefit from the same features as the entire offering at a fraction of the cost.
In other words, rather than committing the needed complete money, investors can just put in a lower amount and gain exposure to the underlying asset’s growth in value.
This has been transformative in the real estate sector, opening up profitable development prospects to a broader pool of investors.
Furthermore, thanks to this increased disintermediation, investors may align their interests with experts like Assetmonk who have the requisite competence and can execute the necessary due diligence and monitoring on their behalf.
To put it another way, investors with limited funds can now pursue premium and flexible commercial space investment opportunities in large-scale development projects.
Why Should Investors Take Part In Fractional Ownership?
- Long-term lease: Renters in rental units change regularly. As a result, the landowner is obligated to pay the rent until a suitable substitute is found. Commercial leases are frequently three years or longer. The leasing arrangement is also renewable. As a result, commercial buildings provide investors with dependable income. High-end commercial space is rented by large enterprises, tech firms, and financial institutions. These companies pay their rent on time. Furthermore, several tenants have prolonged their lease terms due to the time, effort, and resources invested in turning the premises into offices. Invest in a previously rented commercial property to reap big rewards.
- Rental Income Returns: Commercial estate fractional ownership provides a high return on investment due to ongoing rental revenue and appreciation. Over the previous five years, commercial property investment in India has expanded at a CAGR of 16%. Aside from enhanced value, buying through a respected fractional ownership organization may result in a 15% boost in rental revenue returns over the next three years. It is included in the lease contract to protect against inflationary pressures and to ensure that your investment remains steady over time.
- Dual returns: Investment in commercial real estate generates a twofold return. The benefits of fractional ownership include both immediate financial gains and the value of a commercial property. You own some business property. As a result, your investment’s value will increase. Small investors are increasingly being tempted financially.
- Liquidity: Liquidity is a significant advantage of fractional ownership. Traditional real estate investments have lesser liquidity than fractional property assets. Of course, you should double-check your contract, but having the option to sell your investment at any moment reduces the risk of trading. How so? You may always sell the property and transfer your ownership interest to others.
- Versatility: Do you wish to diversify your real estate assets but lack the funds to purchase properties in other markets? Real estate fractional ownership enables this. Shared ownership, for example, permits you to purchase real estate while working in commercial office buildings and renting out your home, all while earning mortgage payments. Because your funds are not linked to a particular property, you can distribute them over several properties, grades, locations, and regions within the same city. You may then decide whether to focus on a certain industry or to continue diversifying and profiting from economic ups and downs. It reduces the likelihood of market volatility. Diversification can provide benefits without requiring a substantial initial commitment.
- Strength: Due to portfolio diversification, ease of departure, financial gain, and continuous rental income, small investors are becoming fractional owners of commercial buildings. Furthermore, the Indian commercial real estate market is expected to increase from 13-16% soon, making fractional ownership of commercial buildings a beneficial investment. In addition, the Indian commercial real estate market is expected to contract somewhat in 2020. Nonetheless, it greatly improved in Q3. Global property values have fallen as a result of Covid-19, notably in London, Dubai, and Stockholm. According to industry observers, office leasing increased concurrently with India’s burgeoning outsourcing business. Multinational firms control more than 63 percent of the commercial space in India (mainly from the United States and Europe).
Fractional ownership is a unique investment vehicle that marries high returns with income stability, permitting individual investors to prosper from the growth of the commercial real estate market.
Assetmonk is a well-known real estate investing platform in India that offers chances in Chennai, Hyderabad, and Bangalore. It offers practical commercial space investment options such as fractional ownership for as little as Rs. 25 lacs and crowdfunding. IRRs range from 14 to 21%. Our items, on the other hand, are divided into categories to accommodate different economic degrees of investors. Growth, Growth Plus, and Yield are the three categories.