Traditionally, investing in real estate requires a large financial commitment and a lot of time. The investor purchased the property, prepared it for rent, and acted as landlord, accountant, and property manager.
Some real estate investments offer another option. Investors can pool their resources with other investors to acquire a wide range of investment properties and never spend a Sunday afternoon replacing the fill valve on the toilet.
But as with any investment, there are pros and cons that need to be considered before committing.
What is part of real estate?
and Some real estate investmentswhere multiple investors jointly purchase shares of a single property.
The process involves a platform that acts as an intermediary, sourcing viable properties, dividing their value into shares, and managing the investment on behalf of interested parties. By purchasing shares, investors pool their resources to finance property acquisitions and subsequently potentially earn rental income and asset appreciation in return.
However, while fractional ownership has advantages in terms of lower entry costs and potential passive income, it can pose liquidity challenges. While some platforms offer secondary markets for stock trading, immediate sale opportunities may be limited, so a long-term investment perspective is required.
Some advantages of real estate investing
Fractional real estate investing is more accessible than traditional real estate investing and provides a hands-off approach to day-to-day operations. Some main advantages:
- Lower barriers to entry: Shared ownership allows you to acquire property that would normally be out of your reach financially.
- passive income: Investors may be able to create wealth through rental income and property appreciation.
- Professional management: Some investors can benefit from professional property management, relieving the landlord of the day-to-day responsibilities.
- flexibility: Investors can diversify their portfolio beyond their local area and take advantage of opportunities across the country.
- Cost Allocation: Sharing expenses, including taxes and maintenance costs, can reduce the financial burden on individual investors.
- diversification: Fractional ownership allows investments to be spread across different property types and locations, potentially reducing risk.
Some Disadvantages of Real Estate Investment
As with any form of investing, there are disadvantages that need to be considered, such as:
- limited control: Investors have less say in property decisions than outright ownership. Typically, design, tenant screening and maintenance are handled by the platform or determined by the investor group.
- Higher management costs: Professional management fees may be higher than those an investor might face as a DIY landlord.
Some real estate investments can provide a viable path to portfolio diversification and access to real estate opportunities that would otherwise be unavailable. However, potential investors must conduct thorough research, consider associated fees and risks, and align investments with their financial goals and risk tolerance. As with any investment, smart decisions are critical to success.
Are you ready to diversify your investment portfolio through real estate?explore opportunity to arrive Invest as little as $100 or as much as $15,000 per property in single-family homes and vacation rentals in every market. Or, consider arriving in a single-family home fund for instant diversification.
