Gaining popularity over recent years, fractionalized real estate investing is opening up a traditionally hard-to-enter industry by empowering low-capital investment opportunities.
In real estate investing, there are a lot of different options to choose from. You can invest in residential or commercial properties, rehab projects, or even land. But no matter what type of real estate you decide to invest in, the basic premise is always the same: you’re buying a property to sell it for a profit at some point in the future.
In recent years, a new type of real estate investment has begun to gain popularity: fractionalized real estate investing. So what is fractionalized real estate investing? In short, it’s when you break up ownership of a property into smaller pieces and sell those pieces to individual investors. This has a few advantages over traditional real estate investing:
1) It allows investors with limited capital to get involved in the market;
2) It provides investors with more diversification; and
3) It reduces the risk for everyone involved
Two Main Types of Fractionalized Real Estate Investing
If you’re thinking of getting involved in fractionalized real estate investing, there are a few things you should know. First, it’s important to understand the different types of fractional ownership. There are two main types:
1) equity sharing and
2) debt sharing
Equity sharing is when investors pool their money together to buy a property outright. Debt sharing, on the other hand, is when investors take out a loan to finance the purchase of a property and then share the payments among themselves.
Structuring Your Investment
Next, you’ll need to decide how you want to structure your investment. There are three main options:
1) through a real estate investment trust (REIT),
2) through a real estate crowdfunding platform, or
3) directly with a property owner
REITs are publicly traded companies that own and operate real estate assets. Real estate crowdfunding platforms allow investors to pool their money together to finance the purchase of a property. And finally, some property owners are now offering fractional ownership opportunities directly to investors.
If you’re considering fractionalized real estate investing, make sure to check out our other blog posts as well as BRiX U, our education platform designed for the smart investor. But the good news is that this type of investing can be a great way to get started in the real estate market without a lot of capital.