Investment in real estate on a fractional basis is a relatively recent method of gaining exposure to the market. For more than a decade, the notion of fractional investment in real estate has been popular in the United States and Europe. It is now gaining popularity in India. It is important to understand what exactly it means and what its advantages are to the Indian real estate market. MYRE Capital is here to help!
What is Fractional Investing?
Fractional investing real estate is exactly what it sounds like. Here, investors can buy a fractional share of a property. These properties are sold to individual shareholders, who get to share the multiple benefits of these properties, such as usage rights, priority access, and lower rates. This is all because the cost of the property is split between the shareholders.
Consider the following scenario: twenty persons, each with a Rs 500,000 investment, may purchase a 5,000 square foot residential space that would otherwise cost roughly Rs 1,00,00,000. In this manner, each investor makes returns proportional to their respective share of the overall rental yield, benefits from capital and currency appreciation, and has the option to leave the investment when the market value of the property increases.
Fractional Investing Real Estate in India
As mentioned above, fractional investment in real estate is the combined ownership of a property by a number of investors. Due to the surging prices associated with real estate, high net-worth individuals are typically the ones that make these investments. But with fractional investment possible these days in India, thanks to MYRE Capital, anyone can buy a piece of real estate at affordable prices.
Advantages of Fractional Investing Real Estate
Fractional investment in real estate has several advantages, but the three most important are mentioned below:
- Individual investors can acquire access to institutional quality assets by pursuing a fractional investment strategy. This allows them to invest in assets that they would not be able to afford on their own normally. Consider the case of an investor who has Rs 2000000 to put into the market. He/She could either acquire a decent piece of real estate in a subpar part of town or purchase a fractional share of a promising real estate in a better section of town.
- Again, let us assume that an investor has Rs 200,0000 to put into his or her portfolio. They could purchase that decent real estate in substandard locations, but it would require them to use up all of their investment funds at once. Alternatively, they can invest Rs 500,000 in four different class-A properties in the better sections of town by fractional investing real estate. This helps the investor to diversify their portfolio and also helps to smooth out any volatility in the market.
- Earnings from fractional property investment are considered passive income because the sponsor is responsible for all the hard labor involved in maintaining the property on a day-to-day basis. Owners who own a fraction of the LLC receive passive income in an amount that is proportional to their ownership interest in the LLC. In a nutshell, fractional investors reap the benefits of property ownership without having to deal with the hassles of property management.
Final Words
When you use a fractional investment platform like MYRE Capital, you can purchase real estate at much lesser prices and enjoy all the benefits associated with it.