Fractional real estate investing isn’t a time-share, where you pay for a certain amount of time every year in a vacation home. Timeshares don’t offer you ownership rights. Fractional real estate investing allows you, together with other investors, to own a home, vacation property, apartment building or commercial facility. Investment professionals often buy into these assets, but which real estate platform is right for you?
You share the costs and split the profits for valuable real estate, and here’s how these investments can mix with your traditional brokerage account and generate profits.
Disclosure: *Terms Apply.
The Best Fractional Real Estate Investment Platforms
Best for $100 Minimum Investment: Arrived Homes
Arrived Homes allows virtually anyone to buy shares of income-producing rental properties in some of the fastest-growing markets throughout the United States. With a minimum investment of just $100, investors can easily diversify their portfolios across multiple properties and receive passive income each quarter through the rental income generated by each property.
The company takes care of all of the management headaches that go along with investing in real estate so investors can simply enjoy the best part; collecting passive income. After a target hold period of 5-7 years, Arrived Homes will choose the most opportune time to sell the property to realize the highest gains. Each investor will then receive their pro-rata share of the proceeds from the sale and their investment will be fully realized.
- Low minimum investment allows just about anyone to buy in with their retirement funds
- Passive income is not guaranteed, but it is fairly common given how the fund is managed, which helps retirement investors
- You may feel as though the hold period is simply too long for your liking when you have IRA funds tied up in this fund
Best for Beginner Real Estate Investors: Fundrise
securely through Fundrise’s website
Beginner real estate investors
This is a testimonial in partnership with Fundrise. Benzinga earns a commission from partner links across Benzinga.com.
Fundrise is one of the most popular and well-respected real estate crowdfunding platforms, put together by a team of established real estate professionals who wanted to make building a real estate portfolio simple. It’s a very good place to start investing your IRA into real estate because Fundrise has its own IRA to work with.
That’s right. You can roll some — or all — of your IRA into a fund that consists of a diverse portfolio of real estate assets chosen by the Fundrise braintrust. Plus, all of the assets in the fund were chosen for their unique combination of upside, the ability to resist market downturns and their projected ability to generate long-term investor profits. This is the best way to bring dividends back to you—the investor.
This is a simple way to set it and forget it, and the Fundrise IRA allows you to do exactly that, so that you can get back to your life instead of staring at your account all day, every day. Remember, you don’t have to worry about accidentally violating any provisions of self-dealing, and Fundrise will do the accounting, pay the distributions and issue the statements for you.
- The platform handles all the paperwork, which means you are not causing issues that could impact your retirement funds
- The set it and forget it lay out of the platform helps retirees and those who are saving from the future because they don’t need to monitor their accounts too closely
- You can move money from your IRA to Fundrise, but you need to be sure that you’re comfortable with this investment before committing too much money to it
Best for Newer Accredited Investors: RealtyMogul
There’s a reason that many of the best dividend stocks are real estate investment trusts (REITs). Real estate generates revenue through all market conditions through rental income. Since REITs are required to pay out at least 90% of their taxable income to investors through dividends, they often have attractive yields.
The downside to most REITs, however, is that they’re publicly traded. This means that they’re vulnerable to the same market volatility as any other stock. The RealtyMogul Income REIT is a non-traded REIT, meaning that it has the benefits of being a resilient asset class and offering high yields, but without being valued based on the mood of the market on any particular day.
This REIT offers a 6% dividend yield and has experienced consistent growth in its share value since inception. Since it’s not traded on a major stock exchange, shares are purchased directly through the RealtyMogul platform with a $5,000 minimum investment.
- You can get into the non-traded REIT and avoid the issues that are caused by market fluctuations
- The relatively high dividend yield is fairly consistent
- REITs are required to return a high percentage of their income to investors
- While this REIT is not subject to trading, it may not fit into your investment plan or the barrier to entry might be too high
Best for a Diverse Range of Alternative Investments: Yieldstreet
Yieldstreet offers an all-in-one alternative investment platform with offerings for non-accredited investors as well as offerings available to accredited investors only. Yieldstreet regularly has new investment opportunities available, ranging from commercial real estate, art equity funds, structured notes, portfolios of consumer debt and many others.
Even if you’re not quite ready to jump into one of Yieldstreet’s offerings, it’s worth signing up for the platform to gain access to the many webinars and educational content available to learn the ins and outs of various types of alternative investments.
- You an sign up for the platform and simply wait for the right time to buy in
- The platform has a diverse range of offerings, meaning you can choose real estate and more, if you so choose
- There are helpful webinars and educational tools that can teach you about alternative investing
- YieldStreet offers more than real estate, meaning its offers may not be as attractive
Best for Long-Term Investors: CRE Income Fund
securely through CRE Income Fund’s website
When you sign up with the CRE Income Fund, you will buy into commercial properties where all the assets are signed to NNN leases in the highest-performing areas possible. This means that you get the best results from the fund while they handle the management and assets.
The fund concentrates on warehouses, data centers and other types of industrial properties, meaning that these are also properties you likely could not find on your own.
- The fund is designed to use your money to improve the fund and act in your best inrerests
- You can gain access to commercial units that are generally inaccessible to private investors
- There’s no guarantee that the fund can offer the same high returns in perpetuity
Best for Luxury Properties: Mansion
securely through Mansion’s website
When you start with Mansion, you can invest for as little as $99 in luxury homes and properties that have to be seen to be believed.
The platform is designed to help you see the appreciation in each property and generate passive income. You can choose from carefully curated properties chosen by the Mansion staff, easily see the share prices for each home and focus on properties that believe have the most potential.
With the luxury home investment market exploding, this is the perfect time to get in on the ground floor with luxury homes you don’t need to purchase yourself.
- Luxury homes have a unique market that can easily generate income
- You can easily choose from the list of properties and learn all about them before making an investment
- Not all investors will want to spend money on shares of luxury homes
What Are the Advantages and Disadvantages of Fractional Real Estate Ownership?
- No large down payment or excellent credit score required
- Potential passive rental income without the responsibilities of being a landlord
- Everyday issues handled by a property management company
- Diversification from in small houses to large apartment buildings
- You aren’t fighting with venture capital money when you invest
- These properties more easily generate cash flow internally and extrenally
- You don’t need hard money loans to buy into real estate at this level
- Long-term commitment of 5 to 10 years
- Private asset managers control these funds
- Risk of market fluctuations and economic downturns
- Fees involved especially with early redemption
- Interest rates still impact how these portfolios are managed
- You have no control over property manager at each location
Fractional Real Estate is Different than Owning a REIT
Some may be tempted to compare fractional real estate ownership to investing in REITs through a brokerage account. There’s a management fee tied to both, but these investment types differ considerably. There are big differences between the two:
- Investors in fractional real estate ownership actually own their property and can transfer ownership without restriction. When you purchase REITs, you buy shares in companies that own real estate. With a REIT, you don’t own real estate directly.
- Investors in fractional real estate have personal control over the properties they purchase. With a REIT, the management company decides what properties in which to invest.
- A fractional crowdfunding company can diversify its portfolio as much as it likes
- A REIT, while flexible, must be careful which properties it purchases and manages because of how it much return revenue to investors
- Crowdfunding platforms have more flexibility in how they can offer investment products
Fractional Real Estate Investing via Blockchain: Parcl
The adoption of blockchain technology allows investors to seek new avenues for real estate investment. Platforms like Parcl protocol leverage blockchains to mimic price movements of real estate, letting investors gain exposure to the most sought-after real estate investments on a per-square foot basis. This means that investment strategies can vary even more than normal.
These investments are made through synthetic assets, allowing investors’ portfolios to remain highly liquid in a traditionally illiquid industry. Through digital representation of hard assets, Parcl lets investors gain exposure to cities across the United States, starting as low as just a few dollars.
Parcl offers investors various investment options, including liquidity provision in the form of stablecoins and Parcls to earn passive income from one’s capital. With various opportunities on Parcl, there’s a lot of demand for its latest V2 platform. If you’re interested in real estate investing via Parcl, be sure to join Parcl’s V2 waitlist.
So What’s the Best Investment? Fractional Ownership or Investing in REITs?
What is the best investment between the two? It depends on your personal situation. If you want to own a piece of property and you can maintain the investment for several years, then fractional ownership may be for you. If you want regular monthly or quarterly income with the liquidity to get out of the investment at a moment’s notice, then you may want to consider a REIT.
A real estate fund offers you real access so you don’t need to do the house hacking, check the list price of every house in the area, pay all the overhead involved with property ownership or chase down tenants for rent payments.
Frequently Asked Questions
Yes. Fractional real estate investment is a good investment because it allows you to buy into the real estate market without purchasing the properties yourself.
Fractional real estate investment asks you to buy into a property or a portfolio through an investing platform. A REIT is traded like a stock and is tied to a massive corporation that owns a huge portfolio of properties.
Instead of fronting a majority of the funds required to purchase a property, fractional real estate investing allows you to buy into a property or portfolio at a much lower rate, offering access to those who don’t have hundreds of thousands of dollars to spend.