Investing in real estate has long been a popular way for investors to build and diversify their portfolios. Fractional property investment offers a new way for more people to invest in real estate without the time and financial commitments traditionally associated with buy-to-let. In this article, we’ll compare fractional property investment with traditional real estate investment to help you determine which is right for you.
Fractional property investment is a way for investors to own a share of a property without having to buy the entire property. Investors can purchase a fraction of a property by owning shares in an SPV that owns the property and entitles the holder to a share of net rental income and any capital appreciation generated. Fractional property investment allows investors to diversify their real estate holdings and invest in properties that may otherwise be out of reach.
Traditional real estate investment involves buying and owning a property outright. Investors can choose to purchase residential or commercial properties, with the goal of generating rental income or selling the property for a profit. Traditional real estate investment requires a significant amount of capital, as well as ongoing maintenance and management.
With fractional property investment, investors can invest in multiple properties without having to buy each property outright. Fractional property investment offers greater flexibility to invest across multiple properties and quickly build a diversified portfolio that aligns with their personal and financial goals. Fractional ownership is generally better for those looking to take a hands-off approach to property investment by allowing investors to benefit from investment in property without the time and hassle associated with direct ownership.
Traditional property investment is generally better suited to investors who are looking to take a more hands-on approach to the running of their property. Through full ownership investors can take full control of the management, maintenance and letting of a property and make decisions such as setting rental rates or making renovations independently. Traditional property investment is generally better suited to investors who are looking to take a more hands-on approach and have the upfront capital, time, and expertise to buy and manage their properties directly.
The decision to invest in fractional property or traditional real estate ultimately depends on your investment goals, time, experience, and financial situation. If you are looking to diversify your real estate holdings and invest in multiple properties, fractional property investment may be the right choice for you. If you have the capital and are willing to take on the responsibilities of property ownership and management directly, traditional real estate investment may be a better fit.
But, in reality, fractional and traditional property ownership are not mutually exclusive and are complimentary investment strategies. For experienced investors, fractional investment can be a great way to further diversify an existing portfolio across a wider number of locations and property types. For new investors who are looking to invest smaller amounts in property and who don’t have the time or experience to manage properties directly, fractional ownership can be a great way to get started in property, with a view to adding whole properties to their portfolio in the longer-term.
This article is not a financial promotion and is not intended as an offer or solicitation to enter into investment activity. Any opinions expressing are the opinions of Cahootz Group Limited at the date of publication and do not constitute financial, investment, legal, tax or other advice. Any investment carries risks and you should consider these carefully before making any investment decisions.