What You Need To Know About Fractional Real Estate Investing

Fractional Real Estate investing has gained so much traction in the last few years. There are many reasons for this, but the main one is the low initial investment it takes to dip your toes into real estate when you use this method.

While, generally, fractional real estate investing can be less risky and easier to enter, there are still some things you should know before you dive in headfirst.

Low Barrier to Entry 

As I mentioned, there is a low barrier to entry when it comes to fractional real estate investing. The reason is, as the name implies, you’re going to only pay for a fraction of the property and maintenance. 

You’ll be investing in something like an apartment complex most of the time. The developing company will handle all of the decisions and work to get the complex up and running, deal with the tenants, etc. 

While the fractional investors make a passive income proportionate to their shares in the company, this makes fractional real estate investing similar to the stock market, in a sense. You don’t need to know anything about technology to invest in Microsoft. 

You Should Diversify

Another huge advantage of fractional real estate investing is that it allows you to diversify much easier than typical real estate investments. With normal real estate, you’re going to have a lot of funds tied up in a single property because generally, properties are quite expensive. 

Beyond the price, you’ll also have to invest quite a bit of time. With fractional real estate investing, if you remain hands-off, you can invest in many different properties without worrying about your time. If one fails, that’s unfortunate but not the end of the world. 

You will not Have the Same Control 

This is both an advantage and disadvantage. I covered how this is an advantage; you’ll save a lot of time and not have to get hands-on with the development. 

This is great if everything works out. However, you’ll also be putting your money in someone else’s hands because you’re not going to have much of a say in how everything works. 

Going back to the apartment complex, you won’t have much of a say in choosing or handling tenants, what goes into the complex, or anything of that nature. This is why it’s important to pick a company with a nice track record or a vision that you believe in. 

ALSO READ: Advice On Fractional Ownership For Real Estate Investors
https://www.forbes.com/sites/forbesbusinesscouncil/2022/02/24/advice-on-fractional-ownership-for-real-estate-investors/?sh=6b187a093014

Commitments

Most investment sponsors will require their investors to make some kind of commitment. Usually, this will be around a decade or so. I’ve seen a commitment requirement of as low as 10 years, but it typically will not be lower than that. 

This means you will not be able to sell your shares until that timeframe is up. So just because you’re only in for a fraction, does not eliminate your commitment to the property or the investment.

Still Requires Due Diligence

Just because fractional real estate investing is “safer” than regular real estate doesn’t mean you can just throw your money around without a thought. As I mentioned above, you’ll be agreeing to a 10-year commitment most of the time, and you won’t have much of a say in how the business is run. This means you should know who you’re going into business with and how they plan on succeeding. 

ALSO READ: Tips From A Pro: Ryan Dean Hoggan Weighs In On How To Start Your Dream Business

How To Get Started In Land Development

Land development is a riskier yet more rewarding form of real estate investing. Many new investors assume it is only an option for experts, but I’m afraid I have to disagree. 

I believe that land development can be undertaken by new investors that are eager and motivated. I won’t lie, though; a lot more work goes into raw land development. 

There is an inherent risk to the strategy, but that can be said about most investment strategies. One of the main benefits of land development is that raw land is not an infinite resource, and it will continue to grow in value. 

With all of that being said, let’s get down to my top tips for land development. 

Watch Local Market Developments

Pay a lot of attention to what is happening in the local area. If there are a lot of buildings present, new businesses and houses being built, then the land will be more sought after. 

So pay attention to the surrounding markets to time your purchase, and get the right price. Form connections with locals that are in the know about things like these. I can’t overemphasize the importance of having a solid network, no matter what kind of real estate you’re investing in. 

Do the Numbers First

Before you get started investing in real estate, especially with raw land development, you need to know what you’re going to do with the land. Are you going to hold the land and then sell it to someone that wants to build on it? 

Are you going to build something? How much will it cost to build? Will you need to purchase permits? How much is maintenance going to cost afterward? 

Be honest about every single one of these questions, and figure out the numbers. This is crucial to know what kind of price tag you should aim for when you make your purchase. 

Know the Zoning Laws

I mentioned zoning, but let’s talk about it a little more. Certain areas will only allow certain buildings. 

So let’s say someone purchases land, expecting to build a commercial property or even sell the lot to a commercial business. Then they find out that only residential family homes can be built there. 

Their entire plan has been flipped on its head and has become highly uncertain. Zoning is part of due diligence so ensure you do your research and triple-check everything. Don’t take someone’s word about zoning laws; go out and make sure you know the truth. 

Leverage and Financing

As always, I recommend some kind of leverage when it comes to land development. Leverage is one of the most valuable tools in real estate and is recommended by most professionals, including myself. 

The profit increase is just too significant to ignore. Most of the time, lenders will cover about 80% of the cost, sometimes up to 85%. 

Prepare to Market

Marketing is a highly versatile subject, but it’s vital. No matter what business you are in or what you’re selling, marketing is the difference between success and failure. 

You could write the prettiest song in existence, but if you only get ten people to listen to it, then your time will have been wasted. So, invest in marketing. 

Talk to marketing experts, study the locals (again), advertise in newspapers, local websites, social media, etc. Do not skip out on your real estate marketing campaign, and do not underestimate the importance of a strong marketing strategy. 

Can You Invest In Real Estate As A Remote Investor?

2020’s Covid 19 pandemic pushed a lot of businesses into working from home with digital tools and remote real estate investment has also come into the limelight. Traditionally, real estate investors work in person. However, with the present development of digital tools and the level the industry has advanced to, people can invest in real estate as remote investors. 

From a wide point of view, real estate investment is viewed as involving purchasing landed property within your locality, or at least an area close enough for you to purchase, inspect and maintain your property in person. 

When I first heard of the possibility of investing in real estate from another location, I wasn’t impressed, but with the resources available to me today, I engage in real estate remotely, and I’m successful at it.

Remote real estate investment involves purchasing and managing property from another geographical location. This method of investment allows investors to earn passively without having to commute physically to all their properties regularly. If executed properly, remote real estate investment can form very substantial passive income for investors.

Being a remote investor in real estate without doubt would appear scary to some, but to avoid some common mistakes. Here are some important tips to keep in mind:

Research Markets

To invest in real estate, an investor must first find a market from where to purchase property. Therefore, research is a very important part of remote real estate investment because a remote investor has the entire world before him to purchase property. So, you need research to find the exact market to place your capital.

When you as a traditional real estate investor purchase a property around you in person, you already have information about the environment from the time you have spent in the area. Whereas as a remote investor, you are looking to invest in a completely new environment and wouldn’t have the advantage of being conversant with the area. 

Thus, it is essential for you as a remote investor to perform extensive market research, so you don’t make a loss in the long run.

Find a trusted property management team

In remote real estate investing, an estate agent or property management team that would handle the tasks that the investor cannot perform from his location is necessary. This team would handle the inspection of the property, leasing, maintenance, collection of rent and similar duties. 

Just as with markets, a remote investor should do extensive research on the property managers available to ensure he gets optimum service from whichever team he chooses to use.

Continue reading “Can You Invest In Real Estate As A Remote Investor?”

Is COVID Still Impacting Real Estate Markets?

A year after the pandemic began, empty shopping malls and office buildings were a sign that the novel coronavirus severely affected how we live. But more specifically, the drop-in home sales in metropolitan areas signaled that the virus didn’t spare the real estate market either.

In March 2020, governments and healthcare organizations declared it a global pandemic, which resulted in lockdowns and stay-at-home orders. The government decided to shut down markets and impose lockdowns in order to prevent the healthcare systems from collapsing. However, that has had quite some negative effects on the real estate market. 

But as a result, many households have turned into substitutes for schools and/or offices, causing homeowners to rethink their housing needs. Understanding the future of real estate could never be more stressed.

The sudden changes

Since the outbreak of the virus and consequent lockdowns, the reality of real estate markets has changed significantly. Real estate investments have been yielding above other traditional industries for several years in the past.

Continue reading “Is COVID Still Impacting Real Estate Markets?”

How You Can Grow Your Wealth by Investing In Real Estate In 2021

The real estate market is a hot spot of activity. Regardless of what happened last year, it is still an excellent place to invest and benefit. I would guarantee that it has always been a big earner for those looking to develop long-term wealth. It is a perfect way for you to boost your total holdings in 2021.

There’s no excuse not to include real estate in your investment portfolio. Starting in real estate is not as hard as you think. There is no easy way to make money or get rich in real estate, but you can create wealth over time by investing wisely.

Just like any other business, it has some risks. If you take the time to educate yourself about the process and the best ways to get better returns, real estate can be a great way to create wealth.

Here are a few of the top real estate investment strategies that I’ve found to be successful:

Continue reading “How You Can Grow Your Wealth by Investing In Real Estate In 2021”

Raw Land Investing: How You Can Get Started in 2021

2020 showed us that just when we think everything is going our way, things can get flipped upside down. That being said, 2020 is also the year where many people turned to land investing as a source of income. This is because raw land investing is one of the most stable types of investing one can do; people are always looking for land, you have a lot more control over how to manage it, and it can be an asset.

So how can you get started with raw land investing in this next year? Keep reading for some of my tips on how to become a raw land investor.

Continue reading “Raw Land Investing: How You Can Get Started in 2021”

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