The modern age presents many opportunities for people to take interest in the world of investing.  The stock market has intrigued so many people as to propagate expansive tomes on the subject of buying and selling properties or stocks.  From rental property investment to options as uniquely specific as fractional property investments, buying a property’s shares is no small feat.  At the time of writing, fractional property investing is gaining popularity because it is an easy gateway for new investors that immediately presents lucrative returns.  For seasoned investors and newbies alike, fractional property investing is uncannily popular due to its potency.

Investing in fractional real estate only means that you own an abstract portion of real estate, but you will benefit from that slice of real estate as if you have a literal portion of a property.  You receive all benefits as if you own the entire property, but you don’t have to deal with many downsides, including maintenance, surprise expenses, and general property management.  The problems inherent to most types of real estate investments do not abound when one invests in fractions of properties.  The specifics of how this works are as follows.

First, a company or extraordinarily rich person buys a piece of real estate.  Most of the time, this is not a residential piece of real estate, but a commercial one, so it is definitely substantial in terms of size and value.  The company divides the purchased property into abstract shares to sell to seasoned as well as amateur investors.  A company may divide a property into anywhere from a dozen shares to a hundred.  Anyone who invests in these shares receives cash from people who pay the commercial or residential property’s rent.  If you want to make such an investment, be wary that not all properties dish out money from rental income immediately.  Some properties may not be generating income at the time you purchase a share.

Commercial Versus Residential

This general distinction between properties presents important differences of which to keep track.  Typically, “residential” properties are vacation ones.  Shareholders receive spatial occupancies or temporal occupancies.  Temporal occupancies or timeshare purchases entitle owners to rental income during certain times of year.  With this method, you “share” a fraction with other investors.  They have their parts of the year to profit from their pieces of a property, while you have yours, and you all benefit from the property accordingly, receiving rental income during your time of ownership.  

Ownership of commercial property does not typically present temporal occupancies to potential investors.  The only other option is a spatial occupancy, which is the default notion of dividing a large physical space into abstract bits.  With spatial occupancies, you share an area with other investors all year, and the rental income is split as many ways as there are investors who hold shares.  The money you receive from having shares in commercial properties may be calculated every fiscal quarter, month, or week.

The Inclusion of Private Equity

Fractional options do not usually encourage an us-versus-them mentality.  They often offer private equity, an opportunity to make choices.  A company that buys commercial properties raises the value of those properties by allowing investors to receive rental income from shares.  Thus, an investment in such a commercial property is an example of a private equity investment.  All investors then receive money based on what renters pay.

Another option is to involve yourself in a Delaware Statutory Trust.  This trust pertains exclusively to commercial types of real estate.  In such a trust, investors purchase shares of it and earn an established rate of income from whatever property.

Finally, we have the Real Estate Investment Trust.  Companies are REITs as long as they own multiple commercial properties, and investors who purchase any shares within available properties have access to rental income, flow of cash, and profits from all properties across the REIT.

Earn Passive Income

The primary benefit of fractional property investments is that you can generate passive income.  That is, you earn an income, which is not just an occasional burst of cash, but a steady flow of money on which to depend.  Also, that income is passive such that you need not invest a lot of time, energy, and effort in maintaining your assets.  When you buy a share of a property, you are not as responsible for that property as you would be if you actually bought it instead of an abstract share.  The only maintenance you’ll need to perform is research as to how well the actual company will take care of the property.  While you do not need to take care of the property the company owns, you also cannot take care of that property, so pick your battles wisely.