Fractional ownership: you can afford to invest in commercial real estate with 25 lacs

Real estate fractional ownership is a method of purchasing a chunk of a commercial real estate property.

By Ground Report 23 Apr 2023

New Update

Have you been considering investing in that glamorous premium commercial real estate property located on your way to work? But you know you can't since you just have 25 lacs and the property is worth crores? Well, turn that dream of yours into a reality with fractional ownership. A fractional ownership platform finds high-value properties and allows investors to purchase fractions of them.

What is Fractional Ownership?

Joe lives in Hyderabad and wishes to invest in a commercial office space adjacent to his home. His budget is Rs. 25 lacs, so he may become a fractional owner of an Rs. 30 crore office building. Some additional investors possess a portion of the property shares. Their improvements and property upkeep are facilitated by a local property management business.

This is what we call fractional ownership.

Real estate fractional ownership is a method of purchasing a chunk of a commercial real estate property. The asset - in this example, a commercial real estate property - is divided into numerous pieces or fractions, allowing a larger number of co-owners with fractional interest to acquire it.

The expense of the property, as well as the profit, are distributed among several shareholders in fractional real estate investing. The rental income and equity grow in lockstep with the property's value. The property is often managed by a third-party management business that handles repairs and upkeep and is paid proportionally by the property's co-owners.

Practical Illustration Of Fractional Ownership

In Mumbai, there is a Grade-A pre-leased commercial property valued at Rs. 50 Cr. A 50 crore investment was initially only afforded by wealthy individuals. But, now a group of five regular investors, let's call them A, B, C, D, and E, each invests Rs. 10 crores in the same property. They become the property's fractional owners. An average investor with just Rs. 25 lacs can own the property via fractional ownership companies like Assetmonk.

How Good of an Investment is Real Estate Fractional Ownership?

Real estate fractional ownership has various advantages. Apart from the low barrier to entry and the opportunity to harness professional expertise via a third-party management team, you can also spread out your assets and diversify your portfolio, which is considerably more difficult to achieve with full ownership. These are some factors to consider before deciding on fractional ownership in real estate.

Ease of Access

By fractional ownership, it is possible to invest in commercial office spaces worth Rs. 70 crores. It is a significant investment that is frequently only available to the wealthy. But, because of fractional ownership, anyone may purchase a comparable property for as low as Rs 25 lakh. These office buildings also provide 6 to 10% yearly rental revenue. Every year, they earn between Rs 60k to Rs 1 lac in rental earnings. Assetmonk allows you to invest in commercial properties for as little as Rs. 25 lakhs.

Diversification

Your funds are not connected to any one piece of property. As a result, you may distribute money across different households, economic levels, geographical areas, and locations within the same country. You can also choose to specialize in one area or to diversify and profit from economic ups and downs. It reduces the likelihood of market movements.

Long-term Lease

Commercial leases are often for three years or more. The lease contract is also renewable. As a result, commercial properties provide investors with consistent revenue. Large corporations, technology organizations, and financial institutions rent high-end commercial space. These businesses make on-time rent payments. Invest in a previously rented business property to earn significant benefits.

Passive Income

Fractional ownership is an excellent option to invest in real estate without acquiring real estate and creating passive income. With steady rental revenue and appreciation, commercial estate fractional ownership gives a high return on investment. Commercial property investment in India has grown at a CAGR of 16% over the last five years. In addition to increased value, purchasing through a reputable fractional ownership organization may result in a 15% increase in rental revenue returns over the next three years. It is included in the leasing contract to safeguard against inflationary pressures and to ensure that your investment remains consistent over time.

Commercial Property Appreciation

For commercial real estate investments, there are two sorts of returns or benefits. The advantages of fractional ownership include capital appreciation as well as immediate cash gains. As a result, the value of your business property will increase. It's becoming more financially tempting to average investors.

Ease of Liquidity

Liquidity concerns have an influence on real estate. Fractional ownership, on the other hand, is not. The liquidity of traditional real estate investments is lower than that of fractional assets. Fractions ownership enables easy liquidity because the share of your commercial space can be transferred and sold to someone who wants it.

Bottom line

So, if you have been eyeing that commercial real estate property on your way to work for some time now, go ahead and invest with just Rs.25 lacs.

But need help with getting started first? Contact Assetmonk. Assetmonk allows office property investment with Rs. 25 lakhs. So, individuals can acquire a share of commercial properties and produce rent income. Assetmonk also enables you to earn an income source at home by simply using their easy dashboard to monitor investments.

FAQs

Is fractional ownership legal in India?

Yes, fractional ownership is legal in India.

Is fractional ownership safe?

One of the main reasons why fractional ownership is deemed safe is because tenants must sign a 5-7 year lease agreement. This makes it impervious to market volatility and economic cycles, ensuring investors' steady rental income and capital appreciation.

Can I sell my fractional ownership?

Yes, you can easily sell your fractional ownership share by transferring or selling it to anybody.

What is Fractional Ownership?

Real estate fractional ownership is a method of purchasing a chunk of a commercial real estate property. A commercial real estate property is divided into numerous pieces or fractions, allowing a larger number of co-owners with fractional interest to acquire it.

Is the property owned by the investor in fractional ownership?

Yes, the property will be owned by a group of investors in fractional ownership.