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How Should You Invest in Fractional Ownership?: A Step By Step Guide

September 16, 2024
Mohit Bali
Fractional Ownership
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Two investors visiting a commercial property they partially own through fractional ownership
7 minutes read

Explore the essentials of Fractional Ownership, from key concepts and benefits to risk management and platform selection. This is your step-by-step guide to smarter real estate Investing.

Fractional ownership in real estate has gained significant traction as an innovative way for individual investors to gain exposure to high-value commercial properties. Unlike traditional real estate investments, where one must purchase a property outright, fractional ownership allows multiple investors to collectively own a share of the property. Each investor holds an equity stake based on their contribution, making it a more accessible and flexible approach for those looking to diversify their portfolios without the high capital requirements.

This model is particularly popular in commercial real estate, such as office buildings, retail spaces, or industrial complexes, where the property values are typically beyond the reach of individual retail investors. By pooling resources, fractional ownership democratises access to lucrative real estate assets, traditionally reserved for institutional investors

Nevertheless, while fractional ownership is an attractive option, it’s essential to approach it with a well-informed strategy. To maximise returns and minimise risks, investors need to take a systematic approach to evaluating and managing their investments. Read ahead to discover the key steps involved in intelligent investing in fractional ownership.

Step 1 – Research the Concept of Fractional Ownership

A good starting point is to familiarise yourself with the concept of fractional ownership, along with its benefits and potential risks.

What is Fractional Ownership?

Fractional ownership allows multiple investors to collectively own a portion of a real estate property. Unlike traditional real estate investments where one person owns the entire property, fractional ownership divides the property into smaller shares. This model is particularly useful for investors looking to enter the market with a lower initial capital.

For a more in-depth explanation of how fractional ownership works and how it differs from traditional real estate, you can visit our Comprehensive Guide to Fractional Ownership.

Benefits of fractional ownership real estate investments

  • Affordability: Invest in high-value properties without the full purchase price.
  • Portfolio Diversification: Spread your investment across different properties, reducing risk.
  • Professional Management: Most fractional ownership models include professional property management.

Risks of fractional ownership real estate investments

  • Limited Control: Investors typically have limited say in the management of the property. Although they do have voting rights with regards to selling the property.
  • Liquidity Issues: Selling your share can be more challenging than traditional property sales.
  • Platform Dependence: The success of your investment can rely heavily on the platform facilitating the ownership.

If you’re interested in a deeper dive into the benefits and risks associated with fractional ownership, head to our guide here.

Types of Fractional Real Estate Investments

There are two main types of fractional real estate investments: commercial and residential properties. Commercial properties often generate higher rental yields, while residential properties can offer more stability. Investors also have the choice between existing properties and new developments, each with its own pros and cons.

For detailed insights on the different types of fractional ownership investments, check out this comprehensive guide.

Step 2 – Evaluate Your Financial Position and Goals

Lets’ explore how to assess your financial readiness and define clear investment goals to ensure fractional ownership aligns with your broader financial strategy.

Determine Your Investment Budget

Before diving into fractional ownership, it’s crucial to assess your available capital. Understanding how much you can comfortably invest in real estate is key to ensuring you don’t overextend your finances. A general rule of thumb is to allocate a portion of your total investment budget specifically for fractional ownership, keeping in mind other financial obligations and investments.

For more guidance on how to budget for fractional ownership, consider how much you can invest without affecting your liquidity and other investments. Typically, a balanced approach ensures you’re not putting all your capital into a single asset.

Clarify Your Investment Goals

Once you have a clear sense of your budget, the next step is to define your investment objectives. Are you aiming for short-term gains or long-term appreciation? Fractional ownership can serve both goals, depending on the property and market conditions. Some investors prioritise rental income, while others seek capital appreciation over time. It’s also important to assess your risk tolerance and how this investment fits into your broader portfolio. Diversification is a key advantage of fractional ownership, so understanding your appetite for risk will guide you toward the right property type.

Evaluating your financial position and aligning it with your goals ensures that your investment is not only feasible but also aligned with your broader financial strategy.

Step 3 – Choose the Right Fractional Ownership Platform

Here are a few things to be on the lookout for:

  1. Ensure Regulatory Compliance: The platform you choose should ideally have a portfolio of past opportunities (real estate) that are RERA compliant. These legal protections ensure your investment is safeguarded and the platform operates with accountability. Most of the fractional ownership platforms in India are in the process of transitioning to SM REITs structure to comply with the regulations that were introduced on March 8, 2024 – SM REITs.
  2. Research Platform Reputation: Look into the platform’s track record, investor reviews, and financial health. A well-managed platform with a solid history of delivering consistent returns is key to minimising risk.
  3. Check for Transparency in Fees and Management: Understanding the fee structure is essential. Make sure the platform is transparent about how fees are charged, how rental yields are divided, and what ongoing management processes are in place.

WiseX, India’s first fractional ownership checks all these boxes!

WiseX ensures your investment is protected. With over INR 500 crore in assets under management and a strong portfolio of commercial properties, WiseX has a proven track record of delivering returns. The platform also offers full transparency regarding fees and management, allowing you to invest with confidence and clarity.

Step 4 – Select the Right Property

In this section, we’ll guide you through selecting the right property by examining relevant factors:

Property Type and Location

When it comes to fractional ownership, choosing between commercial and residential properties is a key decision. Commercial properties generally offer higher rental yields but may come with more market volatility, while residential properties can provide stable returns with lower risk. Beyond property type, the location is critical. Prime areas tend to deliver better rental income and long-term appreciation, making them ideal for investors seeking consistent returns and capital growth.

Evaluate Rental Income and Financial Projections

Before making an investment, it’s important to thoroughly assess the property’s rental income potential. Review the property’s historical performance if available, and study financial projections based on market trends. Doing so allows you to understand the expected rental yield and appreciation over time. Reliable platforms will provide transparent financial data, making it easier to evaluate potential returns.

New Developments vs. Existing Properties

Investing in new developments or pre-construction projects can offer early access to properties at lower costs but may carry more risks, such as construction delays. On the other hand, existing properties come with a track record and offer immediate rental income. Weighing the risks and expected timeframes for returns is crucial for selecting the option that best aligns with your financial goals.

Step 5 – Legal Due Diligence and Documentation

Let’s go through the importance of reviewing ownership structures, ensuring clear exit strategies, and understanding the tax implications associated with fractional ownership investments.

Review the Ownership Structure

In fractional ownership, properties are often held through Special Purpose Vehicles (SPVs) or Real Estate Investment Trusts (REITs). Understanding how these structures work is vital for knowing your legal rights and obligations as a co-owner. Ensure the platform offers clarity about how the ownership is divided and how decisions are made regarding the property.

Ensure Clear Exit Strategies

Liquidity is another crucial aspect of fractional ownership. Before investing, review the platform’s policies on selling your shares. Look for platforms that provide access to secondary markets where you can sell your stake if needed. Be cautious of contracts with hidden clauses that may restrict your ability to exit the investment smoothly.

Clarify Tax Implications

Understanding the tax implications of your investment is essential. Rental income earned through fractional ownership is subject to taxation, as are any capital gains realised upon selling your shares. Consult with a tax advisor to fully understand your obligations and how they affect your overall investment returns.

Step 6 – Manage Your Investment Post-Purchase

​​Tracking Your Investment Performance

After purchasing a fractional ownership stake, it’s important to regularly monitor the property’s performance. Many platforms offer tech-enabled dashboards that allow you to track rental income, expenses, and updates on the property’s condition. Conduct periodic reviews to ensure your investment is performing in line with your expectations.

FAQs

Q.1. How much money is required to invest in fractional ownership?

The minimum investment amount for fractional ownership can vary widely depending on the property and the platform. Generally, fractional ownership allows investors to participate with relatively smaller amounts compared to direct property ownership. Typical minimum investments can range from INR 5 lakhs to INR 50 lakhs or more, depending on the value of the property and the structure of the investment. This accessibility enables individuals with moderate capital to invest in high-value properties that would otherwise be out of reach.

At WiseX, you can start investing with a minimum of just INR 25 lakhs.

Q.2. Can I sell my fractional ownership shares easily?

The ease of selling fractional ownership shares largely depends on the platform and the specific investment terms. Liquidity can be a concern, as not all platforms offer a straightforward secondary market for reselling shares. Some platforms facilitate secondary market transactions, allowing you to sell your shares to other investors. However, the process can sometimes be slow and may involve additional fees. It’s important to review the platform’s exit strategy policies and understand any potential restrictions or conditions associated with selling your shares.

Q.3. What taxes apply to fractional ownership income?

Fractional ownership income is subject to taxation, including:

  • Rental Income: The rental income you receive from fractional ownership is taxable under the Income Tax Act. This income is categorised as “Income from House Property” and is subject to tax based on your applicable income tax slab rates.
  • Capital Gains: If you sell your fractional ownership shares and realise a profit, the capital gains are also taxable. Short-term capital gains (for assets held less than three years) are taxed at a higher rate, while long-term capital gains (for assets held longer) benefit from lower tax rates. The exact tax rate depends on the holding period and other factors.

Q.4 How do I know if a fractional ownership platform is trustworthy?

To determine if a fractional ownership platform is trustworthy, consider the following tips:

  • Research Reputation: Look into the platform’s track record, including investor reviews, financial health, and historical performance. A reputable platform will have a proven history of successful investments and satisfied investors.

Assess Transparency: Evaluate the platform’s transparency regarding fees, management processes, and ownership structure. A trustworthy platform will provide clear and detailed information about all aspects of the investment.

Bottom Line 

Now that you have a comprehensive understanding of fractional ownership and the steps involved in making a smart investment, here are some resources to further guide your journey:

  1. Take a look at WiseX’s commercial real estate fractional ownership opportunities.
  2. Book a call with a dedicated investment manager to learn more about the opportunities available.

Explore our articles on numerous subjects related to alternative investments.

A Comprehensive Guide To Fractional Ownership

August 6, 2024
Mohit Bali
Fractional Ownership
Add comment
13 minutes read

Read through this guide to understand all there is to know about fractional ownership – its history, evolution, distinction from REITs and SM RIETS, legal framework, regulations, benefits and risks associated, tips for first time investors and FAQs.

Are you eager to understand how fractional ownership can diversify and enhance your investment portfolio?

Fractional ownership investments are rapidly becoming essential for retail investors. They offer steady, consistent returns and access to premium assets previously reserved for ultra-high-net-worth individuals, driving their increasing popularity.

To navigate this investment space effectively, it’s crucial to deepen your understanding of the concept. This article covers the topic along with several key considerations including the history and evolution of fractional ownership, the nature of fractionalized assets, the legal framework, the associated rewards and risks and much more.

Contents: 

  1. What is Fractional Ownership?
  2. Evolution of Fractional Investing in India
  3. Assets That Can Be Invested In Fractionally
  4. How Fractional Real Estate Investing Works
  5. Difference between fractional ownership, REITs and SM RIETS
  6. Legal Framework and Regulations
  7. Benefits of Fractional Real Estate Investment
  8. Risks and Considerations
  9. Tips for First-Time Investors
  10. Frequently Asked Questions

1. What is Fractional Ownership?

Fractional ownership is an investment structure where multiple investors collectively own a percentage share of a high-value asset. Unlike traditional ownership, where one individual or entity owns the entire asset, fractional ownership allows multiple parties to share the costs, benefits, and responsibilities associated with owning and maintaining the asset.

Example: Consider a commercial property valued at ₹10 crores. If ten investors each contribute ₹1 crore, they each own 10% of the property. These investors share in the rental income generated by the property, and if the property is sold, they receive 10% of the sale proceeds. This model allows individuals to invest in high-value assets without needing to bear the full cost, spreading both risk and rewards among the co-owners.

2. Evolution of Fractional Investing

Fractional investing has evolved significantly over the past decade, driven by the increasing demand for alternative investments and the rapid growth of the real estate sector. 

Here’s a brief timeline of its evolution (with a focus on India):

Early 2010s: The concept of fractional ownership began gaining traction globally, primarily in the U.S. real estate market, with early adopters exploring ways to pool resources to invest in high-value properties.

Mid-2010s: Indian investors started showing interest in fractional ownership, particularly in the luxury real estate segment. However, the concept was still in its nascent stages, with limited awareness and few platforms offering such investment opportunities.

2018-2020: The Indian market saw the launch of platforms dedicated to fractional ownership. These platforms began to popularise the concept, offering fractional investments in commercial properties and other asset classes.

2020-2021: The COVID-19 pandemic accelerated the shift towards fractional ownership as investors sought stable, income-generating assets amid market volatility. Since then, the Indian market has witnessed a surge in new entrants, heightened investor interest, and improved regulatory clarity, positioning fractional investing as a mainstream wealth-building strategy. 

2024: The Securities and Exchange Board of India (SEBI) has recently approved regulations allowing small and medium real estate investment trusts (SM REITs) to offer fractional ownership opportunities in real estate. This development comes under the SEBI (REITs) Amendment Regulations, 2024, introduced in March. These regulations open new avenues for investors by enabling them to own portions of real estate properties, making real estate investment more accessible and diversified.

3. Assets That Can Be Invested In Fractionally

Here are some assets that one could explore investing is as a fractional owner:

i. Real Estate

Here are a list of real estate assets that can be fractionalised:

a. Residential Properties

Fractional ownership in single-family homes, apartments, and condominiums allows investors to own a portion of high-demand residential properties, generating rental income and benefiting from property appreciation.

b. Commercial Properties 

Investing fractionally in office buildings, shopping malls, and warehouses offers exposure to income-generating commercial real estate, which often provides higher yields compared to residential properties.

c. Vacation Properties

Investors can co-own vacation properties like beachfront villas or mountain cabins earning rental income , and enjoying personal time if the agreement allows for interval ownership privileges

d. Farmland 

Agricultural land, ranches, and vineyards can be owned fractionally, offering both the potential for land appreciation and income from farming operations.

e. Mixed-Use Developments

Buildings that combine residential and commercial units offer diverse income streams and the potential for higher returns due to their multi-functional 

ii. Luxury Items

Here are a list of luxury assets that can be fractionalised:

Two investors flying together i their fractionally owned private jet.

a. Yachts 

High-end sailing yachts and motor yachts can be owned fractionally, allowing investors to share the costs of ownership and maintenance while enjoying access to luxury boating experiences.

b. Private Jets

Fractional ownership in business jets or light jets provides investors with access to private air travel, with shared costs making it more affordable.

c. Exotic Cars

Supercars, vintage cars, and luxury sedans can be owned fractionally, giving investors the thrill of owning a high-end vehicle without bearing the full cost.

d. Jewellery

High-value jewellery pieces, rare gemstones, and designer collections can be owned fractionally, offering a unique investment opportunity in the luxury goods market.

e. Art Collections: Paintings, sculptures, digital art (NFTs)

Investors can co-own valuable paintings, sculptures, and even digital art (NFTs), benefiting from the appreciation of these assets over time.

iii. Business Ventures

Here are a list of business venture assets that can be fractionalised:

a. Startups

Fractional investments in tech companies, biotech firms, and app developers allow investors to gain exposure to high-growth sectors with significant upside potential.

b. Small Businesses

Restaurants, retail stores, and service providers can be funded through fractional ownership, enabling investors to share in the profits of successful small businesses.

c. Franchises

Investors can own a share in franchises like fast-food chains or fitness centres, benefiting from the established brand and business model.

d. Renewable Energy Projects

Solar farms, wind turbines, and hydroelectric plants offer fractional ownership opportunities in sustainable energy projects with long-term income potential.

e. Film Productions

Investors can participate in the funding of movie projects, TV series, or documentaries, sharing in the profits from successful productions.

iv. Sports and Entertainment

Here are a list of assets in the sports and entertainment space that can be fractionalised:

a. Sports Teams

Fractional ownership in professional teams, minor league teams, or esports teams allows investors to be part of the sports industry and share in the revenue generated.

b. Event Venues

Stadiums, arenas, and concert halls can be owned fractionally, providing income from events and long-term appreciation of the venue’s value.

c. Music Royalties

Investors can own a share of royalties from popular songs, albums, or music catalogues, earning passive income as the music is streamed or played.

d. Film and TV Royalties

Fractional ownership in box office hits, TV shows, or streaming content provides a steady income stream from royalties.

e. Sports Facilities

Golf courses, tennis clubs, and sports academies offer fractional ownership opportunities, with investors earning income from memberships and events.

v. Collectibles

Here are a list of collectible items that can be fractionalised:

a. Fine Art

Masterpieces, contemporary art, and limited editions can be owned fractionally, allowing investors to diversify their portfolios with valuable and appreciating assets.

A fractionally owned wine cellar with premium wines.

b. Wine Collections

Rare wines, vintage bottles, and wine futures can be owned fractionally, offering both enjoyment and potential appreciation in value.

c. Antiques

Furniture, historical artefacts, and rare books can be co-owned, providing a unique investment opportunity in the collectibles market.

d. Coins and Stamps

Rare coins, historical stamps, and limited editions offer fractional ownership opportunities in highly collectible and often appreciating assets.

e. Classic Cars

Iconic models, restored vehicles, and rare finds can be owned fractionally, allowing investors to participate in the classic car market without the full cost burden.

4. How Fractional Real Estate Investing Works

As aforesaid, fractional real estate investing allows multiple investors to co-own a property, sharing the costs, risks, and rewards. Here’s how it works:

i. Pooling Resources

Investors pool their funds to purchase a property, with each investor owning a fractional share based on their contribution.

ii. Ownership Structure 

The property is typically owned by a legal entity, such as a Limited Liability Partnership (LLP) or a Private Limited (Pvt. Ltd.) company, with investors holding shares in the entity.

Fact: WiseX’s SPVs are structured as Private Limited (Pvt. Ltd.) companies, providing a robust and secure ownership framework for investors.

iii. Income Generation

The property generates rental income, which is distributed among investors in proportion to their ownership share. Investors also benefit from any capital appreciation when the property is sold.

iv. Exit Strategy

Investors can sell their shares through a secondary market or wait for the property to be sold, with the proceeds distributed among the co-owners.

v. Data on Returns 

Fractional real estate investments in India have historically provided annual returns of 7-10% from rental income and 4-8% capital appreciation, though actual returns can vary based on market conditions and the quality of the property.

5. Difference between Real Estate Fractional Ownership, REITs and SM REITs

While fractional ownership in real estate, Real Estate Investment Trusts (REITs), and SM REITs offer ways to invest in real estate, they differ in structure and operation:

FeaturesFractional Ownership (Real Estate)REITsSM REITs
Property TypeTypically preferred for Commercial Real EstateMix of Residential and Commercial PropertiesBoth allowed.
Investment ApproachFocused approach on a specific propertyOwns multiple propertiesFocused approach on a specific property
Minimum Investor Ticket Size₹25 Lacs amongst reputed platforms₹300₹10 Lakhs
Underlying AssetsSpecific propertyPortfolio of multiple commercial and/or residential propertiesSpecific property
RegulationsCompanies ActReal Estate Investment Trusts Regulations 2014SM REIT(s) Chapter introduced in the REIT(s) act in March, 2024.
Existing Fractional Ownership Platforms (FOP) to migrate here. 
Offer SizeNo such limit.
Typically FOPs are offering properties ranging from ₹30-100 Cr		₹500 Cr or aboveBetween ₹50-500 Cr
Framework PopularityPopular since 2020’s1st REIT got listed in 2019Only a few regulated trusts operate since the introduction of the regulations.
ReturnsFixed rental income plus expected capital appreciationThe regulations emphasise consistent income distribution but do not specifically guarantee returns through capital appreciationFixed rental income plus expected capital appreciation
Assets’ Development RequirementsInvestments can be made in properties at any stage of development.Minimum of 80% of the value of the REIT’s assets must be invested in completed and rent-yielding propertiesSM REITs to invest 95% of their investments in rent-yielding developed properties

6. Legal Framework and Regulations

The legal framework for fractional ownership in India is evolving, with key regulations covering the following areas:

  • Real Estate (Regulation and Development) Act, 2016 (RERA): Ensures transparency and protects investors’ interests in real estate transactions, including fractional ownership.
  • SEBI Regulations: The Securities and Exchange Board of India (SEBI) regulates platforms offering fractional ownership, ensuring compliance with securities laws. The introduction of Small and Medium REITs (SM REITs) in March 2024 is an amendment to the existing REIT regulations. This amendment focuses on fractional ownership in assets valued between ₹50 crore and ₹500 crore. Additionally, under these regulations, 95% of all assets under management must be invested in revenue-generating properties. Learn more about the framework of SM REITs by reading this document, which answers frequently asked questions about SM REITs.
  • Company Law: Legal entities like SPVs (LLPs or Pvt Ltd) are used to structure fractional ownership, governed by the Companies Act, 2013.
  • Taxation: Income from fractional ownership is taxed as per the Income Tax Act, 1961, with specific provisions for rental income, capital gains, and dividend distribution.

 7. Benefits of Fractional Real Estate Investment

As an alternative investment opportunity, fractional ownership offers several benefits:

i. Affordability

  • Lower Capital Requirement: Allows investors to participate in high-value real estate without needing to commit large sums of money.
  • Access to Premium Assets: Provides access to high-end properties that might be otherwise out of reach for individual investors.

ii. Diversification

  • Spread Risk: By investing in fractions of multiple properties, investors can reduce the risk associated with any single property.
  • Asset Variety: Offers opportunities to invest in different types of real estate, such as commercial, residential, and mixed-use developments.

iii. Income Generation

  • Rental Income: Investors earn a share of the rental income proportional to their ownership stake, providing a steady income stream. Notably, the rental income from commercial properties is 3-4 times higher than residential rental income and also higher than most bank fixed deposits (FDs).
  • Long-Term Capital Appreciation: There is potential for property value appreciation over time, leading to capital gains upon sale.

iv. Professional Management

  • Experienced Managers: Properties are managed by professionals, ensuring optimal operation and maintenance, which can enhance returns.
  • Hands-Off Investment: Investors do not have to deal with day-to-day property management, reducing the hassle of direct ownership.

v. Capital Appreciation

  • Market Growth: As real estate markets grow, the value of properties and, consequently, fractional shares can increase, offering significant capital appreciation potential.

vi. Liquidity Options

Secondary Market: Some platforms offer secondary markets where investors can sell their shares, providing liquidity even in an otherwise illiquid asset class.

8. Risks and Considerations

Here are a few factors for you to consider prior to diversifying your investment portfolio with fractional ownership opportunities:

i. Market Risk

  • Property Value Fluctuations: Real estate markets can be volatile, and property values may decrease, impacting the value of your investment.
  • Economic Factors: Broader economic conditions, such as inflation, interest rates, and economic downturns, can affect real estate values and rental income.

ii. Liquidity Risk

  • Difficulty in Selling Shares: Fractional shares may be harder to sell, especially if there is no active secondary market or during market downturns.
  • Long-Term Commitment: Investors may be locked into an investment for a significant period, limiting access to their capital.

iii. Management Risk

  • Dependence on Management Quality: The success of the investment heavily depends on the property management team. Poor management can lead to lower returns and property value depreciation.

iv. Management Fees

  • Ongoing management and maintenance fees can eat into profits, especially if the property underperforms.

v. Regulatory Risk

  • Changing Regulations: Real estate and investment regulations can change, potentially affecting the profitability and legality of fractional ownership structures.
  • Compliance Costs: Ensuring compliance with local laws and regulations can add to the costs and complexity of managing fractional ownership.

vi. Co-Ownership Conflicts

  • Disagreements Among Owners: Conflicts between co-owners regarding property management, selling decisions, or other issues can complicate the investment. However, the voting rights granted to each investor ensure that decisions, including selling the property, are made based on a 75% majority. This democratic process allows for fair resolution of disputes and empowers investors to make collective decisions efficiently.
  • Decision-Making Delays: Collective decision-making processes can be slow, leading to missed opportunities or delayed actions. Nonetheless, the structured voting mechanism helps streamline these processes, ensuring that the majority’s preference guides actions and mitigates prolonged indecision.

9. Tips for First-Time Investors

Here are a few actionables tips for first-time investors:

i. Research Thoroughly

  • Understand the Property: Investigate the property’s location, market conditions, and potential for rental income and appreciation.
  • Platform Credibility: Choose a reputable fractional ownership platform with a strong track record and transparent operations.
  • Legal Structure: Ensure you understand the ownership structure, your rights, and any legal obligations involved.

ii. Start Small

  • Test the Waters: Begin with a smaller investment to gain experience and understanding of how fractional ownership works before committing larger amounts.
  • Learn the Process: Use your initial investment as a learning opportunity to understand the mechanics of fractional ownership, including management fees, income distribution, and exit strategies.

iii. Diversify

  • Spread Investments: Diversify your investments across different properties or asset classes to reduce risk and improve potential returns.
  • Balance Portfolio: Consider balancing your portfolio with other types of investments (e.g., stocks, bonds) to mitigate risks associated with real estate.

iv. Understand the Legalities

  • Review Contracts: Carefully read and understand all contracts and agreements, including details about management fees, income distribution, and exit options.
  • Seek Professional Advice: Consult with a financial advisor or legal professional to ensure you fully understand the implications of your investment.
Investors monitoring performance of their fractional ownership investments using their investor dashboard.

 v. Monitor Performance

  • Regular Reviews: Regularly check the performance of your investment, including rental income, property management efficiency, and market conditions.
  • Stay Informed: Keep abreast of market trends and any changes in regulations that could impact your investment.

vi. Plan Your Exit Strategy

  • Understand Exit Options: Familiarise yourself with the process and options for selling your fractional share, including any secondary market opportunities that may be available.
  • Long-Term Perspective: While it’s important to have a long-term investment horizon, it’s also crucial to be aware of the potential challenges of exiting early. However, having a well-thought-out exit strategy can help you navigate these challenges more effectively.

Learn more: How to Plan Commercial Property Investment?

10. Frequently Asked Questions

Here are answers to some of the most frequently asked questions:

Q.1. What is fractional ownership meaning?

Fractional ownership is a method of owning a percentage or “fraction” of an asset rather than owning it outright. This model is common in high-value assets like real estate, where multiple investors pool their resources to purchase a property. Each investor holds a fractional share of the asset, entitling them to a proportionate share of the income generated by the property and any capital appreciation. Fractional ownership offers an affordable way to invest in expensive assets while spreading the risks and responsibilities among multiple owners.

Q.2. How do I choose a reliable fractional ownership platform in India?

To choose a reliable fractional ownership platform in India, consider the following factors:

  1. Regulation and Licensing: Ensure the platform is registered with appropriate regulatory bodies, ensuring it operates within the legal framework.
  2. Transparency: Look for platforms that provide clear information on fees, property details, ownership structure, and the rights of investors.
  3. Track Record: Research the platform’s history, including past projects, investor reviews, and overall reputation in the market.
  4. Management Team: Evaluate the experience and credibility of the platform’s management team in real estate and investment management.
  5. Legal Structure: Understand the legal structure of ownership and how the platform handles investor rights and obligations.

Q.3. Is fractional real estate a good investment?

Fractional real estate can be a good investment for those looking to diversify their portfolio, gain exposure to high-value assets, and generate passive income. It offers the benefits of real estate investment without the need for a large capital outlay. However, like any investment, it comes with risks, including market fluctuations, liquidity concerns, and potential management issues. Investors should thoroughly research and consider their risk tolerance before investing.

Q.4. How is the re-sale of fractional ownership handled?

The resale of fractional ownership can be complex and varies depending on the platform and asset. Some platforms offer a secondary market where investors can list their fractional shares for sale to other investors. However, liquidity can be a challenge, as the market for fractional shares may not be as active as for whole properties, potentially leading to delays in selling or a lower-than-expected sale price. At WiseX, investors wishing to exit their investment early are provided with assistance in finding buyers through the secondary market at no additional cost.  

Q.5. Can fractional ownership apply to any purchase?

Fractional ownership is most commonly applied to high-value assets like real estate, luxury goods (e.g., yachts, private jets), and sometimes even artworks. While the concept can theoretically be applied to any asset, it is most effective when used for items that are expensive and typically beyond the reach of a single buyer. The key is that the asset must be divisible in a way that each fraction holds value and can be effectively managed and shared among owners.

Q.6. What responsibilities do you have as a fractional owner?

As a fractional owner, your responsibilities typically include:

  1. Financial Contributions: Paying your share of maintenance fees, taxes, insurance, and other ongoing costs associated with the asset.
  2. Decision Making: Participating in key decisions related to the management or sale of the asset, often in coordination with other co-owners.
  3. Adherence to Agreements: Following the terms of the ownership agreement, which may include rules around the use, sale, or leasing of the asset.
  4. Property Management: Depending on the arrangement, you may have a say in how the property is managed, or this may be handled entirely by a third-party manager.

Q.7. How does fractional ownership work for WiseX?

At WiseX, fractional ownership allows investors to purchase shares in high-value assets, such as premium commercial real estate, at a fraction of the full cost. These identified properties are pre-leased to blue-chip companies, ensuring stable and reliable rental income. Investors pool their funds to acquire the property, and each investor owns a proportional share based on their investment. WiseX handles the management of the property, including maintenance, tenant management, and income distribution. Investors earn returns from rental income and potential property appreciation, with the flexibility to sell their shares through WiseX’s platform or in a secondary market.

Q.8. Is fractional ownership safe?

Fractional ownership can be safe if the investment is made through a reputable and transparent platform that adheres to legal and regulatory standards. However, it is important to recognize the inherent risks, including market volatility, liquidity challenges, and management quality. Conducting thorough due diligence on the platform, understanding the legal structure, and being aware of potential risks can help mitigate safety concerns.

Q.9. Can I sell my fractional ownership?

Yes, you can sell your fractional ownership, but the process and ease of sale depend on the platform and the asset. Some platforms offer a secondary market where you can list your shares for sale to other investors. Alternatively, you may need to find a buyer on your own or wait for the platform to facilitate a sale. Liquidity can be an issue, and the time it takes to sell your shares may vary.

Bottom Line

Now that you are familiar with the intricacies associated with fractional ownership investments, here are some additional resources that will help you in diversifying your portfolio:

  1. Take a look at WiseX’s commercial real estate fractional ownership opportunities.
  2. Book a call with a dedicated investment manager to learn more about the opportunities available.

Explore our articles on numerous subjects related to alternative investments.

Advantages of Investing With WiseX

June 7, 2024
Sahiba Neeru
Personal Finance and Investments
Advantages of Investing With WiseX
2 minutes read

Deciding where to put your money is a big deal. It is not just about saving, but about finding the right investment platform that helps you achieve your financial goals. That is where WiseX can help.

When you invest with WiseX, you are not just putting your money somewhere and hoping for the best. You are entering a world of investment opportunities, tailored to your needs and preferences, that can grow your wealth while the investment amount being safe. Go through this blog to learn the advantages of investing with WiseX.

What Are the Benefits of Investing With WiseX?

Here is a list of the advantages of investing with WiseX which you can avail:

  • Discover Institutional Grade Investment Opportunities

We meticulously analyse more than 150 data points, ensuring that less than 1% of opportunities meeting our stringent criteria. By doing so, we minimise the risks associated with each investment and make sure that you are investing in top-notch properties.

  • Easily Navigate KYC and Start Investing

Our streamlined process allows you to complete KYC requirements and begin investing without any hassle.

  • Transparency

At WiseX, transparency is paramount. We provide detailed reports and complete disclosures throughout the investment process, so you know exactly where your money is going and how it is performing.

  • Flexible Returns

With over 25 years of experience in the real estate sector, WiseX delivers consistent monthly or quarterly returns on your investments, giving you peace of mind and financial stability.

  • Liquidity

Our tech-based platform enhances liquidity, offering multiple exit options for your fractional ownership investments. With WiseX, you have the flexibility to access your funds when you need them, providing peace of mind and financial freedom.

  • Proper Guidance

Investing can be daunting, especially for beginners. Therefore, WiseX provides access to expert advisors who will provide personalised guidance and end-to-end support to you throughout your investment journey.

Step-by-Step Procedure for Fractional Ownership Investment with WiseX

The following are the steps you must follow to invest in A-grade commercial real estate with WiseX:

Step 1: Browse through a variety of properties, across different locations and select one that suits your investment planning. 

Step 2: Upon selection, you will see details like its value, available shares and price per share. Decide your investment amount based on your budget and risk preference. 

Step 3: Complete KYC documents online and confirm your investment amount with your dedicated investment manager.

Step 4: After confirming, sign an EOI (Expression of Interest), and deposit 5% of your investment into an Escrow account, securing your investment opportunity.

Step 5: When the investment opportunity reaches full commitment, submit the remaining 95% of your investment. 

Once you complete the above steps, WiseX will start the documentation process to finalise your investment. Upon successful investment, you will start receiving your returns on a monthly basis. 

The Bottom Line

After understanding the advantages of investing with WiseX, it is clear that our platform offers a tailored approach to investment, minimising risks and maximising returns. Whether you are a seasoned investor or a novice, WiseX offers a seamless experience to all, enabling them to navigate the complex real estate landscape. 

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