Fractional ownership is when a group of people buy a share of an asset without having to pay its full price. By sharing the ownership, each investor gets the chance to partake in the benefits associated with the investment. Since COVID-19, there has been a surge in demand for fractional ownership among retail investors due to the market’s expanding potential.
So, whether you are a high-net-worth individual (HNI) or a retail investor, if you are interested in fractional ownership investment and seek to know the procedure, keep scrolling to discover the steps involved.
What Is Fractional Ownership?
Fractional ownership is an investment approach where multiple investors pool their funds to invest in valuable assets such as residential or commercial properties. Investors hold shares through a Special Purpose Vehicle (SPV), entitling them to passive ownership rights and benefits aligned with their contributions.
By owning shares in the SPV, which in turn owns the property, investors spread the financial responsibility, allowing them to access high-value assets while mitigating individual financial burdens.
What Is the Procedure to Invest in Fractional Property?
Here are the steps you need to follow to invest in a fractional property.
Step 1: Determine the Property Type
First, decide on the type of property you want to invest in, whether residential like luxury apartments or commercial spaces such as offices, warehouses, or retail outlets. For those seeking recommendations, commercial properties like office spaces, fueled by the growth of the Indian IT sector, are an ideal option, with net absorption expected to grow around 20-22% in 2024.
Step 2: Choose a Platform
Research online platforms offering fractional ownership opportunities and choose based on factors like track record, regulatory compliance, and property portfolios.
Among the leading platforms in India, Aurum WiseX stands out as a potential investment partner with over 25 years of experience in real estate.
Step 3: Explore the Opportunities
Upon selection, explore the opportunities offered by your platform and evaluate details like property value, available shares, price per share, rental yield, tenant profile, tenancy terms, and more. Determine your investment amount based on your budget and risk tolerance.
At Aurum WiseX, less than 1% of the opportunities pass the stringent selection criteria based on 150+ data points and get listed. One such exemplary offering is the Sky One Corporate Park, a Grade-A commercial real estate located in Viman Nagar, Pune.
Step 4: Complete Investment
After evaluating the property and investment details, one can invest by completing the following steps:
- Complete the KYC verification and confirm the investment amount with which you want to proceed on the platform.
- Upon completion of KYC verification, the platform sends an EOI (Expression of Interest), which you need to sign and deposit a portion of your investment, generally 5-10%, into the Escrow account. This will secure your investment opportunity.
- Once the investment opportunity gets 100% commitment, the platform will ask you to submit the remaining investment amount during the drawdown phase. Following this, you need to sign the private placement and offer documents.
Now all you need to do is track your investments on the platform’s dashboard and wait for the benefits to roll out.
What Are the Points to Evaluate Before Fractional Ownership Investment?
Here are some key points you must consider before making a fractional ownership investment.
- Micro-Market Trend of the Location
Consider investing in properties situated in prime locations where profitability can be maximised, attracting investors seeking premium returns.
As per a report of JLL India, the real estate sector in Pune has seen a year-on-year growth of rental rate by 5%. This is mainly because of the booming IT sector and the improvements in infrastructure and redevelopment projects in key areas. These factors can boost the value of properties. Thus, it is important to keep up with these trends when looking at properties online.
- Tenant Profile
In residential buildings, tenants often leave quickly, causing unstable rental income. However, commercial properties leased by big multinational corporations (MNCs) offer stability due to long-term leases backed by security deposits and company guarantees. Selecting successful and reliable tenants is crucial for a steady income.
- Legal Compliance
Verify the permissions and legality of the facilitator to operate in the fractional investment domain. With large sums of money involved, it is crucial to mitigate the risk of fraud or any possible legal hiccup.
- ROI Analysis
Perform a comprehensive Return on Investment (ROI) analysis before prioritising any fractional ownership investment option. To estimate your potential ROI for fractional real estate investments, consider factors such as the IRR of the property, capital appreciation prospects, management fee, security deposit, and monthly return yield.
For instance, you can analyse the ROI of the Sky One Corporate Park of WiseX by going through their current investment opportunity model.
- Management and Transparency Factors
Prioritise fractional investment opportunities with tech-enabled management and online tracking capabilities. Additionally, look for transparent exit options without hidden clauses.
The Bottom Line
Through fractional ownership investment, you get the opportunity to own a high-value asset that will enable you to pool money and diversify your investment portfolio are you ready to put this investment into practice? Consider Aurum WiseX to start your fractional ownership journey and own a piece of commercial real estate. By joining us, you can secure a share of lucrative properties and earn monthly rentals of up to 10%. Furthermore, you can leverage capital appreciation with net returns in a range of 12-18% IRR.
