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7 important difference between Full And Fractional ownership

  • Author: Melby Anna Stephen
  • 5 min read
  • May 11, 2021
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We all are looking forward to earning more and thus are looking for the perfect option to multiply our wealth. There are various investment options available to investors which include fixed deposits, gold, stocks, real estate investments, venture capital, etc. Real estate has been one of the favourite investment options as it is one of the safest ways in which you can invest your money. Real estate in itself is a diverse option reaping different benefits.

As the times have evolved, so have the methods of investment. People prefer to invest in big-ticket real estate assets and not limit it to just a home. Previously you were required to buy a property as a whole but now you can invest in real estate by methods of shared ownership or fractional ownership. This method has several benefits such as less cost, no hassle for maintenance, higher return, higher rental income, etc.

Fractional ownership

The best real estate projects come with a high cost and are not accessible to some of the investing classes. Such high-capital projects also require professional due diligence and management to yield better returns. All these also add to the cost of acquiring the property.

By investing through fractional investment options, such high potential real estate assets become accessible to all investing classes. Fractional ownership can be defined as a method of investing and ownership whereby many investors come together and collectively put in small sums of money to own a fraction of high-value property. The main objective behind such investments is to ensure a superior return over some time.

Let’s say for example that there is an office space available in Bangalore in one of its IT corridors which generate around 6% rental yield (which is thrice higher than residential rent). It also has a high potential for greater appreciation. Let’s say that the value of the property is Rs. 5 crores. If the investment is for full ownership, then only a few investors can afford to buy it. However, if the property is open for fractional ownership, then people can come together and pool in a smaller amount to fund such a large property. If 50 investors are pooling in, the one investor can invest in such a property with just Rs. 10 Lakhs. By doing so you can also increase your yield on the property and also minimize your risk by not locking in a huge capital amount in just one property.

Technological development and blockchain technology have been instrumental in promoting fractional ownership among investors. The rapidly growing technology has also increased the depth of the investor base and has made the buying and management process hassle-free.

Which is better? Fractional ownership or full ownership?

Points for Comparison Full Ownership Fractional Ownership
Meaning The traditional method of investing in real estate whereby the property is bought as a whole. An emerging trend whereby investors invest and own fractions of high-end real estate property.
Value In full ownership, you are required to fund in large capitals to fund in large investments. However, not all investors can afford such a high price and end up not investing in such properties, despite the higher returns and higher rental yield. Through fractional ownership, you can invest in large real estate projects with small funds. Thus, fractional ownership has made such high-end properties more accessible.
Who is buying? Only those with high creditworthiness or higher income can invest in high-end projects if they are opting to purchase the property as a whole. Otherwise, you will have to settle for an investment that is lesser in value which may not yield you as much as a high-end property can. Fractional ownership makes investing in high-end properties more accessible and thus anyone can invest in the property by pooling in small capitals.
What do you get? By investing through full ownership, you are eligible for the entire return you earn as rental income or on the sale of the property. By investing through fractional ownership, you are eligible for a fraction of income generated from leasing or sale of the property.
Risk In the case of full ownership, the risk of loss on the property is solely on the investor. In the case of fractional ownership, the risk is divided among the investors of the property and not solely on one person.
Ownership Complete ownership, as well as rights, are vested in the investor buying the property. The investor only owns a fraction of the property. The fraction is determined based on the capital contribution made by the investor.
Liquidity A full ownership property may have poor liquidity rates as it cannot be easily converted into cash. On the other hand, fractional ownership through blockchain technology has a higher liquidity rate as the real estate assets can be now resold just like stocks.

Bottom Line

Real estate is one of the best options for investing your money. It is considered to be one of the safest options for investing and is traditionally considered to be a great asset. Choosing your method of investing is equally important as the type or location in which you invest. Several investment methods have been introduced. The concept of fractional ownership is gaining prominence now as more and more investors become familiar with the concept and its benefits.

Assetmonk is an online real estate platform offering fractional ownership investment opportunities in Bangalore, Chennai, and Hyderabad. Visit our website to find fractional ownership investment opportunities with the best returns and capital appreciation.

Difference between Full And Fractional ownership FAQ’s:

What are the two types of property ownership?

Two main types of ownership include fractional ownership and full ownership. Full ownership is the kind of ownership whereby an individual owns a property completely. On the other hand, fractional ownership is a type of ownership whereby multiple investors come together and pool in their fund and invest in a high ticket property.

Is fractional ownership a good investment?

Yes, fractional ownership is a good investment and also an excellent way to diversify your portfolio. By investing through fractional ownership, you can earn high returns, better rental yield, and also ownership in a property which otherwise may not be possible.

What is fractional ownership in real estate?

Fractional ownership is an emerging trend in the real estate market now whereby investors invest and own fractions of a real estate property. This is carried out generally on high-value real estate assets.

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