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There is no need for your financial approach to be stodgy and old-fashioned as a millennial carving out your living in a fast-changing world. One of the most recent investment options is commercial real estate fractional ownership. What if you could own a portion of that glitzy commercial space, which could be leased to a reputable MNC tenant and provide a healthy cash flow? Fractional ownership allows you to profit from the rental and sale of high-quality commercial property in different locations across India.
Fractional Ownership: Definition?
Fractional ownership, which is growing in popularity in India, has the potential to alleviate the financial load on a single investor or property owner. The term simply refers to a situation in which a group of like-minded individuals acquire a commercial property collectively and become fractional owners. This method of acquiring an item simply distributes the high cost into several fractions, allowing millennials to engage in new possibilities for a fraction of the prior cost.
A premium commercial property that is rented to a tenant, for example, might cost an owner/investor Rs 50 crore. A working professional with an investment of Rs 25 lacs can fulfill his dream of purchasing that property via fractional ownership and earn similar benefits such as high yields in the range of 8-12%, while the asset is managed by a fractional ownership platform like Assetmonk and all activities are done at the click of a button with the help of technology and AI.
Traditionally, the commercial real estate sector was thought to be the domain of affluent and skilled investors. However, with the introduction of new-age PropTech platforms like Assetmonk, millennials may band together to buy an asset, enjoy the return, sell their part (as needed), and even reap capital gains at the time of exit.
Why Millennials Should Invest in Fractional Ownership?
- Resilience: Small investors are becoming fractional owners of commercial properties due to portfolio diversification, ease of exit, financial gain, and consistent rental income. Furthermore, the commercial real estate market in India is predicted to grow from 13-16% shortly, making fractional ownership of commercial buildings a profitable investment. Furthermore, the Indian commercial real estate market is predicted to decrease somewhat in 2020. Nonetheless, it improved significantly in Q3. Covid-19 has lowered global property values, particularly in London, Dubai, and Stockholm. According to industry experts, due to India’s expanding outsourcing sector, office leasing rose throughout the same time. Multinational corporations occupy more than 63 percent of India’s commercial area (mainly from the United States and Europe). It should indicate to millennials that the moment has arrived for them to share in the gains.
- Flexibility: Do you want to diversify your property holdings but don’t have the finances to buy residences in different markets? Real estate fractional ownership makes this possible. For example, shared ownership allows you to invest in real estate while working in commercial office buildings and renting out your house, all while generating mortgage payments. Because your money is not tied to a single property, you can spread it among several homes, grades, locations, and regions within the same city. You can then choose to concentrate on a specific industry or to keep diversifying and benefitting from economic ups and downs. It lessens the possibility of market volatility. You may get the benefits of diversification without making a large initial investment.
- Property Appreciation: Investing in commercial real estate yields a double return. The advantages of fractional ownership include both immediate financial rewards and commercial property appreciation. You own a piece of commercial property. As a result, the value of your investment will rise. Small investors are becoming more financially enticed.
- Liquidity: One of the major advantages of fractional ownership is liquidity. The liquidity of traditional real estate investments is lower than that of fractional property assets. Of course, you should double-check your contract, but the ability to sell your investment at any time makes trading less dangerous. How so? You may always resell and pass your ownership interest in the property to others.
Do not miss Can the Commercial Real Estate Liquidity Problem Be Resolved? Employ These Investment Strategies.
- Rental Income Returns: Due to continued 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. Apart from the increased value, purchasing through a reputable fractional ownership organization might result in a 15% increase in rental revenue returns over the next three years. It is incorporated in the leasing contract to safeguard against inflationary pressures, ensuring that your investment remains stable over time.
- Long-term lease: Rental unit renters rotate regularly. As a result, the landowner must pay the rent until a suitable replacement is identified. Leases for commercial buildings often last three years or longer. The lease agreement can also be renewed. As a consequence, commercial properties give investors predictable revenue. Large corporations, information technology firms, and financial institutions all rent high-end commercial space. These businesses make on-time rent payments. Furthermore, due to the time, effort, and resources put into converting the premises into offices, some tenants have extended their lease periods. Invest in a previously rented business property for massive profits.
What Should You Look For When Starting With Fractional Ownership?
As with any investment, it is critical to conduct the proper due diligence. Consider if the investment is lawful. What are the tax consequences? What are the fees involved? How much danger are you willing to take? What kind of return can you expect? How is that return distributed? Is it possible to reinvest it?
Determine how much you’re willing to invest next. Diversification is essential, so avoid putting all of your eggs in one basket. If required, test the investment with a little amount. If all goes well, you can always increase your investment.
Finally, pledge to invest at least a portion of your monthly earnings. It doesn’t have to be much, but monthly donations can help you grow your retirement nest fund faster.
For the majority of millennials, fractional ownership is the solution they were seeking: the option to invest in reliable assets at an accessible price while receiving passive income. And if you need money quickly, you may immediately sell your possessions without having to deal with any tedious paperwork. This is the way millennials will invest in the future. Invest when and how much you want, then sit back and let the asset do the rest. You shouldn’t let others enjoy all of the fun.
Takeaway?
Fractional ownership is a unique investment instrument that blends high returns with income stability, allowing retail investors to profit from the commercial real estate market’s development.
Investors are confident of the quality of their investment because each property is carefully picked after diving into several parameters such as developer, location, tenant creditworthiness, micro-market demand and supply dynamics, and so on.
Millennials may profit from the prospects given by a new India by investing in physical assets with a track record of high returns through fractional ownership.
Assetmonk is a well-known real estate investing platform in India that offers chances in Chennai, Hyderabad, and Bangalore. It offers practical commercial space investment options such as fractional ownership for as little as Rs. 25 lacs and crowdfunding. IRRs range from 14 to 21%. Our items, on the other hand, are divided into categories to accommodate different economic degrees of investors. Growth, Growth Plus, and Yield are the three categories.
