Retirement is supposed to be a time when people take a break from the hectic lifestyle and spend time doing what they truly love, but for most people, it is simply the end of a regular income. This can result in a lot of time spent worrying about expenses, making passive income-generating investments essential.
To invest smartly, one needs to look beyond the conventional fixed deposits and traditional real estate investments and look for alternative asset classes that can provide regular monthly income, with the security of capital and a steady wealth expansion for living a hassle-free life.
This is where fractional ownership of real estate comes into play, so let start with a basic question, what is fractional ownership?
What is Fractional Investing?
Fractional Ownership of real estate is an investment method where a group of investors pools their funds to collectively make a real estate investment, mostly CRE or Commercial Real Estate.
This helps reduce the cost burden and share the investment risks. Additionally, it is also ideal for generating a regular income. Fractional ownership is apt for investing in CRE or High End commercial real estate that can yield returns of 6-10%.
Why Is Fractional Ownership Ideal for a Senior Citizen?
Investing in fractional real estate for retirement takes away all the burdens of investment, from an investor’s shoulder who is reaching retirement. If you come to think of it, the prices of CRE can amount to hundreds of crores but with fractional ownership, an individual can invest an amount as small as Rs. 25 Lakh. assuming it does generate a profit of 6-10% as we had mentioned above, an investor would be making Rs. 1.5 lakh minimum.
The Pros and Cons of Fractional Ownership
Like any other asset class, before you move forward with your investment in Fractional property, understand the pros and cons of the investment.
Benefits of Fractional Ownership for Senior Citizens
- Monthly income
In fractional ownership, the monthly rental income is sent straight to the investor’s account. They don’t have to wait for the investment to mature, instead, they can start enjoying the profits from the first month of the investment itself.
If an investor is depending on a residential real estate property for generating income, there is a constant risk that the property can go vacant for months or even years at a time. In the case of a fractional property, the investor will most probably be investing in premium office spaces, banks, etc that tend to be in very high demand, are usually leased for longer durations.
While real estate is one of the best and highest paying asset classes in today’s time, if you purchase a property for yourself as an investor, you will have to pay the maintenance charges and look after the property yourself or hire a person for the job. A fractional property, on the other hand, will be managed by someone else, and the investment will be shared, this way the burden of maintenance will neither fall on you nor the investment cost.
You also wouldn’t need to worry about where your money is going or how the company is doing, as fractional ownership platforms promise transparency. Moreover, reputed platforms always perform the company’s due diligence on the investor’s behalf, and only bring highly lucrative projects to the table.
Want to sell off your assets now? Most investment platforms offer internal sales to their customers so the customers don’t have to worry about their money getting blocked in one place in case of emergency or just needing to withdraw the money.
- Hedge against inflation
This is one major reason why we see fractional property as an ideal investment for senior citizens. We know that real estate acts as a hedge against inflation because the asset is always appreciating ( the cost and demand of real estate are always rising). As we have seen in the case of fixed deposits, stocks, and other funds, they don’t perform well during inflation, and the deposit holders go under losses. However, the demand for office spaces, banks, etc, never goes down.
- Security of capital
Since the property is a tangible real-time asset, its value is directly linked to the continuity of the building. And unlike stock or mutual funds, its value doesn’t change with The market volatility.
- Neither too expensive nor too small
Fractional ownership is designed in such a way that they are neither too expensive for the investors, nor is the amount so small that the profit generated is minimal.
Senior Citizen Saving Scheme allows an investment of Rs. 15 lakh only, whereas a real estate property can cost you crores, but fractional ownership lets you choose a middle path and invest a more comfortable amount, which is neither too low nor too high.
- Fractional ownership in comparison to traditional retirement plans
Traditional investments such as fixed deposits, Ppfs, and savings accounts, are only able to generate a meager profit in comparison to Fractional Ownership. Even the retirement schemes that you must have heard offer very low return rates when put next to the inflation rate.
And even if some schemes do offer a decent return, you can only invest a really small amount in it such as the SCSS or Senior Citizen Saving Scheme which also comes with a 5 year locking period, hence you cannot withdraw your money before the stipulated time.
Disadvantages of Fractional Ownership
Short-term investments are very rare when it comes to fractional ownership, as real estate is usually leased for long periods.
- Low Liquidity
Many investors opine that fractional ownership can be really hard to sell-off. The ability to use your money whenever you need it is really important and if fractional property blocks away from your assets for a longer duration, then that can be disappointing.
Assetmonk is a real estate investment platform that offers high liquidity on all its assets, so you might not face this problem when dealing with Assetmonk.
Apart from this, the project could also go under losses and while this is very rare when investing in already established businesses, it is still a possibility.
Becoming a Fractional Owner Through Assetmonk
Assetmonk is a real estate investment platform that offers smart investment options such as Growth, Growth Plus, and Yield, depending on your comfort, expected returns, and how much risk you’d like to take.
Being one of the best online investment platforms in India, Assetmonk offers many benefits to its investors.
A foolproof due diligence process helps ensure that the investment is safe, it also helps strengthen the investor’s relationship with the project and the investment platform.
Assetmonk also makes exiting the contract very easy for their investors. Offering high liquidity, Assetmonk lets investors get involved in internal trade and sell their shares as soon as possible.
When you know how the project is doing, your faith in the company grows, Assetmonk keeps its investors posted on each step of the investment hence making the process very easy for the investors.
Assetmonk walks you through the process, and the customer service is the same from your first day of the investment to the very last.
Retirement real estate has always been a good investment option, but not all retirees can make real estate purchases and not all real estate property can be occupied at all times. Also maintaining and managing a real estate property can be tiring. In such cases, senior citizens need to look for a definite and regular income to help them lead a relaxed life.
Investing in fractional ownership with Assetmonk as a means of diversifying your portfolio is the smart way to deflect the chaos and make profitable investments. Visit our website to get in touch with the team for any queries.
Fractional Ownership for Senior Citizens FAQ's:
Crowdfunding and Fractional ownership can be really good passive investment generating asset classes. But I would suggest Fractional ownership above the former.
Senior citizens or people above 70 years of age can invest in various government schemes, but if they can, they must consider fractional ownership to a regular income of up to 1-1.5 lakh per month.
Stable assisted living communities or senior living estates are a very noble investment idea. You can either own and operate your investment individually or crowdfund the investment.
Yes, the term retirement real estate is the investment we make post-retirement. Since real estate is one asset class that is always appreciating, it is also a great way of generating a regular income which is hard to bet post-retirement.