Arrived Homes is the best fractional real estate investment platform as it allows investors to pool their resources and invest in high-quality properties that they may not be able to afford on their own.
Fractional real estate investment platforms provide investors with an innovative way to access the real estate market without the hefty price tag of purchasing a full property. These platforms allow investors to pool their resources and invest in a fractional share of a property, typically through an online platform. This gives investors the opportunity to diversify their investment portfolio by adding real estate assets, which may have been previously out of reach due to high costs or lack of expertise in the industry.
Overall, fractional real estate investment platforms offer a convenient and cost-effective way for individuals to participate in the real estate market and potentially generate passive income through rental yields and property appreciation.
Quick Look: Best Fractional Real Estate Investment Platforms
Best Fractional Real Estate Investing Platforms
Let’s take a deep dive into the different fractional real estate investment platforms to help you make the best investment for your goals.
1. Best for $100 Minimum Investment: Arrived Homes
Arrived Homes allows virtually anyone to buy shares of income-producing rental properties in some of the fastest-growing markets throughout the United States. With a minimum investment of just $100, investors can easily diversify their portfolios across multiple properties and receive passive income each quarter through the rental income generated by each property.
The company takes care of all of the management headaches that go along with investing in real estate so investors can simply enjoy the best part; collecting passive income. After a target hold period of 5-7 years, Arrived Homes will choose the most opportune time to sell the property to realize the highest gains. Each investor will then receive their pro-rata share of the proceeds from the sale and their investment will be fully realized.
2. Best for Beginner Real Estate Investors: Fundrise
Fundrise is one of the most popular and well-respected real estate crowdfunding platforms, put together by a team of established real estate professionals who wanted to make building a real estate portfolio simple. The best part is the minimum investment is only $10.
You can roll some — or all — of your IRA into a fund that consists of a diverse portfolio of real estate assets chosen by the Fundrise brain trust. Plus, all of the assets in the fund were chosen for their unique combination of upside, the ability to resist market downturns and their projected ability to generate long-term investor profits. This is the best way to bring dividends back to you—the investor.
3. Best for a Diverse Range of Alternative Investments: Yieldstreet
Yieldstreet offers an all-in-one alternative investment platform with offerings for accredited as well as non-accredited investors. It has new investment opportunities available regularly, ranging from commercial real estate, art equity funds, structured notes, portfolios of consumer debt and many others.
Even if you’re not quite ready to jump into one of Yieldstreet’s offerings, it’s worth signing up for the platform to gain access to the many webinars and educational content available to learn the ins and outs of various types of alternative investments.
4. Best for Accessibility and Transparency: mogul
mogul is an online fractional real estate investing platform that allows investors to start with as little as $250. Founded by Goldman Sachs alumni with over $10 billion in real estate transactions, mogul offers opportunities to invest in shares of single-family rental properties. Whether you’re looking for short-term, medium-term, or long-term rental investments, mogul provides a wide range of options.
The platform boasts an impressive average internal rate of return (IRR) of 18.8%, along with monthly dividends, potential property appreciation, and tax advantages. What sets mogul apart is its fast sign-up process, enabling users to begin investing in under 30 seconds. Additionally, with both property and landlord insurance in place, investors benefit from added security and peace of mind.
5. Best for Newer Accredited Investors: RealtyMogul
There’s a reason that many of the best dividend stocks are real estate investment trusts (REITs). Real estate generates revenue through all market conditions in the form of rental income. Since REITs are required to pay out at least 90% of their taxable income to investors through dividends, they often have attractive yields.
The downside to most REITs, however, is that they’re publicly traded. This means that they’re vulnerable to the same market volatility as any other stock. The RealtyMogul Income REIT is a non-traded REIT, which means that it has the benefits of being a resilient asset class and offers high yields, but without being valued based on the mood of the market on any particular day.
This REIT offers a 6% dividend yield and has experienced consistent growth in its share value since inception. Since it’s not traded on a major stock exchange, shares are purchased directly through the RealtyMogul platform with a $5,000 minimum investment.
6. Best for a 1031 Exchange: Kay Properties & Investments
At Kay Properties & Investments, you can invest through a 1031 Exchange that allows you to access DSTs that can help you:
- Potentially defer capital gains taxes
- Access many asset classes
- Search a multitude of geographic locations
- Uncover varying leverage scenarios
With this platform, you don’t need to lay out the cash to buy a whole property and then spend the money to manage it. Experts are available to answer your questions about this form of investment. There are 25 sponsor companies that help make all this possible and 200 years of experience on the customer care team for every investor who’s intrigued by this passive investment option.
Advantages of Fractional Real Estate Ownership
- No large down payment or excellent credit score required
- Potential passive rental income without the responsibilities of being a landlord
- Everyday issues are handled by a property management company
- Diversification from small houses to large apartment buildings
- You aren’t fighting with venture capital money when you invest
- These properties more easily generate cash flow internally and externally
- You don’t need hard money loans to buy into real estate at this level
Disadvantages of Fractional Real Estate Ownership
- Long-term commitment of 5 to 10 years
- Private asset managers control these funds
- Risk of market fluctuations and economic downturns
- Fees involved especially with early redemption
- Interest rates still impact how these portfolios are managed
- You have no control over the property manager at each location
Fractional Real Estate is Different from Owning a REIT
Some may be tempted to compare fractional real estate ownership to investing in REITs through a brokerage account. There’s a management fee tied to both, but these investment types differ considerably. There are big differences between the two:
- Investors in fractional real estate ownership actually own their property and can transfer ownership without restriction. When you purchase REITs, you buy shares in companies that own real estate. With a REIT, you don’t own real estate directly.
- Investors in fractional real estate have personal control over the properties they purchase. With a REIT, the management company decides what properties to invest in.
- A fractional crowdfunding company can diversify its portfolio as much as it likes, while a REIT, while flexible, must be careful which properties it purchases and manages because of how much it has to return revenue to investors.
- Crowdfunding platforms have more flexibility in how they can offer investment products compared to REITs.
So What’s the Best Investment – Fractional Ownership or Investing in REITs?
What is the best investment between the two? It depends on your personal situation. If you want to own a piece of real estate and you can maintain the investment for several years, then fractional ownership may be for you. If you want regular monthly or quarterly income with the liquidity to get out of the investment at a moment’s notice, then you may want to consider a REIT.
A real estate fund offers you real access so you don’t need to do the house hacking, check the list price of every house in the area, pay all the overhead involved with property ownership or chase down tenants for rent payments.
The choice is yours!
Frequently Asked Questions
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Yes! Fractional real estate investment is a good investment because it allows you to buy into the real estate market without purchasing the properties yourself.
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Fractional real estate investment asks you to buy into a property or a portfolio through an investing platform. A REIT is traded like a stock and is tied to a massive corporation that owns a huge portfolio of properties.
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Instead of fronting a majority of the capital required to purchase a property, fractional real estate investing allows you to buy into a property or portfolio at a much lower rate, offering access to those who don’t have hundreds of thousands of dollars to spend.