Imagine if you owned lavish office spaces.

You could earn lakhs as rent every month.

But it isn’t easy. Such properties cost crores.

You can, however, buy a part of them.

How? Through fractional real estate platforms (different from REITs).

A thread🧵

How does it work?

It starts with a company/platform identifying investable Grade A properties like commercial buildings or warehouses.

Such premium properties usually cost crores.

So, the company invites multiple investors to pool money.
After collecting money, the platform creates a Special Purpose Vehicle (SPV) to buy the property.

And the investors become shareholders in this SPV.

Examples of these companies/platforms include Strata, hBits, Property Share, etc.
How do these companies generate returns for investors? 🤔

There are two ways.

• One, they earn rent from the tenants, who are usually locked for a long-term lease.

• Two, capital appreciation from the property when they sell it.
What sort of returns can you expect?

Platforms like hBits and Strata promise 8-10% yearly rental returns on their listed assets.

Post capital appreciation, the overall average annual return they promise is 12-20% in the long term (typically 5 years).
Now, let’s discuss the cost.

They could be of two types:

One, you need to pay an asset management fee of around 1%.

Two, the platforms may take in a share of the profits if your returns exceed a particular number (hurdle rate).
A word of caution now.

This appealing investment option isn’t everybody’s cup of tea.

For most platforms, the minimum investment amount starts from Rs 25 lakh.

In addition, selling your investments won’t be easy.

Let’s understand why. ⬇️
To exit your investments, you need to find a buyer.

Now, these companies allow you to list your share of the property on their platform.

But there’s no guarantee that you will find one immediately.

So, liquidity can be a challenge.
There are several other risks that you need to know.

Like in the case of any property, fractional real estate ownership is exposed to risks like lease renewals, tenant defaulting on rent, occupancy challenges, etc.

Besides, there is no regulatory oversight.
How’s it different from REITs?

By now, you must have figured out several differences between the two.

You can check more details in the table below.
We have a detailed thread on REITs. You can read that as well. 🧵👇

https://t.co/nvuo43oOeQ
How to look at it?

Fractional real estate offers an alternative to diversify beyond mutual funds, stocks, bonds, gold, etc.

But do keep in mind the risks.

It makes sense to invest only when you already have a sizable portfolio of market-linked investments.
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How can we use language supervision to learn better visual representations for robotics?

Introducing Voltron: Language-Driven Representation Learning for Robotics!

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