Best Fractional Real Estate Investment Platforms

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Contributor, Benzinga
February 21, 2024

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.

Pros

  • Low minimum investment allows just about anyone to buy in with their retirement funds
  • Passive income is not guaranteed, but it is fairly common given how the fund is managed, which helps retirement investors

Cons

  • You may feel as though the hold period is simply too long for your liking when you have IRA funds tied up in this fund

2. Best for Beginner Real Estate Investors: Fundrise

  • Fundrise
    Best For:
    Beginner Real Estate Investors
    securely through Fundrise's website

    This is a testimonial in partnership with Fundrise. We earn a commission from partner links on Benzinga.com. All opinions are our own.

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. It’s a very good place to start investing your IRA into real estate because Fundrise has its own IRA to work with.

That’s right. 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.

This is a simple way to set it and forget it, and the Fundrise IRA allows you to do exactly that so that you can get back to your life instead of staring at your account all day, every day. Remember, you don’t have to worry about accidentally violating any provisions of self-dealing, and Fundrise will do the accounting, pay the distributions and issue the statements for you.

Pros

  • The platform handles all the paperwork, which means you are not causing issues that could impact your retirement funds
  • The "set it and forget it" layout of the platform helps retirees and those who are saving for the future because they don’t need to monitor their accounts too closely

Cons

  • You can move money from your IRA to Fundrise, but you need to be sure that you’re comfortable with this investment before committing too much money to it

3. 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.

Pros

  • You can get into the non-traded REIT and avoid the issues that are caused by market fluctuations
  • The relatively high dividend yield is fairly consistent
  • REITs are required to return a high percentage of their income to investors

Cons

  • While this REIT is not subject to trading, it may not fit into your investment plan or the barrier to entry might be too high

4. 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.

Pros

  • You can sign up for the platform and simply wait for the right time to buy in
  • The platform has a diverse range of offerings
  • There are helpful webinars and educational tools that can teach you about alternative investing

Cons

  • YieldStreet offers more than real estate, implying its offerings may not be as attractive

5. Best for Long-Term Investors: CRE Income Fund

When you sign up with the CRE Income Fund, you will buy into commercial properties where all the assets are signed to NNN leases in the highest-performing areas possible. This means that you get the best results from the fund while they handle the management and assets.

The fund concentrates on warehouses, data centers and other types of industrial properties. These are properties that you are unlikely to find on your own.

Pros

  • The fund is designed to use your money to improve the fund and act in your best interests
  • You can gain access to commercial units that are generally inaccessible to private investors

Cons

  • There’s no guarantee that the fund can offer the same high returns in perpetuity

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.

Pros

  • You can invest in tax-advantaged properties that will help you defray other costs
  • Investors can reach out to the platform and speak with experienced experts
  • You can use this platform to access the real estate market without leveraging too much cash

Cons

  • Because it’s only available to accredited investors, those without accreditation will need to find another way to access DSTs

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.

Fractional Real Estate Investing via Blockchain: Parcl

The adoption of blockchain technology allows investors to seek new avenues for real estate investment. Platforms like Parcl protocol leverage blockchains to mimic price movements of real estate, letting investors gain exposure to the most sought-after real estate investments on a per-square-foot basis. This means that investment strategies can vary even more than normal.

These investments are made through synthetic assets, allowing investors' portfolios to remain highly liquid in a traditionally illiquid industry. Through the digital representation of hard assets, Parcl lets investors gain exposure to cities across the United States, starting as low as just a few dollars.

Parcl offers investors various investment options, including liquidity provision in the form of stablecoins and Parcls to earn passive income from one's capital. With various opportunities on Parcl, there's a lot of demand for its latest V2 platform. If you're interested in real estate investing via Parcl, be sure to join Parcl's V2 waitlist.

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

Q

Is fractional real estate ownership a good investment?

A

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.

Q

What is the difference between fractional real estate investment and a REIT?

A

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.

Q

How does fractional real estate work?

A

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.

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