The New Era of Real Estate Investing – A Simpler Path to Building Wealth

Real estate is one of the greatest wealth-creating assets of all time, providing stable returns through all market cycles. However, investing in real estate through traditional means is becoming increasingly difficult.

The housing shortage has made it more difficult to find investment opportunities and soaring house prices and recent interest rate hikes have further limited access to real estate investment.

While this may seem like a deathblow to many investors’ dreams of becoming real estate moguls, a growing number of retail investors are becoming homeowners through a more affordable and effective strategy: fractional real estate.

The real estate investment platform Homes arrivedsupported by Amazon.com Inc. AMZN founder Jeff Bezos, is one of the fastest growing fractional real estate investment providers. The company offers securitized shares of income-generating single-family rentals through SEC-regulated offerings.

The company caught the eye of many high-profile investors during its funding round, attracting investment from Jeff Bezos through its Bezos Expeditions funds, Salesforce.com Inc. RCMP founder Marc Benioff via Time Ventures, former Zillow Group Inc. Z CEO Spencer Rascoff and Uber Technologies Inc. UBER CEO Dara Khosrowshahi.

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Using Regulation A+, the platform can offer the property to non-accredited investors with investment amounts ranging from $100 to $10,000 per property.

Real estate investors receive quarterly distributions of their share of rental income and later realize gains through price appreciation at the end of the target holding period.

One of the most overlooked benefits, however, is the tax advantages that come with owning equity in investment real estate. As real estate depreciates, the actual cash distributions received each year often exceed taxable income.

Condominium is not just limited to single-family rentals. Accredited investors can hold shares of multi-million dollar commercial real estate assets and even major developments.

The real estate platform Realty Mogul offers private equity offerings for commercial properties, such as multi-family, industrial, office and self-storage, with minimum investments starting at $35,000. Annualized returns on investments made through the platform have averaged around 17%.

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Fractional Real Estate vs REITs

Real estate investment trusts (REITs) have long been passive investors’ preferred option for real estate exposure, but this type of real estate investment remains vulnerable to stock market volatility.

For example, the first single-family rental REIT Invitation Homes Inc INVH the share price is down about 20% so far in 2022, while its real estate portfolio, rental income and funds from operations (FFO) have increased and its net debt has decreased.

Fractional real estate, on the other hand, has very little correlation with the stock market. This means that overall investment returns are generally more predictable and stable.

The lower volatility comes with a tradeoff, however. Since shares of fractional rental properties are not publicly traded, liquidity options are generally more limited. There aren’t many options for secondary trading yet, whereas shares of a publicly traded REIT can normally be sold instantly during trading hours.

If one of your investment goals has been to start investing in real estate, now you can find available properties and own them in minutes without having to get pre-approved for a mortgage or get started in bidding wars with other buyers.

Photo: Courtesy of Homes arrived