Real estate: Fractional investing startups on the rise
What’s trending
Fractional investment startups are making it a lot less cumbersome to become a real estate investor. You’ll be one of many owners for a property — vacation homes, single-family homes, apartments, even industrial properties. And then see your share appreciate and benefit from the rental income generated. There are a lot of startups rising in the space such as Arrived, Lofty AI, reAlpha, and Landa as Wired details here. One example is the startup Fractional which sees this type of investing as a way to remove the logistical challenges of property ownership. Don’t need to waste time searching for a property or come up with a down payment. No need to find tenants or handle property maintenance either.
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“What’s been most impressive to me,” a Fractional angel investor told TechCrunch, “…is that in an industry that’s been very asset heavy — you need to buy a house and do construction and then sell it, or buy an asset and then let people invest — they’ve taken a pure software approach that doesn’t compromise the ease of the process and still gives people the hands-on feel of owning a house.”
What’s the catch?
First, it has the potential to shake up who becomes an owner in the real estate market. Right now, mom-and-pop landlords own 70 percent of rental properties in the U.S., according to Census data that Wired pulled. That ecosystem could change if it becomes easier and less expensive to buy in. Second, it could be tougher on renters. Fractional investing puts a lot of distance between renters and landlords. It emphasizes the angle that housing is an investment tool and really being used for profit, Katie Goldstein, the director of housing and healthcare campaigns at the Center for Popular Democracy told Wired.
The bottom line
Fractional investing startups still represent a “tiny niche in the real estate market,” that growing a lot quicker now, Wired reported. It’s hard to say what the future holds but lowering the barrier and eliminating the hassle to real estate ownership is exciting for many first-time real estate investors.
