Fractional Investing vs Traditional Real Estate Investing

Investing in real estate has long been a cornerstone of wealth building, offering stability and the potential for significant returns. However, the rise of fractional real estate investing, particularly through Realbricks, has introduced new possibilities and opportunities for investors. This comparative analysis will explore the differences between the two models, benefits, and considerations to help you make informed investment decisions. 

Understanding the Basics

Traditional Real Estate Investing The age old model of traditional real estate investing involves purchasing entire properties, either for rental income or resale. This method requires significant capital, thorough market research, and often, hands-on property management. Lately, this model has been slowly moving into the hands of a few, due to high property values and constantly increasing inflation issues. Anyone who has never owned a house before, can attest to how difficult buying your first home can be in 2024. Depending on the state you call home, the typical three-bedroom house can list at anywhere from about $125,000 to more than $740,000. With the average income level in the united states sitting at 59,000 a year, its safe to say that purchasing a house can feel out of reach for many Americans. 

Fractional Real Estate Investing with Realbricks Fractional real estate investing with Realbricks aims to change this narrative, and open up the front doors of this investment model preserved for the wealthy. Now anyone is able to get involved in the real estate market with a minimum investment of $100 with shares selling at $10/share. Prime real estate locations are selected and approved by our experienced and vetted team. 

Fractional real estate investing allows multiple investors to purchase shares in a property. Each investor owns a portion of the property proportional to their investment. For instance, consider a property divided into 1,000 shares. If an investor purchases 97 shares, they would own 9.7% of the property. This model enables investors to participate in real estate markets with lower financial commitments, benefiting from property appreciation and rental income in proportion to their share ownership. Realbricks facilitates this process by managing the property and handling all operational aspects, making it a passive investment experience.

Key Differences

1. Capital Requirements

  • Traditional: Requires substantial upfront capital to purchase properties outright. This often includes down payments, closing costs, and financing. 
  • Fractional with Realbricks: Significantly lower entry barrier, allowing investments with smaller amounts of capital. This democratizes access to high-value properties with investments starting at just $100.

2. Ownership

  • Traditional: Full ownership of the property provides complete control over management decisions, tenant selection, and property improvements.
  • Fractional with Realbricks: Shared ownership means management decisions are handled by Realbricks, reducing direct control but also alleviating management responsibilities.

3. Risk and Diversification

  • Traditional: Investing in a single property can lead to higher risk, as market fluctuations or property-specific issues can significantly impact returns.
  • Fractional with Realbricks: Allows for diversification across multiple properties and markets, spreading risk and potentially stabilizing returns.

4. Liquidity

  • Traditional: Real estate is generally illiquid, with long holding periods and potential difficulties in selling properties quickly.
  • Fractional with Realbricks: Realbricks will soon offer a secondary market, enabling investors to buy and sell shares more easily, enhancing liquidity. This feature will distinguish Realbricks from other platforms that have struggled with liquidation for their investors. Other methods like tokenization or crypto currency options for liquidation have existed before, but no other fractional investment platform has ever allowed investors to sell their shares whenever they want using the U.S. Currency.

5. Management Responsibilities

  • Traditional: Requires active management or hiring a property manager, which involves time and additional costs.
  • Fractional with Realbricks: Management responsibilities are handled by Realbricks, providing a more passive investment experience.
Feature Traditional Real Estate Fractional Real Estate with Realbricks
Capital Requirements High upfront capital Low entry barrier (starting at $100)
Risk and Diversification Higher risk, less diversified Can have Lower risk, diversified across properties
Liquidity Low, difficult to sell quickly High, with upcoming secondary market
Management Responsibilities Requires active management Managed by Realbricks, passive investment

Benefits of Fractional Investing with Realbricks

1. Accessibility Fractional investing with Realbricks lowers financial barriers, allowing more people to participate in real estate markets. This inclusivity enables investors to diversify their portfolios without needing substantial capital.

2. Reduced Management Hassle Investors benefit from professional property management provided by Realbricks, eliminating the need to handle day-to-day operations. This is ideal for those seeking a hands-off investment approach.

3. Flexibility and Liquidity The upcoming secondary market with Realbricks will offer greater flexibility. Investors will be able to adjust their portfolios by buying or selling shares in response to changing financial goals or market conditions, creating liquidity for the first time in USD for any fractional real estate platform.

Conclusion

Both fractional and traditional real estate investing have their unique advantages and challenges. By understanding these differences, investors can choose the approach that aligns best with their financial goals and risk tolerance. Realbricks makes it easier than ever to explore fractional real estate investing, providing opportunities to diversify and grow your portfolio with minimal hassle.

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Disclaimer: Investing in real estate involves risks, including the potential loss of capital. This content is for informational purposes only and is not intended as investment advice. Investors should perform their own research and consult with financial professionals before making investment decisions.