Fractional real estate investing companies offer investors the opportunity to own a slice of valuable real estate without the headaches of traditional property ownership. With fractional ownership, investors can pool their resources together to purchase homes, vacation properties, apartment buildings, and commercial facilities.
This is a great way to diversify your portfolio with an alternative investment (real estate) and it allows you to invest smaller amounts of capital. Say goodbye to months of researching properties, securing funding, finding tenants, and managing the property yourself. Fractional real estate investing companies provide an easy way to invest in real estate, making it accessible to a wider range of investors.
In this article, we’ll discuss the most prominent fractional real estate investing companies, and the pros & cons of each. So read on to learn more.
The Best Fractional Real Estate Investing Companies
Fundrise
Fundrise is a fractional real estate investing company that has been around since 2010 and has become very popular due to its low investment requirement of just $10 and 1% annual management fee.
This crowdfunding platform offers a variety of electronic real estate investment trusts (eREITs) depending on your investment goals. Fundrise also pays investors quarterly dividends and has a secondary marketplace where you can sell your shares.
What sets Fundrise apart is its accessibility to non-accredited investors, making it a great option for those just starting in real estate investing. It has been in the fractional real estate investment game for a long time and offers accounts that can be tailored to both growth and income oriented investors.
Fundrise also has a diverse selection of accounts by region and property type, an excellent mobile app, and browser-based site.
The drawbacks are that Fundrise’s investments are illiquid, meaning you cannot easily cash out at any moment. This platform is better suited for long term investments rather than short term investments, as there are penalties for selling your shares before five years.
First National Realty Partners
Next up is First National Realty Partners, a commercial real estate investing platform that focuses on essential needs, anchored properties. The firm invests in assets that are stable and can provide long term, predictable cash flow, such as grocery anchored retail properties.
The company works with nationwide corporations like Starbucks, Walmart, and Whole Foods, making it an appealing option for investors who want fixed income and to hedge against inflation.
Unlike most fractional real estate investing companies, FNRP is vertically integrated, which means that it has its internal teams of leasing agents, property managers, accountants, and real estate agents. This makes the deal cycle entirely run within the company, eliminating the need for third-party sponsors and management companies.
First National Realty Partners provides investors with options to invest in individual properties or funds where they can allocate their capital. Their flagship Opportunity Fund has a holding period that ranges from three to seven years.
FNRP is only available to accredited investors, and it has a relatively high minimum investment of 50,000.The website can also be difficult to navigate. But if you have enough money to invest, the company has clear and consistent property acquisition criteria and tenant relationships with major retail, making it an attractive option.
To learn more details about this company and their offerings, check out this First National Realty Partners review.
YieldStreet
YieldStreet is a crowdfunding platform that allows investors to invest in various alternative assets, including real estate projects throughout the United States. When it comes to YieldStreet’s previous success, the numbers speak for themselves.
YieldStreet’s real estate investments have yielded 9.61% in net annualized returns. Users have invested $4 billion on the platform, with $1.8 billion distributed in payouts.
The platform is available to all investors, with a minimum investment of $2,500 and a target return of 3% to 18%. Investors can earn money through interest and capital appreciation, with payouts distributed monthly.
YieldStreet’s real estate investment opportunities are curated by professionals who carefully vet every deal they consider, with less than 10% approved. Past offerings have included residential, commercial, and mixed-use real estate, including properties in development. Investors can invest in real estate through direct equity investments in ownership stakes or through investments in loans secured by real estate. The private real estate investments are only available to accredited investors with a minimum of $5,000.
YieldStreet also offers other alternative investments, such as marine, legal, and art investments, as well as commercial and consumer finance offerings. Although the platform mainly targets accredited investors with a $500 investment minimum, non-accredited investors can invest in the YieldStreet Prism fund with the same $2,500 minimum account size.
Each investment on the platform is backed by tangible assets, and investors can use the platform’s website or mobile app. The cons of investing with YieldStreet include illiquid investments, higher fees, and concerns over customer ratings and consumer complaints.
CrowdStreet
This platform makes it simple for individual investors to connect with project developers and participate in a diverse range of projects across the nation. CrowdStreet conducts thorough background and reference checks on developers, allowing investors to focus on vetted opportunities that suit their goals.
With options for individual properties or CrowdStreet backed funds, you can create a portfolio that works for you. But before you jump in, note that most of the individual projects and funds available on the site require a minimum investment of $25,000.
The platform is only open to accredited investors who are willing to take on risk and perform their own due diligence. Even with the high bar of entry, CrowdStreet has attracted over 100,000 investors with its high quality offerings and user friendly interface. The platform even includes a chatbot feature.
So, if you’re willing to let your money sit for a few years and you’re comfortable with the investment minimums and risks, CrowdStreet may be a great choice for you.
Final Thoughts
Investing in real estate no longer requires a large down payment or a lot of hassle. Fractional real estate investing has made it easier than ever to diversify your portfolio and generate passive income through owning a small portion of rental properties and commercial real estate.
The best real estate crowdfunding platforms we discussed above offer investors the opportunity to invest in a variety of properties with different minimum investment amounts, target returns, and fees. With options like Fundrise, Yieldstreet, First National Realty Partners, and CrowdStreet, investors have more choices than ever before.
If you’re interested in adding real estate shares to your portfolio, consider your overall investment strategy and where fractional real estate investing fits in. With so many options available, it’s important to do your research and choose the platform that aligns with your investment goals and risk tolerance. Regardless of which platform you choose, fractional real estate investing can be a great way to diversify your portfolio and generate passive income.
