What is fractional ownership and how can retail investors earn passive income from commercial real estate?


Consider earning passive income by drinking mimosas while on a Caribbean cruise. What a dream! You can earn an income doing nothing by putting money into real estate. Rental income is a fantastic way to earn money. You already know that active involvement is key if you already own at least one rental property. Commercial real estate, on the other hand, allows you to realize the rewards of exceptional real estate returns without moving from the couch. Fractional real estate also helps you collect passive income.


Passive income is?

Money earned without working directly is passive income.

Passive income sources provide interest or dividends. In real estate, your passive income will grow over time without your management. Passive real estate investments diversify portfolios and bring in more money to help you achieve your financial goals. It is passive since you are not directly monitoring the investment.

Is Real Estate Passive Income? If you’ve ever ventured into real estate, know that it’s not passive. Without a doubt, receiving regular rent checks is crucial. But you will have to keep reminding tenants. Also, maintenance issues will increase, especially when you are out of the country and need to find contractors.

But, there are ways to make passive money in real estate with no commitment. Real estate is used to generate entirely passive income in different ways.


What exactly is commercial real estate?


Commercial real estate (CRE) is any property that is primarily used for business purposes. Commercial real estate can be owner-occupied, meaning the owner runs their business from that site, or it can be rented out to tenants who want to live and work there. This type of real estate includes everything from small local cafes to vast metropolis skylines.

Retail businesses, offices, hotels (sometimes with short-term leases), shopping malls, restaurants, hospitals, and convenience stores are all examples of commercial real estate. From an investor’s perspective, commercial real estate can include any type of property that generates income or has the potential to do so.

Assetmonk, the leading WealthTech platform, helps you understand commercial real estate. The service offers premium Grade A investment options to its investors through fractional real estate investments and crowdsourcing.


Is commercial real estate a smart way to generate passive income?

Investing in commercial real estate (CRE) is an effective approach to generating passive income from a real estate asset that is influenced by a few main factors:

  • Commercial real estate is becoming necessary for the global economy, making it a long-term investment choice regardless of the economic cycle. It is visible throughout the economy; office spaces house professional workers; industrial warehouses are needed to manufacture items, and retail establishments provide customers with leisure opportunities.
  • Leases for commercial property are generally long-term in nature, with a lease term of at least three years, providing a steady stream of future rental income streams.
  • Unlike other investment vehicles such as residential real estate, CRE is an income-driven investment that is not significantly influenced by emotional impulses.
  • Leases can include stipulations for fixed annual increases, allowing for revenue growth and predictability during the lease period.


How can retail investors earn passive income from commercial real estate?


  • REITs: If you want an extremely passive, hands-off investment option, REITs may be the way to go. If you’ve always wanted to own real estate but don’t have the capital to get started, a real estate investment trust is the second healthiest choice. A REIT is a company that owns a small number of properties. These are mostly business assets that generate passive income without investing in them personally. When you buy a REIT, you are indirectly investing in commercial real estate. As the value of your properties increases, the value of your shares will also increase, which you may be able to resell for a higher price in the future. Dividend payouts from your REITs can also provide you with a passive income stream. As a result, you could enjoy a monthly income stream and appreciation without managing or owning rental properties.

  • Real estate crowdfunding: One of the obstacles to investing in commercial real estate is the limitation of resources. The average person doesn’t have the finances or ability to buy a downtown office tower or a 100-unit apartment building. Most people would never consider it. Individuals can contribute to smaller-scale efforts like this through crowdfunding. Instead of individually owning commercial property, you can purchase shares in the transaction for a percentage of the total amount required for the project. Think of it as a type of partial ownership. Real estate crowdfunding produces passive income while providing access to the real estate market without requiring a large initial investment. It allows investors to earn a lot of money with minimal effort. As a result, investors can now enjoy more comfortable and convenient passive income.

  • Fractional Ownership: Fractional ownership of a commercial real estate structure is an investment arrangement in which many individual investors combine their assets to purchase real estate. Depending on their investments and the number of their investments, investors become landowners of a slice of properties. All investors share the risks and rewards. It is most suitable for an individual investor who cannot afford and invest in the full property. Thus, investors can buy a share in a high-end business or office building. They can also get stable rental income and this helps build wealth. You can invest by INR. 25 Lacs in fractional real estate investment. As a result, fractional real estate investing becomes extremely affordable and yields double returns. Thus, the former will be the benefit of direct investment returns, while the latter will be the benefit of property appreciation. Because you own part of the property, the value of your stake will also increase. He is well known for his institutional investments. However, it is starting to be a credible investment option for individual investors. You can now co-own this office building through co-ownership by investing a small amount and earning rental returns ranging from 6% to 10% per year.

  • P2P loan: If you have the money but don’t want to deal with direct requests from landowners, peer-to-peer (P2P) financing is an option to consider. You can use P2P networks to lend your money to other real estate investors. This allows them to use their money to repair, return or renovate their property. Your loan will then be repaid with interest, giving you passive income in no time.

  • Co-living structure: Tenancy arrangements where tenants co-use living room utilities to support more people than would be possible in an ordinary housing situation. Affordable housing is limited in metropolitan areas, where rising rents and the cost of living make it financially possible to share a house with strangers. Because it offers affordable pricing, flexible contracts, community involvement, and hassle-free living, millennials and college students are driving expansion. According to Anarock Property Consultants, cohabitation generates a rental yield of 7-11% above the national residential average of 3%. According to experts, homeowners could benefit from transforming an ordinary apartment into a co-living space, as these facilities are in high demand. Although there is always a turnover of tenants, co-living spaces offer the possibility of generating constant rental income. activemonk also offers co-living options. Its cohabitation company is Landing Hyderabad International Airport.

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