Real estate investing has been a common way to build wealth for thousands of years. People always need a place to live and many companies need physical stores to serve customers and attract new ones.
High prices have made real estate inaccessible for some people but fractional real estate investing has been leveling the playing field. Investors pool money to buy properties instead of having to save all the necessary money to buy a property. This investing model is gaining demand due to its accessibility and liquidity.
Market Overview From 2023 to 2025
A report from Grand View Research indicates that the real estate market is projected to maintain a 5.2% compounded annual growth rate from now until 2030. That bodes well for fractional real estate investing, which makes the market more accessible.
Fractional investors can get exposure to residential and commercial real estate. High-end properties in desirable locations often attract the most investors. However, fractional investors also pile into vacation homes, retail properties and apartment complexes.
The model can prop up real estate assets since investors pool their money. Furthermore, fractional real estate investors have more liquidity than traditional real estate properties. Most funds periodically give investors the option to exit their positions early. This added liquidity can boost the appeal of fractional investing over the years.
Technology is Driving the Market
Even though real estate follows the same general concept for many years, it continues to change. Technological innovations have been a boon for real estate and they can also make investing in fractional real estate more mainstream.
For instance, real estate investment platforms like Fundrise, Arrived Homes and Groundfloor have made it easier for investors to collaborate on deals and pool their money. These companies work to improve the user experience so fractional real estate investors get more out of their experience.
Blockchain is also changing how real estate works. Tokenization makes it easier to distribute fractional ownership of a real estate asset to investors. Investors can sell tokens as they would with a stock’s shares to exit their position. They can also buy tokens to increase the percentage of their property.
Technology continues to enhance many industries and artificial intelligence should ensure that this trend continues. Real estate investors who pay attention to technological innovations can give themselves an edge over the competition.
Investor Trends and Behavior
Millennials and Gen Z investors tend to be the most active in fractional real estate investing. It’s part of a larger shift toward alternative assets as investors aim to diversify their portfolios and hedge against inflation.
Fractional real estate investing also attracts people who want to generate passive income from their investments. You can find yields from fractional real estate positions that exceed yields from real estate investment trusts.
Fractional real estate can also benefit investors who want to embrace a long-term approach but get nervous about market volatility. While fractional ownership is more liquid than full ownership, it is less liquid than a REIT. This distinction can keep you out of your portfolio instead of checking your stocks each time the market fluctuates.
Whether you buy fractional real estate or REITs, you’ll benefit from real estate’s growth. The expected CAGR from real estate implies that the asset will continue to perform well. Investors who want less volatility and more stable returns may shift their money from stocks to real estate amid uncertainty in financial markets.
Future Outlook for Fractional Real Estate
Fractional real estate investing looks poised to gain more traction. Real estate has been a hot investment for many years, making fractional ownership more accessible. It’s similar to how fractional stock trading has led to a boost in stock trading. When investors can get exposure to an asset without putting up all the capital, they build their positions faster.
While the U.S. has seen a lot of activity in fractional real estate investing, other countries will likely present additional investment opportunities in the years ahead. Other countries already have fractional real estate investing but the successes of this industry are likely to compound. It can also experience more demand in the U.S. as more investors give it a try and generate passive cash flow.
Fractional real estate also offers great integration with DeFi, which can make tokenization more common. Using tokens to trade ownership in a real estate property is similar to selling shares in a publicly traded corporation. This model will continue to make real estate easier for people to invest in.
Getting Started With Fractional Real Estate Investing
Younger generations have embraced fractional real estate investing and it’s here to stay. Real estate is a good inflation hedge that provides cash flow and fractional investing makes it all passive.
Getting started in fractional real estate hasn’t been easier. You can choose from some of the top fractional real estate investing platforms and start building positions in various properties.
About Marc Guberti
Marc Guberti is an investing writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.
