Is Traditional Real Estate Investing a Dying Breed? How Fractional Ownership is The New Investing Wave

In past generations, ordinary families often bought a small property and rented it out to generate additional income and retirement security. It might be a handyman special or discounted foreclosure in a nearby neighborhood and with 20% down and a lot of elbow grease and paint, Mom and Pop could turn the neighborhood ugly duckling into a beautiful swan.

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The 2008 real estate crash shifted the market as institutional investors, incentivized by government discounts, bought many foreclosed homes, finding long-term profit potential. As home values rose and inflation drove up interest rates, affordability became challenging for Gen Z and millennials. Many in these generations viewed homeownership as restrictive, especially with the flexibility of remote work enabling moves for better job prospects or more affordable rentals, thus increasing rental demand over traditional ownership.

Crowdfunding websites taught these generations that one could accomplish financial goals as part of a larger community where individuals pooled small amounts of money together to fund expensive projects. Enter fractional real estate ownership with startup real estate platforms such as Arrived Homes, which had the backing of Amazon.com founder and CEO, Jeff Bezos.

Trending: Arrived Home's Private Credit Fund’s has historically paid an annualized dividend yield of 8.1%*, which provides access to a pool of short-term loans backed by residential real estate. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

With Arrived Homes, for a minimum of $100, anyone can invest in a large portfolio of single-family rental homes that pay a monthly dividend and appreciation from potential changes in property values when the investment holding period ends. Arrived Homes takes care of all property management aspects so investors are not involved in more traditional land lording aspects. 

The Arrived Single Family Residential Fund is a public REIT with the same tax treatment as other traditional REITs. The fund distributes at least 90% of its taxable income to investors annually.

This investment model is extremely appealing to the younger generations and Arrived Homes has already received more than $206 million from over 685,000 investors. Arrived seeks out properties with the highest potential for appreciation and rental growth in 61 markets across the U.S. Most of its 413+ property-funded portfolio thus far has been located in the southeast and southwest areas. So investors can invest in diversified geographic areas, rather than being bound to local areas near them as in traditional real estate investing.

Trending: Wondering if your investments can get you to a $5,000,000 nest egg? Speak to a financial advisor today. SmartAsset’s free tool matches you up with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.

Investing in a fractional real estate platform lets individuals earn passive income by becoming part owners in various properties. This long-term investment has a typical holding period of 5–7 years, unlike publicly-traded REITs, which can be quickly bought or sold. Early redemption is possible after six months but may incur fees and isn't guaranteed. Investors are encouraged to hold through market cycles, experiencing shifts in interest rates and property appreciation across diverse regions.

With high home prices, fractional real estate investing could easily replace traditional real estate investing for all but large institutions. Mom and Pop no longer receive midnight calls about leaking toilets, which suits the younger generations just fine.

Looking For Higher-Yield Opportunities In A Shifting Market?

The changing interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For instance, the Ascent Income Fund from EquityMultiple targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000. Benzinga Readers: Earn a 1% return boost on your first EquityMultiple investment when you sign up here (accredited investors only).

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings.