Fractional vs. Other Real Estate Investments

At Fractional, we make real estate investing accessible, flexible, and hassle-free. Read on to learn about how Fractional is different from other real estate investing options.

1) Traditional crowdfunding and REITs

Fractional empowers you to directly own your investment properties through an LLC designed for co-ownership, rather than just a “share” of a property. This allows for tax benefits and personal net-worth growth that crowdfunding platforms and REITS do not provide.

Higher returns with tax benefits and lower fees

With direct ownership, you can take advantage of numerous tax breaks without worrying about high performance and asset management fees. Tax-wise, you can deduct the costs used to manage and maintain the investment property as well as property depreciation to offset your taxable income. Fractional will handle all book-keeping and accounting to ensure that you take advantage of all tax benefits.
On the other hand, most REIT dividends are not considered "qualified dividends," and are actually taxed at a higher rate. With both crowdfunding platforms and REITs, you will typically be charged trust, performance, and asset management fees.

Greater control without the headache

With direct ownership, you have control over all of the decision making. You can choose properties that match your location and type preferences, and decide on the best financing structure for you. You can set rental prices, choose tenants, and decide how many properties to buy. You can also refinance your mortgage when interest rates drop, or tap into your home equity through loans or credit lines for other purposes.
Many people are intimidated by direct investing because of the significant amount of time and energy required to be successful. You have to deal with tenant issues, maintenance emergencies, and potential liabilities if there are any accidents on the property.
With Fractional, we handle all of this on your behalf by connecting you with all the different service providers you need, such as property management and insurance. You get all the benefits of direct ownership without the headaches.

Accessible and flexible

Traditionally, direct ownership has a high cost of entry: higher capital requirements, time, and energy for an illiquid asset.
Fractional makes direct real estate investing more accessible and flexible to address these concerns. We lower the cost of entry by allowing you to co-invest with other investors. Unlike many crowdfunding platforms and syndicates, you do not need to be an accredited investor to use Fractional. The minimum investment amount is $5,000 and you can choose to interact with your property and co-owners as much or as little as you would like.
Our legal and operating structures allow you to liquidate your property shares easily through your co-owners, or directly via Fractional’s secondary market. Fractional will also be able to purchase your share of the investment property to ensure that you will always have liquidity when you need.

Summary of fee structures and financial benefits

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2) DIY partnerships

Fractional saves you money by handling all pieces of the investment process.
On average, we save investors 25% of their normal costs. For example, hiring a CPA or accountant for book-keeping and managing tax documents like the K-1 usually cost around $1k - 2k annually. Hiring a lawyer for setting up co-ownership legal agreements costs ~$700/hour. We will help you handle both.
Our investors automatically access the best real estate agents, attorneys, and property management companies, and we streamline the entire investment process.
Key benefits includes:
  • Helping your partnership create a co-ownership legal agreement, saving you thousands of dollars and time from dealing with real estate attorneys and creating your own contracts.
  • Setting up an LLC and handling all the busy work from obtaining an EIN to managing the filing and operating agreements of the LLC.
  • Obtaining competitive short-term and long-term loans for properties under an LLC. Our exclusive partnerships allow groups to acquire lower rate LLC loans, with no personal guarantor needed from any co-owner.
  • Creating a business banking account for your LLC in seconds. We operate and automate all money transfers and handle all of the necessary book-keeping, tax, and accounting paperwork.
  • Providing immediate quotes for insurance and home warranty companies offering the best coverage at the best rates.
  • Working with title companies and notaries across the United States to close the property on your group’s behalf. The title of the property is held by the LLC.
Read more about everything everything we do in our offer and closing process.

3) Stock market and savings

See below for the benefits of investing in real estate compared to other asset classes. Investing in real estate offers attractive yields and equity buildup, with additional perks like direct ownership and tax benefits. Real estate can be a great diversifying addition to your investment portfolio.
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Join us today at Fractional.app