Debunking Myths about Fractional

Fractional’s platform offers new and exciting ways to invest in the private markets, but like with any new way of doing things, it comes with its own common misconceptions about how the whole thing works. To better understand our platform, here are a few myths we’ve heard about Fractional, and the realities behind them:
Myth: Fractional is a REIT
Reality: Fractional has all of the advantages of a REIT, with none of the disadvantages. Fractional allows you to directly co-purchase a property with your friends, family, or like minded investors. This means that you aren’t purchasing a security, and all properties listed on our platform are owned by their respective sellers, not Fractional. As a co-owner, you get to take an active role in decisions about how your property should be managed. Your vote is cast among only a few other investors, rather than as a proxy with millions of other silent REIT shareholders. Additionally, Fractional offers all of the tax benefits that come with home ownership, like depreciation, something not available with REITs. By investing with the Fractional platform, you can minimize fees and maximize cash flow for up to 40% more return than an equivalent real estate investment trust.
Myth: I don’t really have ownership in a Fractional home!
Reality: When you purchase a home with Fractional, you have direct ownership over that property, just like any regular homeowner! We automatically create an LLC to purchase the property with, whose ownership is shared among your co-investors. Fractional never owns any of your home, and you will always have control over it, whether or not Fractional is involved.
Myth: Fractional is only for accredited investors
Reality: Just like how anyone can purchase their home, anyone can invest with Fractional! When you use our platform, you find and invest in a home that is owned by the seller, not us. Fractional is not an investment manager and is not offering any securities. This system allows everyone to access the benefits of the private markets with the ease of purchasing a REIT.
Myth: Fractional will disqualify me from first-time homebuyer tax and bank programs
Reality: Since you won’t be living in your Fractional property, you are generally still considered a first time home buyer by organizations like HUD, CalFHA, or many banks.
Myth: Fractional is only for rookie or veteran investors
Reality: Fractional is a highly robust platform with options for everybody! Experienced real estate investors can diversify their portfolio by purchasing better homes, faster. Fractional also makes it easy to own homes out of state, and explore new investing strategies. Our novice users can co-own with other, more experienced users, while also benefiting from the ultra-low cost of entry, low time commitment, and extensive due diligence that only Fractional offers.
Myth: Fractional causes conflict between co-owners
Reality: Fractional’s platform is designed to minimize conflict and maximize cooperation by matching you with like-minded co-owners working towards shared goals. Throughout the ownership process, users are incentivized to support the common interests of the whole group. You vote in accordance with your share of the property, and there is an open forum for all co-owners to make their voices heard. Every management decision is a part of our structured governance system which safeguards your investment with a dynamic voting provision.
Myth: I can only buy homes listed on the Fractional marketplace
Reality: Found your own deal? Let us know and we will be happy to integrate your off-market property into the platform! No matter the home, Fractional’s cutting edge management system and services are at your beck and call. We can accommodate your pre-arranged group, or even help you find other Fractional users who might be interested in co-owning with you!
Myth: Fractional will take a cut of the appreciation of my property when I sell
Reality: You directly own your property, and it is yours to sell. There is no annual or management fee and Fractional takes no cut of your exit. Fractional only takes a 3.5% membership fee on the value of the property when the deal closes, and a 3.5% service fee on the monthly cash flow.
Myth: I can only buy all-cash
Reality: With Fractional Leverage, you can finance your purchase through Fractional's network of lenders. This allows you to invest more flexibly and own a larger share of the property for the same upfront cost. You can also always purchase for cash only.
Myth: Fractional offers are not competitive on the market.
Reality: Fractional works with the top realtors in the country to source their best listings. When the co-investment is completed on the marketplace, Fractional goes to work negotiating directly with the seller. The millions of dollars worth of user-owned homes just goes to show how highly our brokers view Fractional’s community. Sellers love us too, because every home purchased by our users is backed by real faces and reliable financing.
We hope that this article has helped shed some light on what we do here at Fractional, and we look forward to seeing you on the platform!