Fractional Ownership: A Path to Getting on the Property Ladder
Putting a foot on the property ladder can be a daunting task, especially for someone in their early twenties who has just started their career. How would an investor go about making the purchase of their first real estate asset a reality? The real estate industry has long relied on a large number of intermediaries, high entry barriers, and minimal configuration, which creates buyer and seller frustration. Fractional ownership is an innovative and appealing way to gain access to the same benefits as direct real estate ownership without the inconveniences. The primary distinction between fractional and direct ownership is A shared equity investing strategy divides the cost of an asset between individual shareholders. The asset's benefits, such as income sharing, reduced rates, and usage rights, are likewise divided. If the value of an asset rises, so will the value of the investment's shares.
Putting yourself up for retirement is a life milestone that all investors think about. According to a Twindig survey, real estate is viewed as the safest way to invest for retirement by 25% of UK adults. It is also often regarded as the greatest method to maximise financial rewards. Shared equity provides the most secure path to retirement by allowing for portfolio diversity, which is a sure-fire approach to increase your chances of excellent returns. This article will look at the characteristics of shared equity that set it apart from other real estate investing strategies, as well as how Novyy is revolutionising this system to provide the most consumer-friendly service available.
Property fractions allow you to distribute your capital over multiple assets rather than focusing on just one. Shared equity provides significantly more alternatives than direct ownership. Numerous other types of assets, such as holiday homes or resorts, are available to investors through fractional ownership that would otherwise be unavailable through direct ownership. Usage rights, for example, provide you the right to use a holiday home according to your share. If you own a quarter of a real estate, you can utilise it for a quarter of the calendar year.
When you own a fraction of a real estate, you are only responsible for a portion of the upkeep and maintenance. This includes the cost of taxes, repair bills, utilities, project management, and other shared ownership charges. Shared equity agreements typically include provisions for long-term real estate management, with owners collaborating to address any difficulties that may develop.
Low Entry Barrier
For an investor, shared equity avoids the need to present a significant down payment on a real estate and avoid taking out a mortgage. You can choose to split the cost of the real estate with other investors, and if you have a sufficient number of people, you could even buy the entire real estate entirely in cash, eliminating the need for a mortgage. The entry price for a private investor is typically relatively low. For example, a £500,000 home may have a fraction available for under £50,000. The quality of properties offered through fractional investing far transcends that of direct ownership. You may purchase a portion of a luxury home or commercial real estate, which almost always attracts higher rentals and will likely increase more quickly.
These types of properties are always in high demand, so they are unlikely to lie unoccupied for long, enhancing your potential rental income. Passive income is an important component of fractional investing. Investors can generate wealth from fractions as the real estate's value rises, as well as from tenants if the property is rented out.
Types of Fractional Ownership
There are a few types of shared equity in real estate, each with its own set of constraints and benefits.
Timeshare - The most frequent type of shared equity among investors, where numerous individuals own a fraction of a property. Each share owner is entitled to utilise the property for a set period of time.
Private Residence Club (PRC) - Similar to timeshares, this ownership model allows a group of people to invest in a property and own a portion of it. The distinction between the two is found in the property itself. PRCs provide better amenities and services, as well as the assurance of luxurious properties in prime locations. They are usually sold in 1/8th, 1/4th, and 1/2 shares.
Destination Club - This shared equity provides an alternative to standard holiday ownership options such as timeshares. They normally demand a larger initial investment than other types of shared equity, but they provide more flexible usage options and a wider range of assets. Memberships in these can be acquired to gain access to a global portfolio of properties. Often, this is used by investors who travel frequently.
The Novyy Way
We introduced shared equity to the Buy-To-Let (BTL) market, combining the best of both worlds. We are recognised by investors as a real estate private equity firm. Our innovative ownership model enables us to divide the original equity into four or more fractions, facilitating the process for both new and systematic investors.
For an investor, fractional investing with us is a very streamlined and simple process. Purchasing ownership fractions in Novyy properties is a hassle-free alternative to doing a Buy-To-Let yourself and dealing with management and maintenance issues. Senior lenders and banks have mortgaged and funded all Novyy properties. This means you can be confident in the due diligence and marketability of any asset. Novyy often works on properties that are already rented or have an agreement in place that will commence upon closing. This ensures that your fractions begins earning income immediately. Purchasing fractions on Novyy is a seamless experience. It takes less than 5 minutes to sign up for and verify KYC-AML. Evaluate available opportunities, request allocations, sign agreements, and wire transfer your purchase fee.
Individuals seeking stable passive incomes and capital gains, can buy and own fractions of rented properties at Novyy - pre-tax cash yields range from 12 to 18% annually on capital invested + capital gains can be 100% or more over time. To learn more about Fi-To-Let you can watch this video which goes through the step-by-step process of investing with Novyy.