\n<\/p>\n
Like my brother-in-law\u2019s property partnership story, the legal side of fractional ownership needs careful planning. <\/b>When you buy into a property with others, you have two main ways to structure it: direct ownership on the deed or ownership through an LLC.<\/span><\/p>\n The LLC route often makes more sense, especially for larger groups. Why? <\/span>Because it makes everything clearer \u2013 from who owes what for maintenance to how decisions get made. <\/b>Plus, it gives you that sweet liability protection if something goes wrong (and in real estate, something always goes wrong eventually).<\/span><\/p>\n There\u2019s a tax benefit most people miss: when you own fractional shares through platforms like Arrived or Ark7, you still get real estate tax perks.<\/b> It can be depreciation deductions, write-offs for property expenses, and a lower long-term capital gains rate when you sell.<\/span><\/p>\n Even better \u2013 some syndication deals use accelerated depreciation strategies that let you show paper losses while your bank account grows.<\/span><\/p>\n Remember how I mentioned that Ark7 and Lofty have secondary marketplaces? That\u2019s huge. <\/span>Traditional fractional ownership can be like Hotel California \u2013 you can check out anytime, but you might never leave.<\/b> Like stocks, these newer platforms let you sell your shares whenever you want.\u00a0<\/span><\/p>\n However, if you\u2019re going the direct partnership route, like buying a duplex with your cousin, you need a \u201cbuy-sell agreement.\u201d<\/span> This spells out exactly what happens if one owner wants out.<\/b><\/p>\n For example, you might give other owners first dibs at a pre-agreed price formula. Or set rules for bringing in a new partner. <\/span>Without this, you could end up stuck with an investment you can\u2019t unload.<\/b><\/p>\n If you\u2019re buying into a property you plan to use (like those beach house shares on Arrived), usage rights are everything. <\/span>The smartest setups I\u2019ve seen use a point system \u2013 prime weeks cost more points, off-season less. <\/b>You get a certain number of points each year to use however you want.<\/span><\/p>\n For pure investment properties, it\u2019s simpler. Your ownership percentage determines your share of rental income and expenses. <\/span>Most platforms handle all this automatically<\/b>\u2014they collect the rent, pay the bills, and deposit your share monthly or quarterly.<\/strong> There are no<\/span>\u00a0late-night calls about clogged toilets or hunting down rent checks.<\/span><\/p>\n Want to get started? For $40 total ($20 each in Ark7 and Fundrise), you can test both approaches \u2013 direct property shares and diversified funds.<\/span> That\u2019s less than a dinner out; you\u2019ll learn more about fractional ownership by doing it than by reading about it.<\/b><\/p>\n Do you Still have questions about fractional real estate ownership? We\u2019ve got you covered.<\/strong><\/p>\n \u00a0<\/p>\n It depends on how you go about it.<\/strong> To buy fractional shares in a rental property on Ark7<\/a>, you only need $20 (or $50 on Lofty<\/a>\u00a0or $100 on Arrived<\/a>).<\/p>\n It costs even less to invest in the pooled funds offered by Fundrise<\/a>.<\/strong> You can start investing with $10. Alternatively, you can invest in public REITs for the cost of a single share (typically $10-100).<\/p>\n To directly buy a property with a partner (or several), you likely need thousands of dollars to cover the down payment on the rental property<\/a>, closing costs, and repair costs. Through our Co-Investing Club<\/a>, you can buy into real estate syndications with as little as $5,000<\/span>. If you invest without a club, expect a minimum investment of $50,000 or more in most cases.<\/strong><\/p>\n \u00a0<\/p>\n No, you don\u2019t.<\/strong> However, if you buy a property directly with partners, it may be easier to list the partnership\u2019s rules and for owners to buy each other out.<\/p>\n \u00a0<\/p>\n When multiple partners own property through tenancy in common, each owner can sell or transfer their percentage of the ownership without the other owners\u2019 permission.<\/p>\n When partners die, their ownership percentage is included in their estate and distributed according to their last will.<\/strong> Thus, there\u2019s no right of survivorship: the other owners don\u2019t automatically receive a partner\u2019s share upon their death.<\/p>\n \u00a0<\/p>\n If you buy a property directly with partners, you can finance it with a mortgage.<\/strong> That remains true whether you buy as tenants in common, joint tenants, or through a legal entity such as an LLC (read up on how to get a mortgage as an LLC<\/a>).<\/p>\n As for real estate crowdfunding or syndications, you can\u2019t borrow a mortgage loan. However, you could theoretically borrow a personal loan or unsecured business lines of credit<\/a> and use the funds to invest in real estate syndications or crowdfunding.<\/strong><\/p>\n You can also buy public REITs on margin through your brokerage account, although I don\u2019t recommend it.<\/p>\n \u00a0<\/p>\n It depends on the fractional ownership model you use.<\/strong><\/p>\n If you invest in a real estate syndication, REIT, or real estate crowdfunding investment, you don\u2019t have any responsibilities or obligations. It\u2019s a passive investment \u2014 you just write a check, sit back, and collect returns.<\/strong><\/p>\n If you buy a property directly with partners, you negotiate the responsibilities with the other partners. One person might take on most of the labor of managing contractors and tenants, or several partners might share them.<\/strong><\/p>\n \u00a0<\/p>\n It certainly can be, but it isn\u2019t necessarily. Every investment comes with risk, and it\u2019s up to you to analyze that risk compared to the potential returns.<\/strong><\/p>\n You and a partner could buy a great rental property at a fantastic price. Or you could overpay on a shoddy property. For that matter, you could score a good deal and still earn low returns or lose money if you do a bad job screening tenants<\/a> or rent to a professional tenant<\/a>.<\/strong><\/p>\n \u00a0<\/p>\n The fractional investment model has made it far easier to invest in real estate over the last few years. Because you can invest less cash, you can get started earlier, giving your investment more time to deliver compound returns<\/a>.<\/strong><\/p>\n Beyond the low barrier to entry, you can spread your money across many properties. That makes diversifying and investing a small amount in a wide real estate portfolio easy.<\/strong><\/p>\n Don\u2019t know where to start? Try investing $20 in Fundrise and $20 in a property on Ark7. For $40 total, you become a fractional investor in many real estate assets.\u2666<\/span><\/p>\n \u00a0<\/p>\n What are your experiences with fractional property ownership? If you haven\u2019t invested in fractional real estate ownership, what\u2019s held you back?<\/span><\/i><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\nExit Strategies<\/b><\/h2>\n
Owner Usage Rules<\/b><\/h2>\n
FAQs About Fractional Ownership of Real Estate<\/h2>\n
How much do I need for fractional real estate investing?<\/h4>\n
Do I need a legal entity to invest?<\/h4>\n
What does owning a property as \u201ctenants in common\u201d mean?<\/h4>\n
Can I get a loan for fractional real estate ownership?<\/h4>\n
What are my responsibilities as a fractional owner?<\/h4>\n
Is fractional ownership a good investment?<\/h4>\n
Final Thoughts<\/h2>\n
More Real Estate Investing Reads:<\/h4>\n<\/div>\n