How To Turn $1,000 Into Big Money With This Form of Real Estate Investing
Written by
Marc Guberti
Edited by
Amen Oyiboke
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Looking at home prices today can make real estate feel out of reach. But if you want to start investing in properties without needing a huge down payment, fractional real estate investing could be the solution. Some platforms now let you invest with as little as $1,000.
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How Fractional Real Estate Works
Belwood Investments is one of the companies that’s leading the charge for fractional real estate. The company specializes in luxury properties and has an investing app that lets you get exposure to its positions.
For instance, Belwood Investments recently sold a Malibu property that received fractional support from nearly 500 investors. The company received $6.4 million from these investors and bought the property for $21 million. The property was sold six months later, netting roughly a 20% return for investors.
How To Invest in Real Estate With Fractional Positions
Many real estate investors borrow money to fund their acquisitions. For instance, an investor may put 20% down and get the remaining money from a financial institution. However, not every real estate investor wants to raise money from financial institutions. They may receive more favorable financing terms if they turn to individual investors to make up the difference.
Firms like Belwood Investments have minimum investment requirements. A $1,000 minimum investment is a generous entry point for a fractional real estate position. Belwood Investments is far from the only firm that offers this opportunity. Fundrise, Lofty, and Arrived are some of the other platforms that let you get into fractional real estate.
How Investors Make Money With Fractional Real Estate
Fractional real estate is a bit different from stocks and real estate investment trusts. While these assets are highly liquid, fractional real estate is illiquid. You only get your principal back when the investor sells the property, but there are a few ways to profit.
Fractional real estate investors benefit from price appreciation. If the property goes up by 10% in one year, your fractional position also goes up by 10%. Real estate investors also receive monthly cash flow based on the size of their fractional positions. Cash flow only arrives in your bank account each month if you have a fractional position in a rental property.
Some platforms specialize in residential real estate, while others target commercial properties. It’s important to consider your long-term financial goals and risk tolerance before opening any positions.
Reinvesting Profits
Real estate investors can reinvest cash flow into additional properties that are generating cash flow. Some fractional real estate platforms let you get started with as little as $10, making it very easy to build out your portfolio.
Investors can also reinvest profits from any property sales, which is why Belwood Investments was eager to reach a quick agreement for the Malibu property.
“Selling now means the buyer can put their own creative finishes on this architectural gem, while we return funds to our investors in less than six months, allowing them to invest in more properties,” said Steve Belmont, the founder and CEO of Belwood Investments. “Our top priority is delivering strong returns to investors as quickly as possible, and this is a win for all.”
Real estate may feel inaccessible if you want to buy properties on your own. However, there’s strength in numbers. Fractional real estate may help you get some exposure in real estate and generate some nice profits in the long run.
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