Fractional Real Estate: Why Our Clients Love It

Fractional property investment has rapidly gained popularity among our clients at Geonet Property & Finance Group (GPFG) and for good reasons. As we are seeing housing prices in Australia closing in on the $1 million mark, and as borrowing capacities shrink, Australians wanting to invest in property are turning to us for options, and fractional ownership is their investment of choice.

Fractional real estate, as you probably know, is when several individuals collectively own and share the costs of the property. Unlike full ownership, each investor owns a part or fraction of the property, allowing them to invest in premium real estate at a fraction of the total cost.

Fractional Investment in Real Estate: 4 Reasons Why GPFG Clients Love It

To hear more about what our clients are saying about fractional investment, we asked GPFG’s International Sales Manager Mark Reed to share what he hears from clients on a regular basis, for why they have invested in fractional ownership and the benefits they are seeing.

1. Accessibility. Firstly, fractional ownership makes premium real estate accessible to a broader range of investors. By pooling resources with other investors, our clients can own a share of luxury properties that would otherwise be beyond their reach. This democratisation of property investment is a significant draw.

As Mark puts it, “Fractional investment opens the door to high-end real estate markets, previously exclusive to only the most affluent investors. We are seeing average Australians who are feeling priced out of the luxury market, feeling like they are missing out. They are the ones who are most excited about being able to invest at these price points while still getting all the same benefits of buying a full unit.”

2. Flexibility. Moreover, our clients appreciate the flexibility that fractional ownership offers. “They can choose the extent of their investment – be it a smaller fraction for a first-time investor or a more significant share for someone looking to expand their portfolio,” says Mark. “This flexibility allows them to manage their investment according to their financial capacity and goals.”

3. Passive Income. Another compelling aspect of fractional property investment is the potential for generating passive income. Properties managed under fractional ownership schemes are usually high-quality assets in sought-after locations, offering robust rental yields. “Making money is the best part, isn’t it? Our clients are feeling the crunch of inflation in Australia right now; they are pleasantly surprised by the steady income stream their fractional investments generate,” says Mark.

4. Simplicity. Finally, fractional investment simplifies property ownership. The hassles of maintenance, management, and dealing with tenants are handled by professional management companies, offering a hassle-free investment experience. “It’s a set-and-forget property investment,” says Mark. “Once the unit is operational, it’s managed by either a hotel brand or property managers, and investors can sit back and collect the returns.”

Key Benefits of Fractional Real Estate Investment

Along with the reasons above, fractional ownership also has additional benefits for property investors.

• High-Quality Properties in Prime Locations. Fractional ownership opens up opportunities to invest in high-quality properties situated in prime locations. “We have clients who never dreamed of owning an ultra-luxury villa in Bali; that kind of purchase is out of reach,” says Mark.” They are thrilled to hear they can own a piece of it and still enjoy the benefits of returns through tourist stays and also have a few free stays themselves.”
• Ease of diversification. Investors can easily diversify their real estate portfolio by owning fractions of different types of properties across various locations.
• Lower risk profile: Sharing the investment with others spreads the risk, making it a more secure option for many investors.
• Greater investment leverage. Fractional ownership allows investors to leverage their investment dollars. “You’re essentially getting more bang for your buck, accessing higher-end properties,” notes Reed.
• Personal enjoyment. Owners can enjoy personal use of their investment property, which is particularly attractive in popular tourist locations like Bali and Thailand. “Even with our most high-end properties, such as Home Cliff, all investors, even fractional, have access to a certain number of free nights,” says Mark.
• Expert property management: Professional management teams handle the upkeep and rental of the property, ensuring peace of mind for investors.
• Structured Exit Strategies: Exiting a fractional investment is typically more structured and manageable, offering clarity and predictability.
• Potential Tax Advantages: Depending on the jurisdiction, fractional ownership can offer tax benefits related to property investment. At GPFG, we provide our clients with Depreciation Schedules and access to some of the most accredited tax advisors and accountants so all of our investors can maximise their tax benefits.

(Read more: How Can Property Investors Maximise Their Tax Savings?)

“Our clients appreciate the blend of lifestyle and investment benefits that fractional ownership provides. It’s only investing what you can, with less financial burdens, costs and hassles,” says Mark. “Our team is diligent about finding cash-flow positive properties, so with even just a small fractional investment, you can start to earn passive income and cash into your pockets.”

FAQs on Fractional Real Estate

Below are some of our most asked questions for fractional real estate, but if you have more, just get in touch with our team, and we’ll be sure to provide you with everything you need.

What Types of Properties Are Available for Fractional Ownership?

Fractional ownership can include luxury residential properties, vacation homes, and commercial real estate. With GPFG, our portfolio is a diverse mix of branded hotel or resort units, luxury villas and modern loft apartments. We will be launching more developments in Australia and Europe in the coming months.

(Read more about new properties from Canggu Properti: Launching New Projects with Canggu Properti)

Can I Choose Which Fraction to Invest In?

Yes, investors can typically choose their investment level, whether it’s a quarter, a half, or another fraction of the property. At GPFG, our fractional ownership shares typically start at 25%, with options for 50% and 75%, but it could be even lower for our high-end luxury properties.

How Do I Manage My Fractional Property?

Management is usually handled by professional firms, making it a hassle-free experience for investors. At GPFG, we work with world-renowned hotel brands such as Mercure and Ramada Encore, as well as experienced property managers, to ensure that our investors’ returns are maximised and their units are managed properly.

How Is Resale Handled in Fractional Real Estate?

Owners can sell their fractional shares in the property, potentially benefiting from property appreciation.

What Are the Tax Implications of Fractional Real Estate?

Owners are subject to property taxes proportional to their share and may benefit from tax deductions on mortgage interest and property depreciation.

(Watch the GPFG podcast: Unlocking Wealth: Navigating the World of Tax Deductions)

How Does Fractional Ownership Differ Internationally?

Legal structures and market dynamics can vary, making it essential to understand the specific conditions of the country where the property is located. This is the case for any property or foreign investment, and fractional ownership would follow those same guidelines. Our team is happy to provide all the legal groundwork and documentation for a safe and secure investment for all investment sizes.

What Are the Exit Options in Fractional Real Estate?

Exit strategies can include selling your share back to the management company, to another investor, or on the open market. When you go to sell, speak to the team at GPFG about all the options available.

Fractional Real Estate Investment with GPFG

If you are interested in all the ways that you can benefit from fractional ownership, get in touch with Mark and his team today. They can answer any questions and review our extensive selection of properties that are available for fractional purchases.