There is nothing better than making money while you sleep. Passive income investments allow you to generate money by doing nothing, which is perfect for property investors who work full-time or have other responsibilities. Rent is a fantastic source of passive income. But admit it: you immediately think of the mom-and-pop investor who owns many rental properties and spends their nights and weekends cleaning them up and dealing with tenant issues when you think of real estate investing. Many people assume that real estate investment is too difficult, time-consuming, or expensive to begin. That was probably true 20 years ago. However, real estate investing methods like fractional ownership produce passive income (without even purchasing property).
Many people confuse the terms real estate investing and passive income. Real estate can be considered passive investing, though this is not always the case in investors’ minds. One of the most efficient ways to put your money to work for you is through passive real estate investing.
But many associates passive real estate investing with purchasing and renting residential property, such as a single-family home or an apartment complex. They consider this passive income because, as they view the investment, they will purchase a piece of property, rent it out, and then get monthly checks from the tenants.
Sure, buying and renting out a property can provide passive income. It is not, however, passive income real estate investing.
If you are actively involved in property management, it will not be considered a passive income investment. So, where else can you invest your money that requires no effort and no buying of property? Commercial real estate property. However, commercial real estate has double the problems of residential real estate. Not now, thanks to fractional ownership.
So, passive income is?
Whatever work you have, your income will always be constrained by time. To supplement your income, you may work for a salary, hourly compensation, or run a side business. However, you will ultimately run out of hours throughout the day to create further income. Work would also have an impact on your mental, emotional, and physical well-being.
However, passive income alters this. The precise amount of engagement depends on the investment. However, the concept is that once your real estate holdings are established, they will be able to create their own revenue. You may make money while working, resting, or even going on family holidays.
This money may be used to enhance your savings accounts, pay off debts, fund a college education, attain financial independence, or even generate income in retirement. That is what we mean by financial independence. And what better way to generate passive income than real estate?
So, what exactly is passive income real estate? Passive income real estate is a way to profit from real estate without actively engaging in it. The degree of action and engagement varies with the quantity of investment. Rental properties and investment portfolio earnings are examples of real estate revenue. Passive income real estate streams should ideally generate rental income, dividends, and interest while growing without your participation over time.
Commercial properties outperform rental properties in terms of returns. “How will it be a passive income investment if I have to run around and handle the estate, not to mention the double headaches?” you may wonder. You are not required to manage the property on your own. Someone else will operate it for you.
All you have to do is put the money into it. Isn’t it time to start investing now?
So, what exactly is this fractional ownership?
“But wait, aren’t commercial properties pricey and require crores to invest in?” you question. They are, after all, costly and are measured in crores. However, just because you lack crores does not exclude you from investing in commercial properties. Even if you just have lakhs, you can go ahead. That is possible with fractional ownership. Assetmonk, for example, enables a person to invest in a quality office property for as little as Rs. 10 lacs.Â
Fractional ownership works in the same manner that you and your seven friends may pool your resources to purchase a huge Domino’s pizza.
Fractional ownership is a method to invest in real estate without acquiring property and earn passive income. It allows investors to own a piece of commercial property and enjoy all of the benefits of property ownership without the initial investment or present issues. It is more appropriate for high-end commercial real estate with numerous hazards. It is also suitable for a single investor who may be unable to finance the entire property. Investors can purchase a stake in a high-end commercial property and generate a consistent rental income while building long-term wealth. It is well-liked by institutional investors. It is also emerging as a viable investment option for intelligent middle-class and individual investors.
However, as we all know, real estate is not liquid, so why invest? Yes, there is a dearth of liquidity in real estate. Fractional ownership, on the other hand, is not. How so? You can always sell and transfer your property portion to someone else.
How does fractional ownership of commercial real estate ensure your passive income?
- Affordability: For instance, a high-quality office building in Bengaluru costs Rs 300 crore to rent. Such a large investment is usually only doable for HNWIs. However, with fractional ownership, one may now become a co-owner of a property for as little as Rs 10 lakh and enjoy rental returns ranging from 6% to 10% each year. Such an investment might provide an annual rental income of Rs 60,000-Rs 1 lac. A comparable residential property investment, on the other hand, would earn only 1.5 to 3 percent. The pandemic has had a significant impact on residential real estate, with home values falling by 2% to 7% in the preceding year.
- Less Fragile Asset: The commercial real estate market in India slowed during the closure but quickly recovered in Q3. You may rely on passive income real estate rather than the turbulent financial markets. Year on year, net CRE absorption climbed by 63%. Furthermore, new completions jumped to 59 percent. Covid-19 decreased global real estate values. However, as a result of India’s extensive outsourcing sector, commercial renting rose at the same time, according to industry observers. Over 63 percent of office space rented in India is used by international businesses. It should convey a strong message to Indian and non-resident Indian investors that the time has arrived to invest in real estate. Commercial property values are booming in India and are also expected to skyrocket in the coming years. As a result, it is a great moment to invest in fractional ownership.
- Long-term Tenants: Tenants in residential properties frequently depart, causing the property owner to lose rental money until a new tenant can be found. But, in the case of commercial real estate properties, every business property has a three-year lease term. The lease, however, can be extended. It merely ensures a consistent income. Tenants in high-end properties include large multinational corporations, banks, and information technology firms with massive budgets. They always pay their rent on time. Furthermore, because of the time, effort, and money engaged in transforming the apartments into workplaces, such tenants typically extend their leases. But, for higher returns, it is best to invest in a pre-leased commercial property.
- Rental Income Earnings: Through continual rental revenue and appreciation, commercial property fractional ownership gives a high return on investment. Commercial property investment in India has expanded at a CAGR of 16% over the previous five years. Aside from the value gain, you may expect a 15% increase in rental income returns over the following three years if you buy with a respected fractional ownership company like Assetmonk. It is incorporated into the rental agreement to safeguard against future inflation, guaranteeing that your investment remains stable over time.
- Property Appreciation: Owning a fraction of a commercial property is extremely cost-effective and provides a double return. The first is the benefit of direct investment returns, while the second is the benefit of property appreciation. Because you own a piece of the real estate, the value of your stake will rise as well. It’s well-known for its institutional investors. However, it is now becoming a viable investment option for the average and individual investors.