“If you don't find a way to make money while you sleep, you will work until you die.” - Warren Buffet
I have always been a firm believer of “You can only get wealthy when you are a part shareholder of a business where you get cheques even when you are asleep“
We all know about stocks, mutual funds, gold, crypto, and a bunch of other assets that we own in full.
If you own a stock, it’s only you who own the unity.
But that’s fine till here.
Now in case if you want to invest in real estate then what would you do?
One option might be to buy land or along with a house on it.
If you wanted to buy a big mansion, a resort, or a commercial property like a mall. This comes with a huge upfront cost. Neither do small individual investors have a capacity to put together millions of dollars to buy a commercial property.
Let me introduce you to the concept of fractional ownership.
As the name suggests the concept of fractional ownership is that a bunch of individual investors own small peices of an asset, making it a complete pie.
Real Estate Investment Trust (REIT) is another form of fractional ownership in realestate projects.
Here’s now a REIT works:
Say if theres a builder wants to build a commercial property, now he/she has to put together millions of dollars to build a commercial property on that land.
Now what owner can do is that he can get more investors to pony up small fractions of the cost which would be required to build the asset/property.
These small fractional payments would go in a trust which is formed and then each of these investor becomes a part of the trust and the property as a whole would be owned by the trust.
Now the building gets built.
When the commercial place starts functioning the investors get their share of profits distributed to them in proportionate to their initial investment.
REIT is just an example of a fractional ownership asset. There are many more fractionally ownable assets like InvITs.
This is interesting isnt it?
I hope you have learnt something new out of this writeup. To read more of such content around Investing, Startups and Careers do subscribe to UnknownVC.