In the realm of traditional real estate investing, you have two alternatives: making a substantial upfront investment into a Real Estate Investment Trusts (REITs) and Fractional Ownership, which lets you decide how much to invest. While they both share a common objective of investing in real estate, they have distinct features that set them apart.
In this blog, we will dive into these differences and help you make an informed decision on your real estate investments in the UAE.
Main differences between REITs and Fractional Ownership
Ownership
REITs:
Real Estate Investment Trusts are publicly traded companies that own, manage and finance income-generating real estate. The categories of real estate in a REIT portfolio can be very broad as they can include: apartments, hotels, office buildings, healthcare facilities and data centres. When you invest in a REIT, you are buying the shares of the company and earning distributed dividends on the rental income of the assets in the portfolio.
Fractional ownership:
Fractional ownership involves direct ownership of a fraction of a real estate asset such as an apartment. Investors collectively share ownership by purchasing a percentage of a single property. Each owner has direct ownership in the property and the value of the share changes as the asset appreciates or depreciates. The investors also receive dividends on the rental income that is generated.
Control and decision-making
REITs:
Investing in a REIT provides wide exposure to real estate, however, there is limited control and decision-making power over the properties in the portfolio. Investors rely on the professional management of the portfolio to make strategic decisions.
Fractional ownership:
Fractional ownership grants a more direct say in the management of the property through voter rights. Investors can dispute and vote on rental agreements and property enhancement.
Investment size and entry requirements
REITs:
The size and diversity of REITs provide investors with broad exposure to real estate at a low minimum investment.
Fractional ownership:
Investors can invest in single properties with a lower amount of capital compared to purchasing the entire property.
Risk and return
REITs:
The risk and return profile of a REIT portfolio can be influenced by market conditions and volatility that affect the real estate assets listed in the REIT. However, the broad categories of real estate and different sectors can help mitigate market risk.
Fractional ownership:
Investing in a single property can offer more control over the asset and is less correlated with market volatility. However, the return on investment depends entirely on the performance of the asset and the ability of tenants to pay rent.
What will you choose when investing in real estate?
The choice between REITs and Fractional Ownership in the UAE should align with your investment goals, risk appetite, and financial capacity. REITs are ideal for those seeking diversification and a hands-off approach to real estate investing.
On the other hand, fractional ownership suits those who want to have a more targeted real estate portfolio such as residential. Fractional ownership has the unique advantage of accessing high-value properties in different locations with minimum capital requirements.
How can PRYPCO Blocks help you diversify your real estate portfolio?
PRYPCO Blocks offers unique investments in real estate in various luxury locations around the UAE. With PRYPCO Blocks, you can explore our wide range of properties and begin to fractionally invest in the UAE Real Estate market with just AED 2000.
