The term may seem relatively new, but Arthur Naoumidis, CEO of DomaCom, says that the split investment strategy has been around for much longer than people think.
"Syndication has existed for about 100 years at the wealthy end of town, where people go to their accountants and have private unions formed. What we have done is democratize the syndication process, but it is happening all over the world, ”says Naoumidis.
Thanks to the DomaCom platform, you can invest in a property for as little as $ 1,000 after opening an account for a minimum of $ 2,500.
Naoumidis says that "syndication breaks down the barrier to entry, but it also allows you to spread your risks".
So how does split investing work? As the name suggests, you are buying a "fraction" of a property in conjunction with thousands of other investors.
When investing a small amount of money, investors should not lose sight of the fact that property is a long-term strategy.
"This is the thing about diversification; you can take your investment portfolio and build a property investment portfolio – put $ 5,000 into that [property] 6,000 $ in this one, and over five years, you have four or five properties spread over different sites, "explains Naoumidis.
Once the investors have obtained a return on their shares, they have the possibility of reinvesting it via the platform and gradually accumulating a small fortune.
"If you save your deposit in cash, it is liquid but does not pay much in this low interest environment. But if you save it in a property, it’s is a tracking property, so you're in the market you're trying to buy in, which is a great way to build your deposit, "says Naoumidis.
"Each year, you save $ 1,000 or $ 2,000 more, you simply go to the secondary platform and you offer to buy stocks or shares from other owners, then over time, you are developing your property. "
Sale of units to other investors
Like the fundamentals that govern supply and demand in a larger market, the same rules apply to the secondary market for fractional real estate investment.
"If your goal is to try to expedite the building of a deposit for your own investment property or for another strategy that you have along the way, if you cannot selling in this secondary market is where the risk potentially lies, "said Ben Kingsley, director of Empower Wealth.
"Syndication has occurred for about 100 years at the wealthy end of the city … we have democratized the process"
Furthermore, if it turns out that there are a large number of investors who wish to sell their shares, Kingsley says that "potentially the cost of your share in this particular fractional investment could be less than you might have expected. "
While an investor can benefit at any time from the freedom to be able to offer his shares for sale, Naoumidis explains how another liquidity event can take place.
"When we participate in the crowdfunding of a union, it has a lifespan, which is normally five years, and at the end of the five years, all investors vote for a renewal of five years or not, and that must be 100% renewed, ”says Naoumidis.
In case you don't want to renew, and the other investors do, Naoumidis says that the investors will have to buy you back using the secondary market.
"We would appreciate the property just before the vote," he adds
Find out more:
Inexpensive Ways to Take Advantage of the Property
The A-REIT path to real estate investment
The joint venture approach
