Read more about Real Estate
Fractional real estate investment has shaken things up. Today, some platforms allow you to get in on the action in landed assets starting with just a few thousand naira. In this article, we’ll talk about how you can launch a fractional real estate investment startup that helps more people become ‘landlords’—and make significant revenues from it. But first, let’s provide a summary of what this type of real estate deal is.
What is Fractional Real Estate Investment?
Fractional real estate investment involves holding equity stakes in property. So, instead of buying a whole house or office building, you can acquire a portion of it, e.g. 5%, 10%, or 20% of it, and receive a part of the rental income from that property that matches the percentage of it that you hold. You may also get the commensurate percentage of proceeds from the property’s sale if or when it is sold.Who Offers Fractional Real Estate Investment Opportunities?
The most popular providers of fractional real estate investment opportunities are PropTechs. These companies leverage digital technology (and the blockchain in some cases) to offer micro and mini units of real estate to interested investors. Such persons access these opportunities by signing up with the PropTechs on their platforms, whether it’s a website or a dedicated app. Examples of companies in this space are Wealth.NG, Keble Africa, and Jointly.Steps to Building Your Fractional Real Estate Investment Startup
If you’d like to establish a company in the mould of the examples we just cited above, here are 10 steps you can take to make that happen.Investigate the Market
There’s a great deal of appetite for investment opportunities of the kind we’re discussing here. But don’t take our word for it. Research the market to find out where the demand is, what the demographics of potential investors are like, and what the profile of the ideal user of your platform would be. What locations and income groups will you be targeting? Is the competition stiff, moderate, or weak? What are the prospects for growth in the market?Strive for Regulatory Compliance
Whatever form your startup will take, it must comply with existing laws concerning real estate in general and its kind of business in particular. Keep in line with rules dictated by the Land Use Act, regulations concerning Certificate of Occupancy and other land titles, and guidelines laid out by local authorities in the places your properties are situated. Be sure to register all transactions with the land registry and any other relevant government agency.Develop Your Business Model
You should clearly define things like your revenue streams, fee structures, and investor returns. Will your platform charge a maintenance fee, or will it make its money from keeping a small percentage of whatever stake users pay for? And, what property types, locations, or investment durations will you focus on? Your aim has to be to develop a transparent and user-friendly platform that fosters trust among potential investors.Invest in the Right Technology
The quality of technology you deploy at your startup will greatly determine the traction you get for your product, other factors held constant. The key things you must put in place are a website for your company and a mobile app for investors to browse properties, make investments, and monitor their portfolios. You’re handling people’s money and personal data, so make sure to implement secure payment gateways and data encryption to protect sensitive information.Sign up for the Connect Nigeria daily newsletter
Partner and Collaborate
Your primary partners in this business will be real estate developers, property managers, and other allied players in the industry. Their knowledge and connections will prove invaluable, as they will enable you to source high-quality properties and avoid assets with poor prospects.Nail Your Marketing and Branding
Brand optics is something you have to get right. Even if your product is exceptional, you’ll still need substantial publicity to get the word out about it. You can take advantage of digital marketing, social media, and content marketing to raise awareness about your platform. Highlight the benefits of fractional real estate investment, such as diversification and lower entry barriers. If your messaging is appealing and your targeting is accurate, you will achieve a steady stream of signups and usage.Educate Users and the Wider Public
Not everyone who comes to your website or downloads your app will know how fractional real estate investment works. You will need to provide them with resources that will educate them about this. These may include webinars, articles, and tutorials that explain the benefits, risks, and mechanics of investing in fractional real estate.Sort Out Security Measures and Compliance
Implement stringent compliance and security measures to protect investor funds and data. You may consider utilizing blockchain technology for transparent and secure transactions, as a few existing fractional investment platforms already have. It’s something that has the potential to transform real estate investing for the better. On the whole, aim to increase investors’ confidence in the integrity of your platform.Maintain Great Customer Support
Your customer support desk has to be empathetic, efficient, and capable of addressing investor queries and concerns promptly. A reliable customer support team can enhance trust and satisfaction among your user base.Scale and Expand
After gaining significant traction in its first region of operation (say, Nigeria), it will be time to expand into new places (other countries or continents). To successfully pull that off, you’ll have to stay informed about market trends and continuously innovate to meet the evolving needs of your investors. Over time, you’ll establish a strong foothold in the places you’re active in, and become a go-to for the sort of product you provide.Register to attend the CN Business Mixer
Final Words
When setting up a fractional real estate investment platform, you must meld a deep knowledge of the market, an understanding of relevant regulations, and the right technologies, partnerships, and support services. This way, you’ll build a platform that attracts willing and eager investors.Got a suggestion? Contact us: editor@connectnigeria.com