Fractional Ownership Giving Investors New Options After Being Priced Out Of Current Housing Market

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A long stretch of historically low interest rates and record-high inflation propelled the housing market into a territory where many Americans found themselves priced out of the market. While the housing market appears to be cooling down some, mortgage rates hit a 12-year high last week, further adding to the total cost of homeownership.

The idea of owning a home being a part of living the American dream is one that’s been fading for some time. Younger generations have already been putting off purchasing a home until later in life. The current costs associated with buying a house are now making it difficult for would-be first-time homebuyers to justify making the leap from renter to homeowner.

When looking at the investment activity of institutional investors, including funds like Blackrock, over the past couple of years, it almost seems like Wall Street predicted the current situation playing out exactly the way it is.

Blackstone Real Estate Income Trust Inc. (“BREIT”), a non-listed real estate investment trust owned by Blackstone Inc. (NYSE: BX) has made more than $22 billion in multifamily investments so far in 2022 with its acquisition of American Campus Communities, Inc.(NYSE: ACC), Preferred Apartment Communities Inc. (NYSE: APTS) and Resource REIT (non-listed).

In 2021, Invitation Homes Inc. (NYSE: INVH) spent nearly $2 billion buying 4,802 homes across the country and several other private investors have been buying entire neighborhoods. Build-to-rent communities are being built in record numbers, with 6,740 new built-to-rent homes completed in 2021 and twice as many under construction as of the first quarter of 2022.

Opportunities For Individual Investors

Buying an apartment complex, acquiring an entire neighborhood, or developing a build-to-rent community may not be an option for most individuals. However, an increasing number of opportunities are reaching retail investors through platforms that are funding new developments and acquisitions through individual investors.

The Jeff Bezos backed real estate investment platform, Arrived Homes, allows non-accredited investors to become fractional owners in rental properties with as little as $100. Since launching last year, the company has funded 88 rental properties with approximately $35 million in value.

Platforms like CrowdStreet and RealtyMogul offer accredited investors opportunities to fund large-scale multifamily projects, build-to-rent communities and even mobile home parks.

While the projects funded through these platforms may pale in comparison to those funded by hedge funds and publicly traded REITs, they’re rapidly gaining market share and providing options to individuals that may otherwise get boxed out of the evolving real estate market.

See also: Real Estate Investment Offerings on Benzinga Alternative Investments

Photo by Dillon Kydd on Unsplash

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