Platform Terms · Basic level · 3 min read ·
What is fractional real estate?
Fractional ownership, or fractional real estate, is when many people own the same property or real estate asset, each holding a fraction. Each owner is entitled to their percentage of the operation's results and of the asset's value at the exit, and also carries their share of the risk.
In 30 seconds
- Several people share one asset, each with a fraction.
- Your fraction sets your share of results, of the value at the exit and of the risk.
- Each case's terms are in the agreement or bylaws you sign.
Why should you care?
A whole real estate asset is usually out of reach for one person. Splitting it into fractions opens the door to participating with much smaller amounts.
- You can take part in real assets without buying a whole property.
- You can spread your resources across several projects instead of concentrating them in one.
- You leave the operation to a specialized team.
Think of it as a country house shared by friends
Ten friends buy a country house together that none of them could buy alone. Each puts in a part, and whatever the rent brings in, or whatever it's worth the day they sell it, is split by what each one put in. If things go badly, that is shared too.
How does fractional ownership work?
- 1
There is an asset
A property or a lodging business held by a company or a project.
- 2
It is split into fractions
The asset's value is divided into participations that several people can acquire.
- 3
Each person has a percentage
Your percentage is your contribution divided by the asset's total value.
- 4
Results are shared
What the operation distributes and the value at the exit are shared by that percentage, as the agreement sets out.
The formula
Your percentage = Your contribution ÷ Total asset value × 100
- Your contribution
- = what you put in for your fraction
- Total asset value
- = the value of the whole property or project
An example with numbers
Illustrative figures, unrelated to any project: a commercial unit worth 800 million pesos is split among many people.
| Total asset value | 800 million pesos |
|---|---|
| Your contribution | 10 million pesos |
| Your percentage | 1.25% |
With 1.25% you are entitled to 1.25% of what is distributed and of the value at the exit, whether it ends up higher or lower than today.
Where do you see it at Circular Urban?
On Circular Urban you participate, from about 190,000 pesos, privately in the company or project that runs the asset, such as short-stay apartments or coliving. You don't get the deed to an apartment: your participation is a fraction of the project, with rights and terms set out in the participation agreement. Results are subject to the project's actual performance.
- The participation simulator on each project sheet.
- The participation agreement you sign when you participate.
- Your portfolio, in each participation's detail.
What changes in your finances once you get it
You start small
You take part in real assets with an amount that fits your budget.
You spread instead of concentrating
You can hold fractions in several projects instead of everything in one property.
You plan for the long term
A fraction can't be sold as quickly as you withdraw savings: use resources you won't need soon.
Common mistakes
- Myth
With a fraction I own a specific apartment.
- In reality
You own a percentage of the project or company, not a particular unit. Your rights are in the agreement.
- Myth
Because it's real estate, it can't lose value.
- In reality
A real asset can lose value and the operation can have bad months. Your fraction rises or falls with the project.
- Myth
I can sell my fraction whenever I want, right away.
- In reality
Transferring a participation depends on finding someone interested and on the agreement's terms. It can take time.
Test yourself
An asset is worth 500 million pesos and your contribution is 5 million. What percentage of the asset is yours?
Keep learning
Helps to know first
This content is educational. Every participation carries risks inherent to the project, including the possibility of partial or total loss, and results are subject to each project's actual performance.
