FAQ's

Share Prices | Lose | Ownership | Dividend | Costs | Benefits | Selling |

How Are Share Prices Are Determined

Share Prices are the determination of the overall value of your investment. As a reminder, when you invest in a property on SoCal Fractional Investments, you buy shares in an LLC that owns the property. The Share Price values include the value of all the assets and liabilities held by the LLC.

Our Investments team uses an AI Driven Modeler and a third-party property appraisers to approximate the property's current value, as well as a manual review to ensure there are no extreme outliers in the data.

That new property value is added to the balance sheet for the LLC. The LLC's biggest asset is the property, but other valuable assets like the cash reserve exist. We also factor in the liabilities, such as the loan balance and accrued property taxes. The result estimates the total equity investors own in the LLC.

We also make some adjustments for the upfront fees involved in the investment. This includes the closing, offering, and holding costs. Keep in mind that SoCal Fractional Investments are designed for an investment period of at least five years but better to hold to the full term of 8-10years. Accordingly, we structure these costs so that the Share Price reflects the prorated fees through the ten-year period.

Reducing cash reserves from starting operations and servicing loans can initially negatively impact the share valuation. The Share Price value may go up or down, and the actual investment returns will largely depend on the property’s eventual sale price at the end of the investment period.

Share Price values are updated annually after initial property funding at the next quarterly update. After that point, share prices are updated and then as always share prices are what the open market of other investors are willing to pay.

Will I lose My Investment Shares if SoCal Fractional Investments goes under

SoCal Fractional Investments(CCI) has protections in place for investors, even in the event that Cali VR Management LLC goes out of business. We have structured our investments so they can continue to operate even if Cali VR Management LLC is no longer in operation. Each property is housed in its own standalone series LLC, which has its own bank account and separate ownership structure.

Because the investors own the property directly through the series LLC, your investment will continue to hold value as long as the underlying property retains its value. CCI retains no material ownership stake, and there is a clear separation between the company and the investment properties. In the unlikely event that CCI ceases to operate, we would assign a new custodian to make all major decisions (like what property manager to use, when to liquidate the property, etc.).

Ownership

Where did the concept of fractional ownership originate?

The concept isn't new, but the term "fractional ownership" is. Friends, relatives, and business partners have been pooling their resources to buy a second home for centuries. In the early 1990's, fractional ownership of private jets became popular, followed by yachts, then luxury vacation homes and now Single-Family Rental Homes. According to the National Association of Realtors, in 2004, "36% of all home sales were second homes purchased for either vacation use or investment". Despite the current market slowdown, the interest and demand for fractional ownership is growing every year, as more and more consumers discover that they can have their own passive income stream from a second single family rental home, without all of the expense, hassle, financial burden and most importantly all the risk!

Can't I just find a property and purchase it with my friends?

You can, however, with SoCal Fractional Investments you don't need to convince however many others you need to buy a share in your revenue producing single-family rental home, which as most people know, can be very difficult. Furthermore, you will need to prepare a comprehensive set of CC&R's, operating by-laws, rules and regulations, as well as all of the legal and HOA documents for purchase and shared ownership. Instead, with SoCal FractionalInvestments you can just make your own decision to own how ever many shares you want to own within however many properties you want to help spread the risk. We do all of the work, and take all of the risk, identifying the property, repairing the property, professionally preparing it for long term rental, been the property manager and a team of maintenance professionals, preparing all of the legal documents correctly, and marketing the property. We use a AI Driven model combined with 10+ years of experience to do ev,erything from A to Z. All you simply do is invest.

How does fractional ownership primarily differ from the economic considerations for wholly owned real estate?

Primarily, fractional ownership allows you to afford to get into the single-home rental home market and all it's benefits at a much lower entry point, hassle free, spread the risk and it does qualifies for 1031 exchange when it is time to sell.. All costs and expenses are all divided and shared amongst the owners vs. carrying the burden by yourself. Ownership is evidenced by a LLC that both protects you from liability but gives you deeded and titled ownership as the LLC owns the property and is "Tenant In Common" grant deed to the property, backed by title insurance, exactly like the home you live in now. However, you still enjoy all the benefits of real estate ownership without the liability and/or stress. This is a true value catering to discriminating investors who are looking for a real property backed revenue generating investment but really don't want the full burden of owning property. The more investments in a wide variety of properties the less risk and, the more fractional ownership makes financial sense!

Who are fractional properties really for?

This type of investment and ownership is ideal if you want the benefits of owning a passive income generating investment that is backed by real property with the potential appreciation of Southern California real estate and typically of more value than you would afford on your own, Complete management services, investment growth, ROI on your investment, no annual cost and is located in a very exclusive communities, but you can't justify whole ownership because of your projected limited use and or cost.

Dividend

Dividends will be paid quarterly, with the first payment scheduled after purchase of the initial shares. Subsequent quarterly dividends will be paid near the end of each quarter. All dividends will be deposited into your SoCal Fractional Investments cash balance, which you can utilize for future investments or withdraw as needed.

For Individual Properties:

Properties begin paying quarterly dividends once they start generating income. Dividend payments represent the cash flow after expenses and reserves. Therefore, the timing of your first dividend will depend on how quickly SoCal Fractional Investments is able to lease out the property (if it is a single-family residence.)

The time it takes to start generating income varies depending on factors such as seasonality and property renovation requirements.

Single Family Residential Properties

Historically, the average time to lease a single family residential property has been 45 days. However, the range varies from a minimum of 7 days to over 90 days.

Costs

What are the Operating Costs associated with fractional ownership?

The LLC is responsible for all expenses of the property. The revenue from the tenant lease are used to cover the expenses. So using those appropriately is part of the day to day decision making of the managing member. The expenses include the annual LLC Fees, Property Taxes, Property Insurance, Home Owners warranty, repairs fund, property management fee and the crowd fund management fee. The expenses of the property are the responsibility of the tenant when leased those include electric, water, gas, garbage, yard, pool, HOA dues. If there are no tenants then those expenses fall on the LLC which has a general fund for repairs and 'gap" expenses. Generally CCI rents to new tenants between 1 day to 45 days ith an average gap of 14 days. So factoring that in for every 18 months on average is part of the management and growth of the Repairs and Gap fund. In rare occasions there my be a "Cash Call" to the owners to cover some major unforeseen expenses. These expenses are spread amongst the share holds proportionally to their invest. For example: the forced air heating unit goes down. The homeowners warranty generally covers most of the expense but the deductible is $2000. The repair fund is currently at $600 and therefore there is a $1400 short fall. The management team would send out letter of explanation detailing the incident, the accounting and why each of the 10 shares holders would see a "Repair withhold" of $140 on the next quarterly dividend. The LLC operating agreement spells out in more details what happens if Share holders refuse to pay their fair share of any unforeseen expenses. Click Here to see a sample of an operating agreement.

Benefits

When it comes to investment classes, real estate can offer security, reliable cash flow, and asset appreciation. And this is why, even in down markets, real estate investing is many investors' primary way of building wealth.

Cash flow/Revenue

The predictability of rental income is one of the biggest reasons to invest in real estate. As long as you have tenants, rental income is money you can usually count on. While maintenance costs and non-payment of rent can happen, these payments are typically consistent as long as you have tenants in place.

Fractional real estate investing can also be a source of dividends generated from rental income. CCI offers quarterly dividend payments paid directly to investors through their CCI Cash Balance.

Real estate is a historically high-performing asset

Real estate is known for its historically high returns. According to a study commissioned by CCI in 2021, investing in single family rental homes in Southern California over the preceding 20 years would have resulted in an 11.1% annual return on investment — outperforming the S&P 500’s annualized return of 8.43% during that same period. This means home prices double every 8-10 years hence our minimum hold period for an investment.

Real estate can be consistent

People will always need a place to live. Businesses, particularly in specific sectors, will consistently require commercial properties for rent. You’ll always want to stay in that beachfront property during your holiday. The necessity of real estate can make it a safe and secure investment.

For instance, as of 2024, 44% of the population rents their homes, providing landlords with a steady pool of tenants to occupy their investment properties.

Depending on your investment approach, you may experience less volatility than alternatives like stocks. Public REITs often fluctuate with the stock market, responding quickly to economic changes. Conversely, private real estate investments typically absorb market shifts more gradually, allowing more time for analysis and adjustments in investment strategies.

Real estate helps diversify your investments

Investment diversification is crucial for mitigating risk and maximizing returns in a portfolio. By spreading investments across various asset classes, diversification helps reduce the impact of volatility and downturns in any single investment.

Diversification also enables investors to capture opportunities for growth in different areas, balancing out potential losses with gains from other investments. Overall, it promotes stability and resilience in a portfolio, enhancing the likelihood of achieving long-term financial goals while minimizing exposure to undue risk.

Fractional ownership of real estate also has the added benefit of letting you diversify even further by spreading your property investments across several real estate markets nationwide rather than just the ones in your immediate area.

Real estate is tangible

There is something to be said about a tangible asset—something you can see and touch that provides a greater sense of ownership and security. Even if you invest fractionally in real estate located many states away, that real estate still holds inherent physical value because it consists of land and buildings.

Hassle-free real estate ownership
Invest in real estate, earn passive income, and diversify your portfolio with ease through Arrived.

You could access fractional ownership at lower-cost

Fractional ownership of Real estate is one of the few investment classes where you can get into this secure investment for as little as $1000. Completely lowering the barrier of entry.

Financing real estate is very expensive between the mortgage interest and the mortgage insurance can put a 100% owner upside and they may have to pay in monthly to cover the expenses. The rents just won't cover the huge over head. Fractional ownership eliminates these expenses as the properties are entirely debt free once the maximin number of shares are sold. This means no mortgage interest and no mortgage insurance expenses saving an annual amount on 8-10% of the homes value.

As a real estate investor, you’re eligible for several tax breaks and benefits like deductions for:

Incurred expenses to maintain the property
Your travel costs to the property
Property management fees
Insurance
Marketing expenses
Depreciation on a 27.5 year schedule allows you to take a tax deduction.

When the LLC is sold any gains will be taxed as capital gains, not income, which are taxed at a lower rate. You can defer those capital gains if you use the money from selling one property to buy another. 1031 excahnge.

Real estate can hedge against inflation

Real estate can serve as a hedge against inflation in three key ways:

Rising rent income: When inflation occurs, the prices of everyday goods and services, including rent, tend to increase. Owning shares in a single-family rental properties you will see your quarterly revenues rise as management increase the rent 5% annually) which is above current inflation rates but does hence you against inflation .
Property appreciation: Inflation typically leads to an increase in the value of assets like real estate. As the cost of goods and services rises, the value of properties tends to appreciate over time.
Locked-in expenses such as LLC fees, property taxes and so on keep the cost basis low.

You could benefit from forced appreciation

Real estate investing is special because property value can increase over time, and revenues could increase of time. So your shares become worth more over time through forced appreciation. Selling these shares on the open market allow you to gain from those factors earlier than the sale of the property at the end of the term.

Real estate can provide long-term security

Investing in real estate is a long-term commitment, but it has distinct advantages over other investment options. Rental properties can generate consistent income through rent, while real estate values typically appreciate over time, leading to potential capital gains when you sell.

You can start small

Many people feel priced out of the single family residential market right now, but that doesn’t have to keep you from investing in real estate. You can enter inot an investment for as little as $1000 on soe investments.

Whether you’re starting with fractional investments or leveraging equity to expand your portfolio, real estate offers diverse and resilient opportunities. With its ability to hedge against inflation, unlock tax advantages, and generate forced appreciation, it remains a powerful strategy for building wealth over time.

Selling

How can I sell my share in the future?

You may sell your share anytime after the first year of purchase. Sells to any other share holders or owner of the property, or you may sell your shares to other shares holders of other properties within the CCI family or you may sell shares to any third party. Typically, resale shares are listed with SoCal Fractional Investments, or with a local real estate broker, who will promote the sale of your share the same way they promote any other property for sale. The market for fractional ownership shares is massive and growing, as more and more buyers realize the benefits and savings. You set the price and are in control of the sale, just like any other property sale.