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Investing in real estate in groups has become increasingly popular over the last fifty years and has become a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stock markets. Hence to handle such complexities investing by forming a group is Best Avenue. A property can be owned by more than 2 buyers, hence one can become the co-owner of a property, thus sharing the investment budgets equally. Making a group investment can be done by forming an SPV (Special Purpose Vehicle), company that will invest and own the property. The rentals will shared among the promoters of the company or SPV.
Real Estate Investment Groups
Real estate investment groups are sort of like small mutual funds for rental properties. If you want to own a rental property, but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you. A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company, thus joining the group. A single investor can own one or multiple units of self-contained living space, but the company operating the investment group collectively manages all the units, taking care of maintenance, advertising vacant units and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.
There are several versions of investment groups, but in the standard version, the lease is in the investor’s name and all of the units pool a portion of the rent to guard against occasional vacancies, meaning that you will receive enough to pay the mortgage even if your unit is empty. The quality of an investment group depends entirely on the company offering it. In theory, it is a safe way to get into real estate investment, but groups are vulnerable to the same fees that haunt the mutual fund industry.
Advantages of making investment in groups are:
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- Opportunity to invest in multiple properties at one time, ultimately diversifying your portfolio
- Better price due by negotiation from developer
- Any sort of risks will be distributed among the group members
- One can become the co-owner of an expensive property, which he may not have been able to buy due to budget constraints
- Due to group investment, options of large investment with higher returns are then open for individual
- Members bring resources & knowledge for both beginning and experienced real estate investors
