Here are a few thoughts .....
First, the focus is on growth with no personal liability.
-- you do not sign a promissory note or mortgage
-- you have significant protection from litigation and lawsuits
Second, you can invest in larger, higher-quality projects that can be done in a way that meets your individualized investment goals.
Third, group investing spreads risk of "loss" over the entire group.
-- vacancies are spread out over 20 units rather than one or two units
-- "risk" operates much like the insurance industry
Next, you have opportunity to structure your financing to meet individual investor goals
-- No mortgage means increases in cash flow, minimizing risk
-- Lower loan-to-value ratios (50-60 percent mortgage value). This utilizes leverage benefits while maintaining the investment safety net.
-- Set payments in single or multiple pay options for investors. This can range from a few hundred dollars per month to a single payment of five or six figures.
Moveover, you have the ability to maintain tax benefits of real estate ownership for investors while eliminating record-keeping and tax preparation.
Group investing eliminates the burden of management for investors. Done right, there is no tenant contact nor maintenance issues. Further, good investment properties have already been located, prices negotiated, and financials (income, expense, etc.) and returns already analyzed.
Frequently, group investment opportunities find people investing with local people they already know and trust.
Group investments provide great asset protection.
-- Protects investors from suit against investment
-- Protects investment from suit against investor
Who SHOULDN'T be involved in a group real estate investment?
-- Investors who want total control of the investment
-- Investors who want to select the investment (project/property) themselves
-- Investors who don't know how to set up the investment
-- for example, there are laws and Internal Revenue Service (IRS) regulations that must be met both in setting up and runing and/or managing a group project
-- also, to encourage others to invest, there also are numerous and specific laws that must be followed.
These are a few of the many pros, and a handful of the cons of group investment. Bottom line, make sure your real estate adviser understands how such a project can be set up, and understands capitalization rates, internal rate of return, vacancy rates, carrying costs, and the many ins and outs of investing in income producing properties.
With everything in place, group investing can be a very lucrative approach for creating channels of passive income for all parties involved.
