Real estate investment is one of the most accessible and lucrative forms of investing, but that doesn’t mean every individual has the means to do so. The good news is if you don’t have the funds to invest in real estate on your own, it’s not completely unobtainable.
Real estate investment groups (REIGs) are groups of investors that pool their funds to invest in real estate. This allows people who can’t afford to invest on their own to profit from real estate and make passive income. However, for many solo investors, the question still remains—is group investing a good idea for buying rental properties?
The Pros of REIGs
The biggest advantage of REIGs is that they make real estate investing more accessible to those who aren’t always able to afford it. REIGs also make property management much easier by doling out the responsibilities to the group or the lead organizer instead of letting them fall on one person’s shoulders. REIGs are also a great option for investors looking to easily diversify their portfolio.
Plus, REIGs aren’t just great for experienced investors; they’re great for first-time investors as well. This is because they allow people to safely learn the ropes of property investment. When you’re not the only one shouldering the financial and management responsibilities, there’s much less pressure, and you can focus on gaining knowledge and experience.
The Cons of REIGs
For many people, the biggest con of REIGs is that you’re working with other people, so you must be able to trust and rely on them. Typically, lead organizers run REIGs, and when you join an REIG, they’re the ones deciding what to invest in. So not only are you relying on others, you’re relying on the lead organizers to make the right investments and financial decisions. Unlike real estate investment trusts (REITs), which are taxable corporations, REIGs offer no real guarantee you’re working with knowledgeable professionals.
Furthermore, some REIGs charge a membership fee to join, which reduces the returns that are already split among the group. And depending on the agreement terms, you may have trouble pulling your money out should you want to jump ship.
Is an REIG Right for You?
Now that we know the pros and cons of REIGs, the question remains: is group investing a good idea for buying rental properties? The answer entirely depends on whether you can find a good, trustworthy group to work with. You can tell an REIG is trustworthy by looking for a few key characteristics:
- They are a formal legal structure with an operating agreement that aims to protect your rights
- They have a history of quality investments you can look to
- They offer learning opportunities and networking events
- Their risk tolerance, investment strategies, and investment goals align with yours
If you’re part of an REIG and need help managing your property, or if you have multiple investment properties that require management services, let Excalibur Homes help. We provide leasing property management services that make owning real estate easy, so you can sit back and watch the returns come in.