You may be a little intimidated as a small time real estate investor when you step into the arena with the big sharks. You know those guys who seem to have an endless amount of funds and are into buying those big buildings and vast amounts of properties.
Perhaps you see them as being what they consider generous when they offer the little guy a chance to buy a small part of the balance of a property. They have put out the funds for the first 50% or more and now the public can chip in on the rest. These guys are not being generous, they are business savvy investors. This can be a great benefit to you.
This type of real estate business partnership can creates a win-win situation. For the big investors, it ties up less of their capital in one property and allows them to diversify. Instead they allow smaller investors to provide funds to raise capital for the property acquisition and this may lower the required mortgage amounts.
This means that you now have an investment in a large piece of property that otherwise would be out of your league of investments. On the average, you will be expected to invest at about $50,000 of your money, but this may vary. Your returns on this investment are going to come from the profits that a property is generating from things like building rent and parking revenue. The big upside is that you are a hassle free owner. You have a real piece of the property through a Co Tenancy relationship. For example, I own few medical properties that generates around 10% per year. I receive monthly cash distributions that are deposited directly to my bank account. The great advantage is that I don’t need to do anything. I don’t need to collect rent, get calls in the middle of the night or have property owner headaches. My investment is managed by a company and all I have to do is abide by the terms of my agreement.
This is a great type of long term investment that can help to minimize some of the risks that can come with real estate. The big guys have done their due diligence when it comes to checking it for being a sound investment. Yes, there is always risk involved but if you think about it, they have not become big guys by making foolish investments.
You can take some extra precautions of your own. While I personally like this type of investment I like to increase my odds of it being a sound investment. I do this by ensuring that the commercial property that I am investing in is not going to be a target of the economy. By this I mean, I opt for buildings that house professionals for the medical industry or the legal professions. These are two industries that no matter what is happening in the economy they are “must have” required services.
There is still a difference between your rewards for this type of investment compared to those of the big investors. If the premises become vacant, the big investors are in a better position to ride out this storm. You however are a small income and growth investor that should want to re-invest into other available investment options. That is why you want to take a close look at how solid the current return on investment is going to be.
This type of investment is long term. Returns vary but, I hope it grows each year by about 10% which includes the increase of the value of the property itself. You can look at it as being similar to buying property and renting it. This type of investment gives you current rental income and long term equity advantages. The big difference is you have the responsibility of the upkeep of your rental property. With a partnership with large investors that is not your responsibility. You basically invest your money, then let it go to work for you.
Again, what you are doing here is diversifying your investments. You can either choose to do this as one type of investment, or if you feel really comfortable with real estate investing then you can do a couple of different deals along these same lines. You may want to choose different partners for each transaction, or stay with one that you feel comfortable with. If you are experiencing good success with the one big investor then it could make sense to stay with this one. However, if this is a new experience for you and you are going to try more than one of these types of investments, you may want to experiment with a couple of different partners to gauge the experience.