A Few Tips To Make An Informed Decision
How To Find A Real Estate Investing Partner
by Gregg Cohen | Feb 18, 2015 | Uncategorized
A large portion of adults who consider entering the housing industry are afraid of the unknown. Going solo in the industry can be a scary thought and sometimes prevents someone from making a solid investment decision. Learning how to find a real estate investing partner can be a lucrative skill for any level of investor.
Why Would You Need Em
You know what a real estate partner is, but why would you actually need one? Partnering on real estate deals can be a blessing if youre in the situation where you need something. Here are the reasons you would want to consider learning how to find a business partner with money.
The Mula
Obviously, one of the top reasons you want to know how to find a business partner with money is for the financial benefit. Sharing money is caring, right? You may have some funds for financing an investment property, but not all. Investment partners are ideal to get the funding you need and spread the financial risks. Less real estate risks mean less stress for the both of you. Buying investment property with partners can take off a lot of financial stress as well.
Expertise
This is especially beneficial if you are a beginner real estate investor. You may be venturing into a new geographic area or buying your first income property. Whatever the situation, you will gain maximum real estate advantages when you partner up with someone with a specific skill set. You want someone to bring something new to the table, while still complementing your strengths and weaknesses. Thats one more reason to get to know how to find a business partner with money.
Split Responsibility
Related:How to Start a Real Estate Business Through a Partnership
Building Relationships
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What Is An Om In Commercial Real Estate
When researching commercial real estate investing, you may have come across the term OM. What is an OM, and how do they work? Is structuring an OM something you need to be well-versed in to earn consistent returns in commercial real estate investing? Or is just a cursory understanding of OMs sufficient? In this article, well cover what an OM is and whether or not you need to learn the ins and outs of them to get into commercial real estate investing.
What Is A Real Estate Investor
A real estate investor is someone who purchases real estate for profit purposes. A real estate agent or REALTOR® often partners with an investor to secure real estate investments or real estate deals.
The most obvious way to become a real estate investor is to buy rental property. But you can become a real estate investor in other ways, which include investing in real estate stock or a real estate investment trust , participating in a real estate crowdfunding opportunity, renting out part of your home and building a spec home.
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Investments In Private Real Estate Fund Offerings
For many private investors seeking to invest in real estate, the best option is to invest in assets being acquired and managed by a third-party, professional investment manager . This can be in the form of a fund, for a single, specific investment, or a hybrid structure that combines existing assets with future acquisitions. Such investments have many advantages:
The benefits above are valuable however, there are also issues to consider when making investments in private real estate offerings. And while most managers will provide a great deal of information to investors evaluating their opportunity , reviewing that information and using it to come to a clear basis for a decision to invest, or not, remains in the hands of the investor.
Best For Institutional Commercial Real Estate: Equitymultiple
- Fees: 1% on equity investments other fees vary by offering
- Minimum investment: $10,000
- Average annual returns: 16.8% historically
- Total investor distributions: $126.7 million
- Investment options: Institutional commercial real estate equity, preferred equity, and senior debt opportunity zones and 1031 exchange investments
- Accredited investors only: Yes
EquityMultiple focuses almost entirely on institutional commercial real estate, and it also offers equity, preferred equity, and senior debt investments. The company recently added tax-advantaged real estate investments and fund products to its lineup. Distribution schedules vary by deal but are usually monthly or quarterly.
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Variety of target hold periods
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Easy-to-use platform
- Fees: 0.15% Advisory fee 0.85% asset management fee
- Minimum investment: $10 to $100,000, depending on account level
- Average annual returns: 7.31% to 16.11%, from 2017 to 2021
- Total investor distributions: $124 million+
- Investment options: Varies depending on the selected account level
- Accredited investors only: No
Since its launch in 2012, Fundrise has invested in more than $5 billion worth of real estate across the U.S. Today, it manages over $1.5 billion of equity on behalf of more than 170,000 individual investors.
Fundrise offers five account levels: Starter, Basic, Core, Advanced, and Premium. Thereâs a minimum investment amount at each level and varying investment strategies and potential returns.
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Request share redemption at any time
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Global Partner For Real Estate Solutions
M& G is one of the worlds top 30 property investors*. As a global real estate solutions provider, we currently manage £35.4 billion of assets in real estate equity and more than £5 billion of real estate debt on behalf of our clients.
Promoting environmental excellence health, wellbeing, and occupier experience and a positive contribution to society are the core pillars that underpin our responsible approach to investing.
We have a history of innovating. Using our strength in origination of unusual or complex assets to find value in less competed areas of private markets such as real estate debt.
We also offer long income solutions for clients seeking stable, inflation-linked cashflows capable of matching long-term liabilities.
* IPE Top 100 Real Estate Investors 2020. AUM as at 30 September 2021 .
Why Is Real Estate Considered To Be An Inflation Hedge
Home prices tend to rise along with inflation. This is because homebuilders’ costs rise with inflation, which must be passed on to buyers of new homes. Existing homes, too, rise with inflation though. If you hold a fixed-rate mortgage, as inflation rises, your fixed monthly payments become effectively more affordable. Moreover, if you are a landlord, you can increase the rent to keep up with inflation.
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Real Estate Partnership Entities
A real estate partnership can be formed through a variety of pass-through entities. Each of these real estate partnership formations provides dual benefits to investors. The 3 most common entity partnerships are:
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LLC or Limited Liability Company
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LLP or Limited Liability Partnership
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S-Corporation
Taxation is eliminated on a corporate and personal level since income or losses are passed through to each investor for reporting on a personal tax return. These entities also provide legal protection from claims against other business or personal assets belonging to each investor that are not part of the partnership.
Why You Need Partners In Real Estate
As I said earlier, there are several benefits that you can get from working with partners in real estate investing. The simplest benefit that I would consider to finding real estate investors near me is that sharing my investment means sharing the risk. Investing in real estate comes with its own share of pitfalls, and partnering with another investor helps mitigate the risk.
While it does also mean that you will be sharing the profit, the fear of failure is the number one obstacle that stands in the way of beginner investors. So, knowing that you wont lose as much money if you fail will give you the chance to start your journey in real estate investing.
But there are many other benefits to finding other investors for real estate, and they include the following:
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Adding Value Throughout The Process
On behalf of investors and institutional partners, we buy and operate multifamily real estate with the goals of cash flow, appreciation, and preservation of investor principal.
Property Sourcing
We tend to focus on secondary and tertiary cities that have the highest population and employment growth metrics. We work with many brokers, lenders, local professionals, and other contacts to source on-market and off-market properties. We also pursue direct marketing activities to reach out to owners directly, generating outstanding results from these initiatives which continue to pay dividends over time.
Deal Underwriting & Screening
We underwrite and analyze hundreds of multifamily real estate deals every year to ensure we only buy the best properties for our intended goals. We assess demographic trends, deal financial performance, rent boost potential, renovation requirements, and many other variables to ensure only the most attractive deals wind up at the end of our screening funnel.
Asset Management
Once we purchase a property we reassess everything about how the property operates, including staffing, strategy, IT systems, marketing, and other operational expenses. We carefully manage all renovations to ensure the right level of renovations are implemented, with carefully controlled costs, to maximize the return on our investment. We patiently manage our customer mix in order to optimize financial outcomes for our properties.
Property Exit & Liquidity Event
What Else Should I Know
Real estate investing is its own animal, regardless of whether youre doing it through a crowdfunding platform or in a more traditional manner. Regardless of the venue, you have to be prepared to put cash upfront and be comfortable with the fact that this is not a liquid investment.
Youll be making a commitment and you wont immediately be able to pull out your investment monies, so be prepared to stay with a property for at least 3 years. With real estate as with many things, longevity is its own reward.
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What & Who To Avoid When Partnering On Real Estate Investments
What dont you want in a real estate partnership? Some of the worst nightmare real estate partnership scenarios involve:
- Difficult partners that make it hard to make money
- Overly involved partners that drain time and energy
- Partners that may try to kick you out of the deal or company
- Partners that ruin your relationships with other people in the industry
- Those that may fail to perform, and even steal from your operation
While there may certainly be exceptions to bringing in a more experienced partner to contribute, investors can normally avoid these situations by retaining firm control and legal boundaries.
But Watch Out For Fatal Flaws
While the holistic view tends to be the best place to make decisions, its important to keep an eye out for fatal flaws in a potential investment. These are issues which in and of themselves change the entire outlook for an investment.
A perfect example in real estate development is a project which has excellent economics, experienced sponsorship, great deal terms, and excellent location and tenancy, but also happens to be located on a contaminated property.
Its not appropriate to score the environmental issue in one section of a review and say that the positives outweigh the negativesthis is an issue that needs to be thoroughly understood and in and of itself can be able to remove an opportunity from the consideration set.
This is just an example, but the point broadly is that a scorecard can help maintain perspective, but shouldnt outweigh further judgment if there are issues that compromise the investment in and of themselves.
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Cons Of Real Estate Companies Vs Regular Real Estate Investing
However, there are also a few disadvantages. These include:
- Slow returns: Property may be a solid way to make money, but it isnt the most rapid one. Often renovations must be done before the property itself sees a profit and in turn, you see one as well. If youre looking to realize a profit right away, consider an investment property thats already tenant-occupied or a REIT both will provide quick cash flow.
- Accessibility: While new investors can find a home with real estate companies, they wont be able to do so with all such companies. Many deals are inaccessible unless you have $1 million in assets or at least $200,000 in annual income and these can be the choice opportunities. This isnt a deal-breaker but something to know as you start out.
- Risky asset class: While risk is mitigated by the lower amount of investment here, the fact that real estate company deals are backed by just one asset does amp up the risk a bit. If rents plunge, for example, you will feel the sting.
- Lack of liquidity: If you need the money now, you cant simply sell a building. In fact, if youre investing through a real estate company, expect to commit to at least 3 years. That means you wont be accessing tons of cash any time soon.
When Should Property Investors Consider Getting A Real Estate Investing Partner
A real estate partnership refers to an investment strategy where two or more investors purchase a single investment property. Partnerships can be active partnerships where all parties take responsibility for equal day-to-day property management or passive income partnerships, which raise capital from not-as-involved investors.
Up next are the pros and cons of entering into a real estate investing partnership.
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What Our Partners Say
IMMO is building the real estate asset manager of the future data driven and tech-enabled, providing a unique platform for institutional asset owners to find attractive and uncorrelated yields in an asset class they consistently want better access to.
Gareth JonesFinTech Collective
IMMO is uniquely placed to revolutionise residential real estate by connecting consumer supply with institutional demand. They are solving major pain points for sellers and tenants, and poised to build a mega brand.
Vasile FocaTalis Capital
IMMO has a first mover advantage, with no lack of ambition. Im looking forward to working alongside them as they deliver on exciting investor partnerships and create a new model for residential investment.
Professor Andrew BaumLeading Real Estate Strategist
At this stage of my career, I am driven to working with great people, in companies doing really exciting things and solving interesting industry challenges. IMMO ticks all these boxes. The potential growth opportunity for single-family residential in Europe is incredible and IMMO is well equipped to take a leading position.
Todd RuppertCEO of Ruppert International
We have been truly impressed by IMMOs ability to source high-quality high-yield assets in high-demand markets. The furnished rental product they are providing is first-in-class and not matched by any other offering.
Managing DirectorMunich Family Office
Real Estate Investing Platforms
Real estate investing platforms are online market places where investors can find both commercial and residential properties and either buy the property or buy shares in it. The platform where you find the properties will usually take care of the physical management of that property, still making it less of a hassle than finding and managing the property on your own. What distinguishes these platforms from the ones we talk about above however is that they are usually only exclusive to accredited investors – those with at least $250,000 yearly salary and/or $1,000,000 net worth.
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Alternative Real Estate Income Sources
Real estate investment trusts s, mortgage-backed securities , mortgage investment corporations , and real estate investment groups are investment alternatives within the real estate sector. They are generally considered vehicles for deriving real estate income but they have varying processes for doing so and varying processes for entry.
Rental Homes For Investment Partners
Homes for sale in North Florida are provided by JWB annually. More than 300 clients currently build monthly income through the high ROI rental program launched for investment clients. The pathway towards wealth through new construction houses and turnkey homes is provided as a download right on this page.
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