WHAT IS A REAL ESTATE INVESTING COMPANY?

A real estate investment company is an organization that acquires investment properties on behalf of their investors. They can either build or buy properties to add to their inventory or help investors develop an investment strategy.

Commercial real estate is the most popular investment for real estate investing companies. This includes commercial office buildings, apartment complexes, hotels and industrial properties. Some real estate investing companies focus on a particular niche market, for example shopping mall properties or commercial properties in a certain city or region.

Investing companies receive funding from various sources: individual investors, private equity funds, pension funds, etc. Often times, real estate investment companies will put up their own money as well to participate in the capital risk alongside investors.

Real estate investing companies provide value by managing all of the operations related to a real estate project. This might include acquiring property, finding and managing tenants, processing rent transactions, providing maintenance for the property, or selling the property after the investment period closes. You want to find a company that focuses on having experienced and knowledgeable real estate professionals.

They serve a purpose similar to mutual funds. Investors get the advantage of having easy exposure to the real estate market in their investment portfolio, while eliminating the day-to-day operations related to the property.

But past that, as an investor, why would you want to partner and work with a real estate investment company? What value can they bring to the table?

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1. AVOID PROPERTY MANAGEMENT HASSLES

If you take on the burden of real estate investing yourself, expect to receive an education along the way. The operational responsibilities associated with managing a property can equate to a full-time job.

When you work with an investment company as an investor, they handle all of the ‘dirty work’. That includes all of the paperwork, formalities, and property management, so you get to act as the passive investor and collect the returns on the investment.

2. EXPERTS HANDLE PROPERTY ACQUISITION

The first step on your journey as a real estate investor would be identifying real estate opportunities and properties with high investment potential. You would need to cast the vision and business plan for the project.

Instead, real estate investing companies invite you as the investor to leverage their experience and expertise in the real estate markets. Their teams know and understand the nitty gritty of real estate so investors can feel comfortable with the management team.

Investors get the opportunity to work with the investment team’s experts who go out and identify properties to buy and sell, know how to facilitate transactions and acquisitions, and can effectively manage the project through the end of the investment period.

3. REAL ESTATE SYNDICATION

Going it alone as a real estate investor can dramatically limit the scale and type of property you can invest in. Working with a real estate investment company opens to door for investors to participate in real estate syndication.

Real estate syndication assembles a group of investors to fund a real estate project. This means that one investor doesn’t need to have all the capital or assume all the risk for the investment in one property.

We’ve previously discussed what real estate syndication is and how it works here and here.

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4. INVESTMENT PORTFOLIO DIVERSIFICATION

Chances are, if you’re running a real estate project solo, you’re putting all your time, effort, and capital into the one project.

Real estate investing companies enable everyday investors to gain exposure to the real estate market and diversify their investment portfolios. We’ve discussed the importance of diversifying your investment portfolio, and how real estate is a key asset class for any successful portfolio.

For most everyday investors, real estate investing companies provide the best means of real estate diversification. By working with a real estate investing company, the experts can help you decide what types of real estate investments fit your investment criteria and meet your risk tolerance. From there, they can help determine which properties and projects are suitable for you to invest.

Real estate investment companies present a good way to add real estate investments to your portfolio. They enable you to add exposure to multiple real estate properties through a single company. By investing with a real estate investment group, you can potentially have your investment risk spread across and diversified among several projects within the company.

5. RENTAL INCOME & PROPERTY APPRECIATION

By partnering with a real estate investing company, you are tapping into the potential returns from rental income and property appreciation. Both present investors with an attractive and consistent rate of growth in their investments.

Real estate investment companies can provide accurate and reliable revenue projections for their real estate investments. Ideally, the company has a good track record of success in their prior real estate projects. This gives the investor some peace of mind with regard to their future earnings.

KEY TAKEAWAYS

For common investors, real estate investing companies provide value in several various ways. Overall, they allow the investor to become a passive investor and transfer the operational burdens to the investing company.

This can save you time, money and energy in your investing efforts. If you’re looking to add real estate to your investment portfolio, real estate investing companies offer a simple, easy way to accomplish the task.