5 benefits of property syndicates
Property syndicates in Australia are traditionally associated with commercial and industrial investments. But in today's market, more residential investors are benefiting from starting a property collective.
Property syndicates in Australia are traditionally associated with commercial and industrial investments. But in today’s market, more residential investors are benefiting from starting a property collective.
With house affordability set to be a problem for at least 40 years, forming a syndicate can be a viable solution.
These collectives allow many investors to pool funds to buy property that would otherwise be out of reach financially. For budding investors, it’s a sensible consideration.
If you’re chasing peace of mind and a reliable return on investment, property syndicates could be for you. Here are the top benefits to consider:
1.Reduces capital outlay
Property syndicates offer access to higher-yielding real estate you normally wouldn’t afford alone.
This opens you up to retail, commercial and industrial real estate, which is especially helpful as the purchase price is typically higher. You should also gain a much higher return rate than you would with residential real estate.
These arrangements encourage small investors with limited funds to break into the market. Larger, higher-quality investments become a more attainable goal by reducing the capital outlay.
Property syndicates generally require a minimum investment of $50,000, but certain syndicates have a higher entry point.
By joining together, you build a stronger financial front which can be more appealing to lenders when borrowing. If you can use funds from the syndicate to fund the bulk of the property’s purchase price, banks will likely be less rigid about lending policies.
2. Lowers your risk profile
Because you’re spending less, the investment risk is decreased. If you already own a property or properties, purchasing a slice of another property will also help to lower your risk profile.
Syndicated Property Investment (SPI) commonly offers multiple properties in multiple locations. As the capital outlay is lower, you’re in a better position to spread your funds across these investments. This diversity is invaluable for any investment profile and further spreads your risk.
3. Encourages property development
Property development can be highly lucrative. However, for small-time investors, a development strategy may be financially out of reach.
SPI makes bigger investment opportunities, such as property development, accessible. Both residential and commercial property development comes with a higher risk and purchase price, but can also generate a much higher return. Property development opportunities are usually for a shorter term, compared to direct residential or commercial investments which tend to be long-term investments. Residential property syndicates often provide terms of two to three years, which can generate faster returns.
4. Less time consuming
Investing in real estate as an individual and not a full-time investor can be challenging. Devising your investment strategy, researching areas and properties, completing paperwork, getting appraisals and ensuring you meet the minimum requirements to obtain financing is very time-consuming.
Joining a property syndicate can be beneficial to small-time investors with busy schedules. Such hurdles become the responsibility of the syndicate management team, freeing up your time.
5. Rely on experts
Reputable syndicates are managed by professionals who use their expertise to secure the best investment property, in the best location (for long-term capital growth), at the best price. Investors who might not have the experience or the expertise in all the elements of a project (including acquisition and negotiation, project management and development, etc.), can rely on the expertise of a company with specialist roles dedicated to delivering best practice for each stage of the project.
Depending on your financial position and objectives, a property syndicate may be a suitable investment strategy. To fully understand what it entails and whether it’s right for you, seek specialist financial and property advice.