Commercial
Property syndicates vs Investing alone: The comparison
Published
25 July, 2022
The real estate market welcomes more and more investors every year. While experienced operators continue buying and first timers start their investment journey, there seems to be more competition than ever. That’s how property syndicates can help. They turn many investors into just one, combining hoards of capital and strategically placing them into big league property investments.
But is a property syndicate right for you? Or might you be better off as a solo investor?
Today, we’re looking at the pros of both property syndicates and investing alone to help you figure out your best option.
Why a property syndicate might be right for you
Property syndicates
are a hugely popular avenue for investors to take part in high quality commercial real estate and residential property. Property syndicates take the combined capital of a group of individual investors and set out to acquire, manage and eventually divest one or more properties. Here’s why a property syndicate wins the capital of many Australian investors.
Access to big league property investments
It’s simple math. Adding your capital to a group of similar-minded investors’ pot of funds means you’re all able to pursue far larger properties than you otherwise would alone.
Sure, you need to split the profits according to your percentage of ownership. But the truth is, you can expect far larger returns from far larger investments.
Consider commercial real estate and the tenants occupying them. A multinational tenant inside a 20,000 sqm industrial site is going to be paying a far larger premium per sqm compared to a local hardware stare in a small bricks and mortar store. You may be able to purchase the latter premises with your own funds. You’d be pressed to achieve the same returns as the former.
For more info on returns, check out our post about what is a good return from commercial property investment.
Diversification
Property syndicates often combine more than one property into the same investment. These multi-asset syndicates – also known as unlisted property trusts or real estate funds – reduce risk by having multiple tenants, perhaps in multiple industries, provide you with regular cash flow. So, if one tenant leaves or one industry declines, you’ll still have peace of mind knowing your income will continue thanks to the diversified nature of your multi-asset investment.
Lower debt to equity
When you find a reputable property syndicator to invest with, you’re likely going to have far less owing to the bank compared to the value of the property. This ratio, called the Loan to Value Ratio (LVR), is a huge consideration for investors. The less debt, the less risk. As syndicates acquire funds from a range of investors, the requirement for bank finance is lower. You have a larger spread of options as an investor when you have a larger amount of equity in your investment.
Split the costs
Yet another advantage of property syndicates is splitting the costs of investing with other investors. Stamp duty is sliced into very small amounts, so are solicitor and agent fees, registration costs, etc.
Access to property experts
By far a favourite for property investors, investing in a property syndicate means you can take advantage of the decades’ worth of real estate networks your fund manager has acquired. And these networks of professionals are, in essence, at your disposal.
That not only means you’ll save time finding the most suitable agent, banking manager, solicitor, property consultant, surveyor, etc. You’ll also be able to leverage the top-shelf relationships your property investment company has already forged.
Is a property syndicate is right for you?
We’ve helped hundreds of Australian investors achieve significant wealth. Find out how our property syndicates could help you do the same. Get in touch today.
Why you might consider investing alone
We all like to be independent at times. The saying ‘If you want something right, do it yourself’ is probably more commonly used than ever these days. If you’re that way inclined, the same may be said for property investment. Here are why some people prefer investing in property alone.
Decide when you exit or divest
When you invest alone, you decide when it’s time to bail out of the investment. You can sell the property whenever you like and return your capital to your bank account for use on other investments or perhaps personal expenses.
Of course, you will have to rely on your own expertise as to when is the right time to divest. Many solo investors will attempt to read market indicators and act according to newspaper headlines, podcasts or water cooler conversations. When it’s not their full-time job to buy and sell property, it’s easier to be caught up in hearsay and divest at an inappropriate time.
Control over your hard-earned money
Some investors are concerned (understandably) about handing over their capital to a third party. How do you know they’re a reputable company? How much risk is the syndicator willing to tolerate? When you’re in charge of the investment, you can see where the money is flowing and how its spent.
But if you do decide to partner with a real estate syndicator – and as we’ve seen, there are many solid reasons why you would – it’s crucial you choose the right one.
Properties & Pathways has its tenth birthday this year. That’s ten years of solid returns, huge exponential growth in our investor base and not one cent of capital lost for our investors. Get in touch with us to find out if investing alongside us in our next property syndicate is right for you.
