To many of us, finances and investment decisions traditionally are topics we hold close to our heart. For some, it is fear of putting ourselves out there for comparison. For others, like me, it is the fact that I never am confident of where to start and what is the right decision.
It would seem that a step into group investing would amplify both of these insecurities, but in reality, the transparency and mission-focused participation make it easier.
What is Group Investing?
First, we must understand what group investing is and is not. After I graduated college, I had a friend who was not only much more business-savvy than I was, but also had more disposable capital on hand. He suggested that we invest in a property together as a way to build a financial foundation. Great idea, right?
All I needed was to come up with $35K by the end of the month and he would do the rest.
Is this group investing? Technically, I would be part of a group that was investing in a property.
There were multiple problems though:
- I didn’t have $35K sitting around (in fact my salary after graduating was about half of that).
- I had no clue what we were investing in or what the results were going to be.
When we talk about group investing, we are talking about sharing everything from start to finish - shared vision, shared savings, shared decision making, shared ownership.
Reason #1: Faster Capital
If one of the greatest barriers to real estate investing is capital, then the solution is to acquire capital faster. Logic says the more sources of capital the faster the combined capital grows.
Of course this flies in the face of conventional wisdom of not mixing business with pleasure.
For people to be comfortable building capital together there must be a clear and agreed upon goal and transparency to everyone’s combined contributions. It is much easier to build confidence that your individual investment will result in achieving your dream when you watch the collective balance increase each month.
And timing is the other part of building capital. Not all group members will have the ability to contribute a lump sum to move the investment from 0 to 100 overnight. Implementing a manageable monthly contribution provides accessibility and acceleration to the investment.
Reason #2: Reduced Risk
By nature, investments have risk. The “what if” question plagues both first-time and experienced investors as they put their hard-earned dollars to work. Unlike investing in stocks, real estate investment may require more active participation which also may be a concern.
The Average Return on Investment in the
U.S. Real Estate Market is 8.6%.
Investing as a group reduces risk by not only by creating allies in decision making, but also through the ability to transform from separate individuals into a multi-member LLC. Doing so creates and entity that offers significant benefits and protections - such as the ability to transact, tax benefits and personal liability protections.
Reason #3: Shared Experience
It is rare that real estate investment is a one-and-done experience. Whether this is your first time or your one-hundredth time, investing as a group provides the unique learning opportunities and shared achievement that cannot be replicated on your own. Some will argue that sharing the experience also means sharing the potential income. This may be true depending on the investment, but the shared celebration of reaching milestones and making investments changes your perspective on what makes a successful investment experience.
Where to get started?
So you don’t have it all figured out? That is actually the best place to start and the details will get clearer as you form and share ideas with your group. The important part is starting.
TribeVest guides you through the process of forming your vision, setting goals, inviting others, aligning expectations and beginning savings. When you are ready to form that LLC and make your investment, we have partners and tools to help you do that too.
Which means it’s time to stop talking about it, remove the barriers and start by answering the question: What’s Your Dream?
