When it comes to investing in real estate, there are many different strategies that can be used. One such strategy is group investing, where a group of investors pool their resources together in order to purchase a property. Group investing can be a great way to get started in real estate investing, as it allows you to leverage the expertise and resources of other investors. However, there are some things you need to keep in mind if you're going to be successful with this strategy. Here are 5 pro tips for group investing in real estate:
- Choose the Right Group to Invest With
- Align Your Group
- Formalize Your Investor Group
- Make Contributions and Pool Your Capital
- Find Your Real Estate Deal
Choose the Right Group to Invest With
If you're looking to establish a strong investor group, it's important to identify like-minded individuals with shared values, compatible risk tolerances, and complementary talents that come together to form an effective support system. Taking the time to build a network of investors that pool resources and provide guidance can be incredibly beneficial since there are so many viable investment opportunities out there. Instilling trust in a small group of people who understand your strategy can also help you navigate the turbulent waters of the market. Communities of investors share ideas, recognize trends and make decisions as a team - so joining or creating the right group is paramount.
There are many ways our Tribes find their group - one being wealth-building communities like:
- Left Field Investors for passive investing in real estate
- The Flipstress for women flipping houses
- Thanks for Visiting for short-term rentals and being a great host
- Tribevest member community for group investing
Align Your Group
Effective groups are ones that have clear, established roles along with a plan for completing their tasks and staying on track. To make sure your group is in alignment, you need to make a plan—one that integrates group structure and promotes accountability. Building the type of foundation required for success means looking at who is best suited for each job within the group and then establishing standards for what is acceptable behavior from all those involved. By laying out expectations ahead of time, you can make sure everyone in the group are all moving towards the same goal.
You should plan to discuss your mission, type of investments, capital requirements, investment goals and when you plan to launch. Once you're aligned, you should also talk about group structure. This will hold everyone accountable without making any other member the bad guy. Structure should include: initial contributions, ownership structure, voting thresholds, and an exit strategy.
Formalize Your Investor Group
Creating an investor group is a great way to leverage the collective resources of your team. It’s important for investor groups to formally file an LLC, open a business bank account and draft an operating agreement from day one. Doing this will provide the structure needed for you to make informed decisions as a cohesive unit, ensure regulations are followed and make sure each investor’s interests are protected. Taking the time to do this early in the formation process can save you from dealing with issues further down the line.
Related Read: The Cost of Running Your Investor Group
Your group will need to file an LLC so you have a formal business entity to transact with. As active owners, the best way to set up your group is with a multi-member LLC. Once your LLC is back, you'll want to open a business bank account. It helps ensure everyone feels like an equal participant and it's a place that will serve as a single, centralized location for all group capital. This helps remove risk associated with everyone using their own personal accounts. Finally, you'll want to establish an operating agreement. This will formalize your group structure by laying out the rules and procedures. It should include a description of your group members' rights, duties, liabilities, and obligations.
Make Contributions and Pool Capital
Once you've formalized your group and have all the administrative taken care of, you should encourage your group to make their first contributions. This is the fun part where you start to take action as a group! This could be on a reoccurring basis or a one-time contribution depending on your timelines and goals. Having an organized timeline will help your group meet your goals and not stall out.
Find a Real Estate Deal
Through the alignment and formalization of your group, you should have an idea of what you'd like to invest in. Real estate is a broad category and one that you can passive or actively invest in.
For those looking to capitalize on passive real estate deals, it's critical to consider the price and risk versus return tradeoff. The best passive deals can offer investors a handsome profit with relatively limited risks. However, it is essential to vet any passive deal wisely to ensure that there are no surprises down the road.
It's also worth exploring active investment opportunities as they provide potential for an even greater return on investment via hands-on management and careful decision making. No matter which type of deal you're considering, carefully assessing your options is key in finding the best real estate deal for you.
Take Action Today and Find Your Group
If you follow these five simple steps, you will be on your way to successful real estate investment. Choosing the right group to invest with is essential for success. Aligning your group ensures that everyone is on the same page and working towards the same goals. Formalizing your investor group provides structure and capital pooling makes it easier to finance deals. Lastly, finding a great deal is the key to success in real estate investing. By following these tips, you can achieve success, together. So what are you waiting for? Get started today by taking action and find your group!