It has long been said that investing in real estate creates long-term wealth. Few investors, however, understand the advantages of commercial real estate investing, including office buildings, retail stores, hotels, healthcare facilities, and senior care facilities.
There are a lot of reasons why people avoid investing in commercial real estate over residential real estate, including the fact that it is a more complex asset class. Thus, wary investors often invest their money in safe investment vehicles like stocks and bonds. Consequently, they miss out on tremendous opportunities in commercial real estate investing.
Co-investment platforms in the real estate sector are causing the game to evolve quickly in today's market. Investors now have access to large, out-of-reach opportunities in real estate that were previously out of their reach.
As a result of democratizing real estate ownership, investors have greater access to a wider variety of commercial real estate investments.
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Investing in commercial real estate through co-investment involves several individuals pooling their capital. Depending on their capital contribution relative to the asset's overall purchase price, each co-investor will own a percentage of the asset.
With the advent of online channels, it is now easier and more convenient to assemble investors in co-investing.
Now you may ask, is it a good time to invest in commercial property? Most people don't take the leap to invest directly in commercial real estate nowadays due to its complexity. But it's for this reason that co-investing can be beneficial.
The result of this method comes with a few advantages, which include:
There is often information available to other investors that the general public is not aware of. Many deals are found, analyzed, and underwritten by experts that are too sophisticated for the average investor to understand.
When co-investing, a person can leave the due diligence to a professional who specializes in commercial real estate investment.
A company structure in co-investing allows investors to benefit from tax savings not available to individual investors when investing in commercial real estate.
There are some jurisdictions that offer more favorable tax rates when no investing entity holds more than 10% of the investment or if the investment is made with a debt instrument.
Individuals can invest as little as $25,000 in real estate co-investment. It opens up a brand new world of property investment to a wider audience and lowers the entry barriers for many investors.
Rather than putting all their eggs in one basket, investors can adopt the divide-and-conquer strategy and allocate capital to multiple properties and even in different countries, thereby reducing risk exposure.
Co-investing enables investors to take advantage of commercial real estate investment in a variety of geographical markets, sectors, investment strategies, and capital stacks. Moreover, investors can choose opportunities according to their risk and return preferences.
For investors with varying investment objectives, identifying a platform where opportunities originate across the spectrum is crucial and this is where co-investing can come into play.
There are high entry barriers to commercial real estate investing. The majority of banks require a 25% down payment when you buy commercial real estate. Only a very few people can commit so much equity to one deal at a time.
Nowadays, a person can contribute just a fraction of the equity and still reap all the benefits by co-investing with other investors.
As compared to equity markets, commercial real estate is one of the most attractive fixed-income strategies. It is possible to achieve great risk-adjusted returns when you invest alongside experienced investors.
Experienced investors are familiar with the complexities of managing and operating commercial properties. It is possible to invest in a deal and then leave all of the decision-making to the other expert investors when co-investing in commercial real estate.
The purpose of this isn't to give people a license to make blind investments. It is still recommended that investors do their due diligence before investing.
Investors now have a vast array of options to choose from, thanks to co-investment platforms.
In today's market, investors of all budgets can access a wide range of real estate investments that come in a variety of shapes and sizes—but it is important to remember that not all real estate investments are the same.
When investing in real estate, working with the best professionals in the industry is vital.
Everyone isn't suited to commercial real estate investing. But if you think it might be something you would be interested in, email us at general@saintinvestment.com or contact us at 949-881-7128 at Saint Investment Group today!
A master in Investment, Marketing, and Capital Raising.
Nic has honed his focus on the Real Estate and debt markets with Saint Investment Group and pursues large-scale Distressed Asset purchases with his partners and syndications.
