THE BEST Real Estate Investments: Partnerships, Funds & Trusts
Within the range of property ownership lies a group of investment structures that involves partial ownership of one or more properties.
These real estate investments generally involve stable & passive income over a range of timelines.
Today we talk about the key real estate investments and how they can work for you:
Real Estate Limited Partnerships, Investment Trusts, Investment Groups, and Mutual Funds.
Let’s learn!
Why Invest in Real Estate?
Real estate can enhance the risk-and-return profile of your portfolio, offering competitive & risk-adjusted returns. In general, the real estate market is one of low volatility, especially compared to equities and bonds.
The four property investment types we will cover today are:
- R.E.L.P. Real Estate Limited Partnerships
- R.E.I.T. Real Estate Investment Trusts
- R.E.I.G. Real Estate Investment Groups
- R.E.M.F. Real Estate Mutual Funds
These investments either consist of a specific offering, a semi-specific offering, or a blind pool of properties.
Let’s look at them in detail.
RELP: Real Estate Limited Partnerships
Description: A real estate limited partnership (RELP) is like a real estate investment group. It is an entity formed to buy and hold a portfolio of properties, or sometimes just one property. However, RELPs exist for a finite number of years.
Advantages: Passive yearly income distribution from income generated by the RELP’s properties. Plus the sizable profit payoff when the properties sell and the RELP dissolves down the road. Very secure when partnered with a reputable developer.
Duration: Typically 5-10 years.
Buy-in: $50,000 & up, as a qualified accredited investor.
Payout: 6-8% annual coupon plus profit at fund/ property sell out, annualized at 12% plus.
Liquidity: Low.
Costs: Related management fees as set by the fund sponsor.
Risks:
• RELP agreement may prevent free access to funds
• Failure is possible with an unskilled and inexperienced group.
REIT: Real Estate Investment Trusts
Description: A real estate investment trust (REIT) is created when a corporation (or trust) is formed to use investors’ money to purchase, operate, and sell income-producing properties. REITs are bought and sold on major exchanges, just like stocks and exchange-traded funds.
Types: Trusts can count their holdings in properties, real estate or property management companies, mortgages, or any combination of the above.
Advantages: High liquidity, due to their being bought & sold on major exchanges.
Duration: Investors can buy and sell on the same day.
Buy-in: Shares are bought via a broker with optional no-min buy-in; $3000 and up.
Payout: Annual returns up to 11% or more.
Liquidity: High.
Costs: Associated one-time and re-occurring management fees (5-10%).
Risks: Due to being sold on exchanges, REIT’s can be directly affected by market dips and crashes, unlike many property investment types.
REIG: Real Estate Investment Groups
Description: Real estate investment groups (REIGs) are sort of like small mutual funds for rental properties. REIGs may also earn income from mortgage lending, or property management fees.
Advantages: When you want to own a rental property but don’t want the hassle of being a landlord.
Duration: As per individual agreement; 10 years +.
Buy-in: USD 1,000 and up.
Cap Rate: 5% and up.
Liquidity: Low.
Costs: Management fees as set out by the agreement.
Risks:
• Group fees may erode profits
• REIG agreement may prevent free access to funds
• Failure is possible with an unskilled and inexperienced group.
REMF: Real Estate Mutual Funds
Description: Real estate mutual funds invest primarily in REITs and real estate operating companies. They can provide investors with much broader asset selection than can be achieved through buying individual REITs.
Advantages: They can provide the ability to gain diversified exposure to real estate with a relatively small amount of capital.
Duration: Short to long term.
Buy-in: Flexible, via broker; no-minimum options.
Payout: Annual returns at up to 11% or more.
Liquidity: High.
Costs: Funds can have excessively high management fees, at times over 10%.
Risks: Due to being sold on exchanges, REMF’s can be affected by market dips and crashes, unlike many property investment types.
BAI Capital offers several exclusive US properties where you can invest as a limited partner, or as an outright owner.
This type of partnership arrangement is called a Real Estate Limited Partnership. Sometimes we refer to it as a Real Estate Equity Fund.
This type of fixed-income fund structure allows the investor a great return with minimal risk.
Please inquire about our current projects.
This link also provides more information that you may find useful:
