DEFINITION of Real Estate Investment Group
A real estate investment group is an organization that builds or buys a group of properties and then sells them to investors as rental properties. In exchange for finding tenants, handling maintenance and other responsibilities, the organization receives a portion of the investors' monthly rent proceeds.
BREAKING DOWN Real Estate Investment Group
These groups provide a service for rental properties that is similar to mutual funds in that investors can reap some of the benefits of owning rental properties without having to manage them. Most real estate investment groups include provisions that require investors to pool a portion of their rent to cover mortgage payments in the event of vacancies.
How Real Estate Investment Group Are Structured
A real estate investment group might be referred to as a real estate investment club, but these two phrases do not always represent the same thing. Some real estate investment clubs are simply networking organizations wherein individuals discuss real estate, yet the members remain competitive with each other. The members privately invest in real estate as individuals without combining their funds in any way. The participants might share some information with each other however their sense of competition tends to limit this input.
Real estate investment groups can resemble other types of investment clubs wherein the members make decisions together on properties they should invest their collective resources towards. Such groups are typically unregulated. The degree of active participation in a real estate investment group can vary, especially if the rules of membership do not require each participant to put money into the pool to make investments. If the bylaws of a real estate investment group are too stringent with large outlays required of each member, the size of the group could be relatively small.
One of the objectives of forming a real estate investment group is to combine a portion of the members’ resources and knowledge. For smaller private investors, this can give them a better chance to compete with larger real estate players. Individually, they may not have the deep pockets needed to secure the deals they want to pursue. The joint effort creates opportunities to make offers they might not otherwise be capable of.
Some real estate investors might look online to essentially form virtual real estate investment groups. They may even turn to real estate crowdfunding platforms. They still typically pay a fee to participate and have an opportunity to develop a portfolio by sharing in investments with others. This takes a different investment approach compared with real estate investment groups, but it offers a comparable strategy of collaborating with others to pursue real estate deals.