"A mutual fund that invests in rental properties"
WHAT IS IT?
A Real Estate Investment Group (REIG) are a group of partners who focusses on working with capital real estate. They have the availability to choose if they want to buy, sell, renovate or finance properties. The most common option of real estate investment groups is to buy out multi-unit properties. In this way the units will be sold to investors while the group takes care of the administration and maintenance of the property. Therefore, REIGs are a great option for people who would like to invest in rental real estate without the extra care of running it.
HOW DOES IT WORK?
In an ordinary REIG situation a company builds or buys real estate like for instance an apartment block and then sell the apartments to investors through the company, thereby joining the group. To that end, REIGs are somewhat like a mutual fund that invests in rental properties.
IF I AM THE INVESTOR, WHAT CAN I EXPECT?
Overall flipping houses can create quick returns but it is necessary to have deep market knowledge.
For the investor it is possible to invest in one or more units of rental residential spaces. The company is responsible for the management, maintenance, interviewing tenants and advertising vacancies. The cost for this work is in a percentage of the monthly rent which is designated to the company.
Also, if there is a situation of vacancies you will still receive some income even when your units are empty. This is constructed in the lease. The standard REIG lease is in the investor’s name and all of the units pool a portion of the rent to insure income during vacancies. If the REIG does not have to many vacancies, this fund will cover the costs for the investor.
REIGs are a way to be indirectly connected to the ownership of rentals which gives the investor some maintenance benefits. It also provides an income and some appreciation. However, investing in REIGs requires quite some capital of the investor and access to financing. There is also a risk for vacancies and it has some similar fees as mutual funds. Also, there could be the chance that the manager of your REIG is not legitimate.