ADVANTAGES OF GROUP INVESTMENTS:
The Ability To Purchase A Property By Pooling Resources
The main reason for forming a group of investors to purchase investment real estate is the group’s ability to pool resources so that a property may be purchased.
Historically, investment real estate has outperformed inflation, as it has increased in value at a rate faster than inflation. In certain stages of the real estate cycle, more appreciation potential exists in larger properties that can be purchased by groups than in the smaller properties that they would have to buy themselves if they were limited to their own resources.
Generate Cash Flow
Many investors are interested in investing in a group where a 100% cash purchase is anticipated. In a group acquisition strategy of an all cash purchase, the goal will be to generate cash for distribution.
Many investors join investment groups because they believe it is wise to spread their equity over several investments rather than put “all of their eggs in one basket.” Instead of an investor putting $1,000,000 into one property on a free and clear basis, often investors decide that it would be wiser to diversify through an investment group may decide to purchase multiple properties free and clear, or with another group that was formed to acquire properties using leverage.