Property Investment Funds And Syndicates

What are Property Investment Syndicates?

Syndicates are simply groups of investors who collectively invest funds to make a property purchase. This typically allows individuals to enter an investment with far less capital outlay than would be required if they were investing alone.

The actual property purchased by the syndicate can vary from a single, larger property to an entire development or group of properties that are identified as an investment opportunity. Buying as a group allows investors the buying power to negotiate discounts, thus improving investment potential for all syndicate members.

A well managed syndicate will usually have clearly defined goals and expectations from the start, but one disadvantage could be the possibility some members may disagree on a particular exit strategy.

What are Property Investment Funds?

Property investment funds typically purchase, own and manage property on behalf of fund members or shareholders. These funds are popular because they offer strong returns without the investor having to worry about employing a successful exit strategy to realise returns, eg. renting out the property.

Property investment funds come in all shapes and sizes: the type of property purchased can vary from residential to commercial units and include retail or office blocks; the location of the investments can be geographically diverse or localised to a single country or city; and the minimum investment can be anything from €5,000 to €250,000 or more.

All funds are categorised into one of two types: funds that are not regulated by the financial services (un-regulated), and those that are regulated. Both types of fund are run by regulated managers.

Un-regulated Funds

Un-regulated or "closed" funds can usually raise more finance than regulated funds and use this gearing to create larger portfolios, generating far higher returns than regulated funds. With this comes a slightly higher risk and investors are rarely able to withdraw the investment prior to a fixed date.

Regulated Funds

Property investment funds are popular as they allow buyers to invest at a lower level and spread their risk via multiple investment vehicles. Each fund also looks to spread risk by creating a balanced portfolio of investments, managing risk levels and ensuring target returns are met.

With a regulated or "open" fund, the risk is lower and returns are usually more conservative. Investors often have the facility to withdraw funds at any time.

Real Estate Investment Trusts (REIT)

A REIT is a tax exempt property fund, providing 90% or more of all profits are paid as dividends to its shareholders.

REITs were introduced to the UK in January 2007 and it is expected that many REIT investments will be made using pension funds in order to benefit from their tax efficient nature; however, tax paying REIT shareholders will still be taxed on their dividends.

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