There is safety in numbers. This is true in battle and in multifamily real estate. When investing in an apartment building or a condo complex, it may be a wise decision to minimize individual risk by investing with a group.
Real estate investing groups are somewhat like mutual funds for property ownership. They enable those who do not have the capital to invest in large properties alone to get a piece of the return. In turn, they minimize risk to each individual investor in the group.
Jason Cohen Pittsburgh frequently invests with JoCo Partners, a group with interests from Texas to the Northeastern United States. Our work with this group enables us to get into larger properties and perform extensive renovations on them to reposition them as high-end rentals.
When seeking a real estate investing group, it’s important to differentiate the legitimate investing entities – a group of like-minded individuals who actively invest in multifamily real estate – from the thinly veiled sales pitches for books and seminars that promise riches for little work. Multifamily real estate investing groups like JoCo are constantly seeking new opportunities to invest in real estate that matches the focus of the organization. Those groups rely on their members for leads and networking opportunities and are constantly seeking new investors to join the group.
The more investors, the larger the multifamily real estate acquisition can be. And, with a larger group, the less each individual member will take a financial hit if the property is not as profitable as projected. This is particularly significant when purchasing, repositioning, and managing multifamily real estate.
Say you bought an apartment building by yourself. You renovate it and start renting the units. You manage the building as the landlord. But some units are vacant. You are not receiving the monthly income that you budgeted for when you sunk your money into the property and the rehabilitations. Investing with a group doesn’t eliminate this situation, but it can make its ill effects less palpable. Even if the individual unit that you own through your group is unoccupied, pooling income from the properties makes it more of a collective loss than one that specifically targets one investor. The loss would still be there, but just not as detrimental.
For the investing neophyte, groups may be a wise way to get into multifamily real estate investing. You can learn from other members who bring their diverse backgrounds to real estate investing. However, it is extremely important to choose the right group. Know your real estate investment goals before you join or start a group. At Jason Cohen Pittsburgh, we are just as careful about the people we invest with as we are the properties in which we invest. Our network of investors share our interests in multifamily real estate acquisition and repositioning, enabling us to have successful investments in a cohesive manner.
Sure, there is safety in numbers. Just make sure you’re analyzing those numbers as thoroughly as you are the acquisition itself.