How REIGs Work And If They’re Right For You
Real Estate Investment Groups (REIGs) have gained popularity as a collective investment approach for individuals seeking to invest in real estate without the challenges of property management. REIGs allow investors to pool their resources and invest in properties as a group, typically managed by a professional entity. This article will explore how REIGs work and help you determine if they are the right investment option for you.
How REIGs work:
REIGs function by bringing together a group of investors who collectively invest in real estate properties. A professional real estate company or an experienced sponsor typically manages the group. Here’s how REIGs typically operate:
Pooling of funds:
Investors contribute a certain amount of money to the REIG, creating a pool of funds used to purchase properties. The amount each investor contributes determines their ownership share in the REIG.
The REIG’s management team identifies potential properties for investment. They conduct due diligence, assess the property’s potential returns, and make acquisition decisions on behalf of the group.
Once properties are acquired, the management team handles property management tasks such as tenant selection, rent collection, property maintenance, and repairs. Investors do not have to be involved in day-to-day property management activities.
Distribution of returns:
The income generated from rental payments or property sales is distributed among the REIG investors based on their ownership share. Depending on the REIG’s structure, the distribution may occur periodically, such as monthly or quarterly.
Determining if REIGs are right for you:
While REIGs offer certain advantages, some may have better investment options. Consider the following factors to determine if REIGs align with your investment goals and preferences:
REIGs typically require a minimum investment amount. Assess whether you have the necessary capital to contribute to the REIG and evaluate how it fits within your investment portfolio.
Passive investment approach:
REIGs are well-suited for investors who prefer a passive investment approach. If you want to avoid being involved in the day-to-day management of properties or lack the time and expertise for property management, REIGs can offer a more hands-off investment option.
REIGs provide an opportunity to diversify your real estate investments across multiple properties and locations. If you seek diversification within the real estate sector without investing in individual properties, REIGs can be a suitable choice.