Property Syndicate – an opportunity to build a more diverse property portfolio.
So, what is a Property Syndicate and could it be right for you?
Everybody knows that Australians love to purchase property. Whether it be a place to call home, a beautiful little holiday abode up the coast or an investment property they can rent out to earn an income and build wealth.
Investing in property is something that many of us have done, are doing or are striving to do. When people invest in property it is often purchased in one person’s name or perhaps purchased together with their partner. This is naturally the most common and simple way to do this – however there is another option!
Investing in property via a Property Syndicate is where a group of investors pool funds together to invest in direct real estate property.
Why would you consider doing this?
By pooling funds together this may mean that as a group you can purchase larger or more properties than if you were to go at it alone. For example, you could have five individuals who all individually could purchase a property, however, what if those five individuals came together? They could purchase a property five times the value! This could mean purchasing a property with greater yields or growth potential.
It could also help with diversification – instead of owning 100% of one property you could own 20% of five different properties. This could mean owning as a group, five properties in different locations (or even states), different types of property (new house and land, established houses, townhouses, apartments, commercial etc) that could help reduce risk if one location or property type was to underperform. You’d be building a diverse property portfolio.
It could also mean being able to get into property sooner as you may not be in a position to purchase a property by yourself, but by doing it as a group you could be part of a property purchase with only needing to contribute a smaller portion of the initial capital. There is also the ability to contribute different amounts and have different levels of ownership with the property purchases. For example, if one person contributes more capital then they can have a greater share of the ownership than another person who contributes less.
What are some of the risks to consider?
By investing as a group, you naturally do not have full control of your investments with regards to decision making as there are other investors interests to consider. This could lead to disagreements amongst the group.
It is therefore critical that everyone in the syndicate is of a similar mindset with the same goals and objectives clearly discussed and outlined prior to any action taken, as you don’t want one investor to have a different plan to the others and find this out later down the track.
What to do if considering investing via a Property Syndicate?
Speak to your Highview team first! Speaking with the different members of your Highview team including your Accountant, Financial Advisor, Mortgage Broker and Lawyer is mandatory. There are a lot of things to consider and everyone’s personal circumstances are different. Getting expert advice at the beginning is an absolute must to ensure that it is right for you and everything is structured correctly to minimise any risks.
Contact your local expert today to start the discussion here.
Good luck with your property journey!
Article Written by Beau Appleby – Associate Partner & CPA, Highview Accounting & Financial, Prahran.