Property syndicates: the benefits of joining forces
With more and more investors understanding the importance of diversification when it comes to building a balanced property portfolio and mitigating investment risk, a growing number of buyers in Australia are realising the financial and strategic benefits of pooling their capital together and investing in a property syndicate. For seasoned investors, especially, syndicates can open up a range of opportunities that often wouldn’t be accessible to the standalone buyer. So what further benefits can syndicates bring to your investment strategy?
Access to high-quality investment opportunities
Large-scale developments and commercial properties can both represent strong opportunities for investors. However, both these types of investments are highly capital intensive, and in reality not financially feasible for the majority of individual investors. In most cases, a high quality commercial property will cost upwards of $3 million or if not more to purchase, and a boutique apartment development could cost anywhere from $2 million to $15 million to complete. For the majority of investors, these types of projects would be too difficult to finance alone. Property syndicates, however, can give investors the opportunity to gain exposure to these assets, and at a fraction of the cost of investing directly. In many cases, these syndicated assets are often higher quality, and potentially more lucrative, than individual projects.
Opportunity for diversification
Another benefit of syndicated investments is that they also provide investors with a key opportunity to diversify their property portfolio. Since the capital outlay is lower when investing in a property syndicate (typically $50,000 or above), investors are able to spread their funds across multiple investments in different locations, be this through a mixture of residential and commercial syndicates or a combination of both syndicated and direct investments. In some cases, property syndicates themselves can be diversified and even comprise multiple types of properties in various locations.
By distributing capital across different areas and asset types, investors are able to take advantage of the growth cycles of different property markets, and even the individual movements of different industries within those markets. This diversification can also help investors build a more balanced portfolio that includes a mixture of both incoming-producing and high growth properties, in turn enabling them to benefit from ongoing cash flow as well as long-term capital growth.
Whilst distributing funds across different investments can help investors build a more balanced property portfolio, this diversification also plays a crucial role in limiting buyers’ exposure to risk and market fluctuations. Just as investing in different locations and asset types enables investors to take advantage of upturns in different markets, this strategy at the same time reduces the likelihood of being left with a stagnant property portfolio should one of these markets or industries experience a downturn. This can give investors a far greater level of protection than dedicating all funds into one asset and relying on that asset to perform.
Investing in real estate requires sophisticated knowledge of the market and constant monitoring of market trends, especially when you’re dealing with large-scale projects like commercial acquisitions or developments. The benefit of investing via a property syndicate is that these projects are typically managed by an experienced team who oversee the strategy and day-to-today management of the assets on behalf of investors. Providing you engage a reputable company with a strong track record, these managers can be invaluable in guiding the strategy of the syndicate and ensuring the assets stack up to feasibility checks, in turn minimising investment risk and maximising the potential value of the project.
Find out about our latest syndicate opportunities
Investing in a property syndicate can offer unique opportunities to investors, but this strategy isn’t suited to everyone. Before investing, it’s recommended that you speak to a financial advisor to determine whether this type of investment aligns with your investment goals and risk profile.