You can always go with a syndicated deal. Small partnerships, with a limited number of investors. Like a $10M 250+ unit complex, with 20% down, across 25 investors. 10% returns are generally projected,
There are plenty of those out there.
Where would one typically find these syndication deals?
Banks, funds and brokers. The same people who sell stocks.
We had alot of these in Norway in the past 5-15 years and many of them proved to be financial disasters for the investors. Some of the potential downsides:
- Syndicates tend to rise in popularity when markets are on the rise. You don't want to buy on the top (as with anything). Many investors who got into this in 2006-07 were left with only 10% of their initial investment after a few years.
- Whoever is in practical charge of the syndicate (banks, funds) typically gets a fat management fee and they are good at hiding this fee, e.g. it could be hidden under "maintenance" and "other costs" in the fiscal reports. Syndicates are a great cash cow for everyone involved in the work around it.
- Owning a share in a syndicate is like owning a stock with bad liquidity, meaning it can prove hard to sell if you need the cash or want to cash out. Its either keep the share or sell at a big discount.
- Syndicates often operate with a span of 4-10 years: 1) Gather investors 2) Buy a bunch of properties 3) Manage the properties and possibly do upgrades 4) Sell with profit. Basically its like buying and selling a property, but someone else takes care of managing the property (and gets paid for it) and you have little saying in when you want to sell it.
- You don't get to decide when/if doing maintenance or upgrades. Basically, you give up alot of power and control in exchange for having others do the work for you, and sharing the risk with other investors.
I'd rather invest in real estate stocks or buying real estate myself than being part of a syndicate. There are alot of rubbish deals with unrealistic projections out there. The only clear upside I see is that you get to work with big commercial properties, but you can get this exposure through RE stocks.
Maybe there are more success stories in the US?