Residential development syndicates are becoming far more common investment options for the general public, but what are the benefits of these types of property investments?
Property investors typically gravitate towards direct residential property investment because it’s more familiar to them, whether that be from their own experiences buying a house or from general media coverage and home renovation shows.
However, residential development syndicates, in which investors pool their money together, are becoming far more popular as property investors seek genuine alternative investment options.
So what are the benefits of residential development syndicates? Here are 6 reasons to consider these types of investments.
1). Access to larger, higher-quality investments
Residential development syndicates are typically multimillion dollar projects which are financially out of reach for the large majority of individual investors. Development syndicates allow investors to access these larger, higher-quality types of assets that they couldn’t otherwise fund by themselves.
2). Lower capital outlay
Compared to direct residential property investment, development syndicates typically don’t require as large a capital outlay. For example, buying an investment property or even a development site would typically cost many hundreds-of-thousands-of-dollars or more. However, a development syndicate generally requires a minimum investment of between $50,000-$100,000, making the capital outlay significantly lower.
3). Diversify your portfolio
Because the capital outlay is lower, investors can spread their funds across multiple investments. This could incorporate a spread of direct residential investment, residential syndicates and commercial property syndicates. By holding a diversified property portfolio, investors are effectively mitigating their risks.
4). Realise returns sooner
With direct residential property investment, investors typically have to take a long term view, which is generally at least 7-10 years. Residential development syndicates often provide investment terms of 2-3 years, providing returns in a much shorter timeframe.
5). Managed by professionals
Provided you engage a company with a good track record, residential development syndicates will be managed by a team of professionals who can utilise their expertise to secure the best results for the project. The company will complete the necessary research, negotiation and acquisition of the development site, as well as manage planning approvals, project designs and construction of the project. Completing a development as an individual can be extremely time consuming, which is why residential development syndicates can be a better option.
6). Greater peace of mind
Having a reputable company manage a residential development syndicate means investors can have greater peace of mind, compared to completing a development by themselves. Investors only have to provide the funds and wait for the returns at the end of the project. This means less stress. Good syndicators will provide investors with regular updates regarding the progress of the project.
Residential development syndicates aren’t for everyone but they do offer unique opportunities. It’s recommended to speak to a reputable property investment advisor to determine how these residential development syndicates fit into your investment strategy.
Damian Collins is the founder and managing director of property investment consultancy Momentum Wealth. Offering market leading research and advice on the Australian property market, the company helps clients accelerate their wealth through property investment by assisting them in the strategic planning, financing, acquisition, management and development of their commercial and residential investment properties. Damian has completed a Bachelor of Business at RMIT University and a Graduate Diploma in Property at Curtin University. Damian is a board member of the Property Investment Professionals of Australia (PIPA) and is the Deputy President of the Real Estate Institute of Western Australia (REIWA).