8 How to Invest in Property Syndicates
Investing in property syndicates is now increasingly becoming quite popular. This is because there are several and regular offerings around, potentially due to better returns you can get.
After all, bank deposit interest rates are pretty low, so many people are looking for better investment options. Property syndicates can offer you a good entry level investment into the property market and usually give between 5 and 7% annual returns paid to you as dividend. This post explains how to invest in property syndicates.
Understanding property syndicates
Keep in mind that property syndicates can be quite appealing, but like any other types of investments, they also have some risks. Therefore, you need to understand these risks and rewards before you decide to enter into the market.
The best way to know these risks associated with property syndicates is to consult your financial advisor. You can also read the information given on a specific opportunity before you make a decision.
In most cases, when it comes to a property syndicate in commercial property, then a property fund manager usually arranges to buy a high-value commercial property. Once the property is purchased following the terms of a sale as well as a purchase agreement, the property fund manager can give interest in that property to several investors. After securing pre-arranged bank financing, the funds can be availed to make the purchase.
Types of offers
With property syndicates, you usually get wholesale offers and retail offers. A wholesale offer refers to the one that is made to eligible or experienced investors. To be regarded as an eligible investor, you need to have enough experience and knowledge in financial products to a certain level that enables you to determine the associated risks and merits of the transaction. Besides, you also need to have a specific level of assets.
The good news is that wholesale offers usually do not need to give much disclosure compared to retail offers. As a result, they can have pretty low levels of investor protection. Wholesale offers are also not usually made public when it comes to advertisements.
On the other hand, retail offers are closely regulated by financial regulatory bodies. Also, any property fund manager who handles and offers these products to retail investors, needs to produce a product disclosure statement. This product disclosure statement must have a summary of important information to describe the purpose of the offer, risks associated with it, and important dates.
The information in the product disclosure statement needs to be accurate at all times and should not be misleading. Ideally, if any of the key information in the product disclosure statement changes at any point, the manager can update the product disclosure statement.
There is a good thing for the property fund manager giving this detailed information in a retail offer. This is because the offer can be marketed widely and multiple investors can provide reasonable amounts of capital to get good returns compared to larger commercial properties. Otherwise, to access this form of investment can be out of reach for many people.
