How Can I Join a Real Estate Investment Group (REIG)?

Some real estate investors like to work independently, buying and selling properties with just the capital they have. Others prefer to craft a more in-depth portfolio, perhaps with fractional ownership of assets that they buy through a Delaware Statutory Trust or a REIT. Every investment method has its advantages and potential disadvantages. One less common approach is through a real estate investment group (REIG).

What Is a REIG?

A real estate investment group is a company that buys, sells, and finances real estate. Some also remodel and renovate. Some buy, hold, and manage, while others buy, improve, and flip. A REIG can use the capital of its combined members to make the investments it wants to pursue. For example, a group might focus on buying multi-family housing and managing those properties, purchasing single-family homes that need work, fixing them up, and reselling them. But a REIG can also buy and sell other commercial assets like office buildings and retail properties.

The structure of a group will vary depending on its size and purpose. For example, some smaller membership organizations may not have fees but work together to decide what properties to buy and how to dispose of them. In other cases, the group’s path is directed by a professional leader or a board, with the members primarily contributing funding instead of active participation.

REIGs are not REITs

In some ways, a REIG sounds like a REIT . Both focus on real estate ownership or financing activities, use funds pooled from a group of investors, and distribute any profit back to the shareholders. However, REITs have specific size and concentration requirements, plus income distribution mandates that they must abide by to allow them to maintain their pass-through tax status. REIGs don’t have these rules to follow.

REIGs aren’t regulated by the SEC and are not considered liquid investments like REITs since the investor may not be able to withdraw their capital when they want or need to. In addition, it might be tricky to discover how skilled the group’s leaders are, which could be a concern when you join.

What’s the Best Way to Choose a REIG?

As with any investment, it’s vital to do your homework and wise to seek financial advice. A real estate investment group can be a smart way to leverage your available capital and reduce or eliminate your management responsibilities while investing in real estate. However, choosing a poorly managed group could result in an unsatisfactory outcome. Also, it's a good idea to ensure that you invest with a like-minded group. If you are aggressive, you may not be compatible with a REIG that takes a conservative approach or vice versa. It's a good idea to research the leadership and past outcomes of the group before you invest your money.

^{This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Examples are hypothetical and for illustrative purposes only. Withdrawal strategies should take into account the investment objectives, financial situation and particular needs of the individual.}