How To Start A Real Estate Investment Group (REIG)

A Real Estate Investment Group (REIG) can be a powerful strategy to expand your portfolio while leveraging collective resources. An REIG means you pool your resources with other investors to target larger, real estate opportunities. Such a group allows you and other members to share their experiences and expertise.

You can start your REIG. Doing so could potentially boost real estate investments and give you the chance to generate competitive returns on investment, but investors should carefully consider potential risks.

The following are the steps to take when developing your REIG.

#1–Define Your Investment Goals

Before bringing potential investors into the fold, you should establish clear target investment targets and consider additional factors. Some considerations include:

• Asset type (Residential, commercial, or multifamily)
• Investment strategy (value add, buy and hold, fix and flip)
• Expected financial commitment from each member
• Handling returns (distribute to investors or use to buy more assets)
• Involvement level (passive vs. active investors)

Defining your REIG’s investment goals will help attract like-minded investors and set the foundation for a structured approach.

#2–Determine Long-Term Growth and Exit Strategies

Figuring out your investment goals is important. So is determining how long you want to hold a property and when to sell it. Focus on the following:

• Reinvestment strategies to grow the portfolio.
• Options for liquidating investments
• Succession planning to ensure sustainability

Flexibility and adaptability are key to navigating market changes while ensuring the group’s long-term success.

#3–Assemble a Core Group of Investors

Building a REIG requires members with aligned interests and complementary skills. Seek individuals with expertise in real estate, finance, law, or property management.

A prudent approach is to start with a small, committed group and expand strategically. Some ways to do this include:

• Hosting networking events to attract potential investors
• Asking for references from finance and property management experts
• Partnering with real estate professionals who can offer valuable insights

When finding your group members, vet them by conducting thorough background checks focusing on financial credibility and group alignment.

#4–Select a Legal Structure

Selecting an appropriate legal entity for your REIG is crucial for protecting assets and ensuring compliance. Common structures include:

• Limited Liability Company (LLC): Offers liability protection and flexible management, but requirements vary by state.
• Partnership: General partnerships offer simplicity but provide less liability protection, while limited partnerships (LPs) or limited liability partnerships (LLPs) may provide additional protections.
• Corporation: Suitable for larger groups but involves more regulatory requirements, paperwork, and filing.

Consult a real estate attorney to determine the best structure for your REIG.

#5–Create an Operating Agreement

An operating agreement establishes clear guidelines for governance, financial contributions, and member responsibilities. This legally binding document helps prevent disputes and ensures all members understand their rights and obligations. A REIG’s formal operating agreement would typically include:

• Contribution amounts and ownership percentages
• Investment strategies
• Profit and loss distribution
• Decision-making processes
• Exit strategies for members who wish to leave the group
• Conflict resolution mechanisms

#6–Secure Funding and Capital Contributions

You need money to buy property. This means you need to set up how your group will raise capital. Options include:

• Member contributions (initial buy-in and ongoing investments)
• Bank loans or private financing.
• Crowdfunding or partnerships with larger investors

Ensure that all members agree on funding obligations and cash flow expectations.

#7–Identify and Evaluate Investment Opportunities

With capital in place, you can search for properties that align with REIG’s investment strategy. You can use real estate professionals like brokers and property managers to source likely assets. Finding the property is the first step. You must also conduct due diligence through:

• Market research and property analysis
• Inspection and risk assessment
• Financial modeling to project returns and cash flow

#8–Manage Properties and Monitor Performance

Once your REIG has acquired the real estate, proper management can help maintain property value and support investment objectives. Issues to consider include:

• Hiring property managers
• Tracking income, expenses, and property appreciation
• Keeping an eye on local market performance
• Maintaining high occupancy levels
• Conducting regular meetings to review performance and adjust strategies

Property management software can streamline operations and enhance transparency among members.

Understanding the REIG Set-Up

Starting a Real Estate Investment Group can provide you and your investment partners with a structured method to potentially expand your portfolios, share risks, and maximize returns. By defining goals, assembling the right team, securing funding, and managing assets effectively, your REIG can benefit all members.

If you’re interested in ways to refine your real estate investment strategy, Realized 1031 can provide expert guidance on structuring and managing real estate investments. Visit realized1031.com to learn more.

The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.