Real Estate Investment Group or REIG can be a good fit for you if you are someone new to real estate investing. Even if you aren’t new to real estate investing but lack the time or money to do it, REIG is for you.
But what exactly is a REIG?
In essence, REIGs allow the investors to pool their resources and take advantage of the potential returns of real estate ownership. Not only this but they free up the investors from the hassle of actively managing real estate properties.
Doesn’t that sound great?
So, let’s dig deeper and understand what Real Estate Investment Groups are, how they work, and much more.
Here we go!
What Is A Real Estate Investment Group (REIG)?
A REIG is a group of private investors that focuses on real estate investment, by pooling money, expertise, knowledge, and/or time to purchase income-generating properties.
Basically, all REIGs combine funds from different members and investors and utilize them to buy and invest in real estate while giving the participating investors a return, such as an interest payment or profit split.
In broad terms, REIGs give investors access to the advantages of real estate investing – like potential capital appreciation, tax benefits, and passive income – while lowering the costs and risks related to owning a single property.
Real Estate Investment Groups can opt to purchase, finance, sell, or renovate properties in an effort to increase their earnings. Purchasing multiunit properties, selling units to real estate investors, and taking over property management and upkeep are common activities that REIGs perform.
Each REIG will have a different investment strategy, but it may use any of the common real estate investing strategies, such as buying commercial real estate, rehabbing and renting, holding mortgage notes for properties, or fixing and flipping properties.
How Does A Real Estate Investment Group Work?
As a potential investor, it is important to understand the functioning of REIGs. Check out below how they work:
- A REIG is formed by a group of individuals who collectively want to invest in real estate.
- To structure this group, these individuals usually form a limited liability company (LLC), partnership, or other legal entity.
- Depending on the size of the group, minimum investment requirements, and the overall investment strategy the members contribute money to the group. This money is then grouped to form a large investment capital.
- Further, experienced professionals in the management team conduct research and perform analysis to identify potential investment opportunities for acquiring suitable properties.
- Once a property is acquired, the REIG management team takes charge of the property management. This may include maintenance, repairs, tenant management, and other day-to-day management activities.
- According to the terms of the investment agreement, once the returns on investment are generated they are distributed among the group members. The distribution can be based on some predefined criteria or factors like capital contribution percentage.
- Talking about decision-making, the structure and governance of the REIG play a great role. Usually, the management team makes strategic decisions on behalf of the group, but some groups may also allow the members’ involvement in the decision-making process.
- Lastly, the investment duration and exit strategy of a REIG can vary from group to group depending on the specific investment objectives and the terms mentioned in the investment agreement.
Pros And Cons Of Joining A REIG
Below are some pros and cons of a REIG that you should consider before joining one Have a look!
Pros
- You can invest in bigger real estate deals and hold tangible real estate with less money.
- Because the experts in the group take care of all aspects of property acquisition, and management. Also REIGs offer a passive investment opportunity.
- Joining a REIG gives you access to the knowledge and experience of seasoned experts. They are well-versed in the real estate industry.
- You and the other investors split costs associated with maintenance, repairs, and property management when you invest in a REIG. This can lower personal financial obligations and increase cost-effectiveness.
- Joining a REIG provides you opportunities to network, and work together with other investors who share your interests.
Cons
- It is possible for investment goals, management styles, duties, or outcomes to clash or come into conflict.
- You have little authority to make investment decisions if you’re a member of a REIG. The group’s management team makes strategic decisions, which can restrict your ability to personalize investments to your tastes.
- Depending on the terms of your agreement, it could be challenging to pull out your money.
- A membership fee might lower your returns.
- Generally speaking, REIG investments are less liquid than stocks or other publicly traded securities.
FAQs
1. How can you find REIGs to join one?
To find REIGs, using professional networking groups and websites like LinkedIn or the National Real Estate Investors Association can be a good start. You can also reach out to financial advisors or local real estate agents who specialize in real estate investments. Also they may help you connect with professionals or firms involved in such investment opportunities.
2. How much money do I need to join a REIG?
Thoroughly perform due diligence while assessing REIGs. Examine the management team’s performance history and experience. Also, understand the group’s investment strategy and objectives, and pay close attention to the terms and investment structure.
Further, it is also advisable to speak with a real estate expert and financial advisor. They can help determine whether REIGs are suitable for you depending on your investing goals, risk tolerance, and financial circumstances.
We hope you find this helpful!
If you are looking to buy or sell real estate properties in New York by seeking expert assistance, get in touch with Elite Properties today!
Single-room occupancies (SRO) have existed and have been used for centuries. Yet, they have a complicated history!
Today many Americans are facing a home affordability crisis as a result of the rising cost of housing in cities like New York. In such high-cost markets, SROs, generally boost the supply of affordable housing and decrease homelessness.
On the other hand, there’s a common trend that people are purchasing these types of properties and converting them into single or multi-family residential to gain better profits.
So, let’s find out more by taking a closer look and understanding single-room occupancies (SROs) in New York.
What Is A Single-room Occupancy (SRO)?
A furnished single room that can be rented on a monthly basis or for an extended period is called an SRO.
Generally speaking, SROs are multi-tenant houses or apartment buildings with small individual rooms that share a kitchen and a bathroom in common areas. This type of housing is usually targeted at people with low incomes or single adults who prefer a minimalist lifestyle.
SROs are similar to low-end hotels, commonly huge buildings located in big cities. In fact, a lot of them feel more like hotels but with fewer amenities.
Modern SROs today are marketed as co-living spaces or micro-apartments. A co-living space is a form of communal living in which you get a private bedroom and the rest of the rooms or common areas are shared. A micro-apartment is a tiny studio which is a small, two-room flat with a kitchen or bedroom combo and a bathroom.
Classification in SROs
SROs are usually classified as “Class B” residences in New York City.
A “Class A” residence is regarded as a proper apartment rented on a monthly basis or more. A “Class B” residence is a multiple dwelling that is rented out on a temporary basis to individuals or families who are lodged with or without meals.
Class B properties are a level below Class A properties and are typically older, with renters who have lower income, and may or may not be professionally managed. Commonly, rental income under Class B is less than Class A.
For SROs, a Certificate of Occupancy will say “Class B,” “Rooming Units,” or occasionally just “Rooms” or “Furnished Rooms.”
Background Of SROs
SROs were there for a long time, but they peaked in the late 1800s when a large number of workers from the West and Europe arrived in NYC and other major eastern US cities in search of work in the rapidly industrializing eastern region.
Many of these workers were single and sought out single rooms; female SROs had curfews to keep residents safe, and hot meals were usually served in the common areas.
Men’s SROs, on the other hand, quickly became a magnet for vagrants and criminals. Further, SROs began to decline by the mid-20th century, primarily because the majority of urban residents wanted them gone.
Though SRO housing initially emerged as an economical alternative for urban migrant workers, they later saw restrictions and declines as a result of changes in housing laws.
Many were destroyed or converted midway through the 20th century as a result of urban redevelopment initiatives.
Current Status Of SROs In New York
Today, single-room occupancies have once more gained attention real estate pricing keep rising. In fact, they are beginning to draw in a younger, up-and-coming demographic.
There are about 210,000 small units that are currently available in NYC but they are unlikely to satisfy the potential demand for a cheaper renting choice, given that there are about 1.2 million single adult renters in the city.
This is why renters are drawn to SROs because they offer more privacy, independence, and affordability, which can potentially raise demand for such affordable residences.
Also, SRO-designated properties often entice investors with reduced prices and revenue potential. However, due to restrictive rental policies and limited financing alternatives, these properties are ending up being an operational burden rather than a profitable investment.
As a result, standard multifamily residential apartments are what most of the SRO-designated property owners are constantly trying to convert such SROs to.
Converting Single-room Occupancies SRO
SROs mostly emerged after the Great Depression, when owners started turning their residences, such as townhouses and brownstones, into SROs. Because these SRO rooming units can no longer build for profit in NYC. The property owners are constantly converting them into regular multi-family residential or Class A apartments.
An architect will apply to the New York City Department of Buildings (NYC DOB) for a new Certificate of Occupancy and do all the required alterations to bring the property up to code in order to convert SROs into Class A apartments. The application also require a copy of HPD’s Certificate of No Harassment.
What Is A Certificate Of No Harassment (CONH)?
To convert a property out of the SRO category or to conduct any significant changes to an SRO. The owner must get a CONH from HPD.
This certificate serves as proof that the owner did not harass any of the SRO unit tenants. This aimed at persuading them to vacate the building for improvements.
Common Uses For SRO
Those in need of affordable accommodation benefit most from SROs. They’re an excellent option for those on fixed incomes, low-wage workers, and students.
SROs are also a great choice for those who require temporary housing. Temporary employees and recently divorced individuals can also easily reside without signing a long-term lease.
That is it!
We hope this blog has helped you gain better insights into SROs.
If you want to make informed decisions while dealing in real estate, professional guidance is the key. You can get in touch with Elite Properties’ experts now!