Pooled Fund Investing is the combining of capital from multiple investors which, when added together, create greater purchasing power (and thus more diverse and higher returning investment opportunities). By pooling resources (capital) with other investors we are all able to achieve something greater than what we could achieve on our own.
We've all heard the expression, “The rich keeping getting richer”. This is often because high net worth individuals are able to invest in America’s best performing, most stable real estate properties. In fact, the wealthiest already own most of America’s “High Ground”, of larger, more expensive, higher-performing real estate assets.
Few private individuals can afford to buy these kinds of investment properties on their own.
The opposite typically happens with smaller real estate investment properties. Smaller investment properties generate greater competition (because the less capital required to buy a property, the more potential investors there are in the buyer pool), which drives up the price and reduces potential returns - the principle of supply and demand.
Therefore, in order to seize the best investment opportunities, and assume the least amount of risk, intelligent investors should mirror that of high net worth investors, by pooling resources (capital). This will enable you to invest in those well-positioned, quality buildings, which offer stable cash flow and high returns. By pooling resources with other investors you will be able to invest in the "High Ground" too.
We have been assembling small groups of investors ("Pooling Funds"), for years.
The group is comprised of a few (typically 2 to 5) investors, with similar investment goals. As a group you will invest directly in a piece of real estate. Each member of the group will hold title to the real estate as Tenants-In-Common. Realty Yield's Tenant-In-Common investment opportunities are not securities. They do qualify for 1031 exchanges.
NOTE: Realty Yield can take the role of Sponsor (Syndicator) and Co-Invest for those investors interested in partnering with us.
These groups typically have a 3-8 year life span, with an initial 12 to 18 month period in which a property is fixed up, rents (income) raised (maximized), and operating expenses trimmed where possible. Next, there is a holding period, until each of the 4-engines that drive income-property investment returns is optimized and reaches its peak level. It is at this point that the property is usually prepared for sale.
Realty Yield is particularly well positioned to facilitate these pooled-fund investments for private investors. Our team has considerable experience working with owners/clients in an asset management capacity, to strategically maximize returns and accelerate capital/equity growth at the highest possible rate.
Asset management is different than property management; this is a key point all real estate investors should clearly understand. Real estate investments should be proactively managed on an ongoing basis. Every real estate investment needs an operating plan tailored around the owner’s specific investment objectives. This plan should articulate specific strategies and tactics aimed at tracking and influencing the moving parts of your real estate investment. An effective operator must understand whether a property is stable, in transition, or in need of repositioning and have a plan that anticipates and responds to the unique opportunities and pitfalls associated with that particular property.
Our knowledge of real estate economics and our proven process for applying that knowledge to specific real estate investments are the keys to our clients' success.
Additional information about these Pooled Fund groups is illustrated below. Alternatively, you can contact us for more detailed information, or to schedule a time to meet in person.
There are four engines that drive investment real estate returns; Cash flow, appreciation, mortgage pay down and tax benefits. The rate of return of all these combined is often called the Internal Rate of Return or IRR. Over time the tenants pay off your loan, rents go up and your building becomes worth more. Much of your new wealth, however, is in the building and can only be accessed by selling or refinancing. The rate of return on all your equity, your IRR, usually peaks somewhere around 4-7 years into an investment. Over time you build up what is often called dead equity or money that’s not working for you. To produce the highest returns while assuming the least risk, you have to turn over projects at least every ten years.
Typically, it takes at least $350,000 in investment capital to buy a large enough property to start seeing a higher rate of return and to realize some economies of scale. The minimum investment is really a function of how many partners you want. We’ve found that 2 to 5 are typically best. Most participating investors usually have at least $100,000 to invest. This is not a hard rule by any means and there are plenty of exceptions.
The Tenant-In-Common entities are each named on the deed, as well as the Tenant-In-Common entities percentage of individual ownership. A signed agreement between Tenant-In-Common owners details respective rights and responsibilities.
One owner is designated the manager. This can be a paid or unpaid position, which can be passed among owners. This manager is responsible for contracting with a professional property management company, to handle the day-to-day operations, as decided and directed by the group. The managing member serves as the conduit through which information, news, and correspondence, can flow between the individual owners, the property management company, and in some/many cases Realty Yield. The managing member is responsible for insuring all members receive their monthly income and expense reports from the management company. The managing member will typically visit the property at least twice each year and encourages all other members to join him or her.
Each year the managing member of the investment group revisits the management strategy, with both the property management company and Realty Yield. After consultation with the group and reviewing reports, the property’s annual operating budget is discussed and prepared by the property management company.
In the event that one or more owners wants to buy or sell their percentage of ownership before the entire property is sold, the managing member works to insure the activities of the Tenants-In-Common conform to the procedures spelled out in the operating agreement.
The property management contract is typically for a period of one year and can usually be cancelled with 30 days notice. Contracts typically require the management company to get approval for all non-recurring expenses over $1,000.
Additionally, all services the owners, as a group, contract for, should have separate contracts, with payments based on specific services rendered. For example real estate commissions earned from buying and selling a specific piece of real estate, professional property management fees, legal and accounting fees and fees associated with refinancing of existing debt. The group may contract for specific products or services from an individual member of the group if that member is affiliated with a business that can offer value to the group. The contract needs to stand on its own merits and be open for review and separate from the ownership agreement.
Some of this may sound complicated but it’s not. The idea is that we’re all in this together. Realty Yield often partakes in the chosen investment. Each owner is paid a return that is directly correlated to their percentage ownership in the property. No owner will be paid a return in any way other than as a percentage of their ownership in the property.
At Realty Yield, we want your investments to succeed. All investors need a plan, whether your goal is capital (equity) growth, maximum cash flow, realizing optimum tax benefits or any combination thereof.
The experts at Realty Yield will guide you through the complex and ever-changing world of real-estate investment with confidence. At Realty Yield, we know that lasting wealth comes from making the right decisions, at the right times. Knowing what to do in these moments is what sets Realty Yield apart.
By working with us, you’ll benefit no matter what your needs, whether you are looking to buy real estate property, sell real estate property, complete a 1031 exchange, secure a commercial loan, consult on investment real estate / portfolio performance improvement strategies, or executing a tax favorable exit strategy at retirement.
You are more than just a client, and we are more than just a brokerage firm. That’s why at Realty Yield, we make a personal commitment to you. We will create your own, unique, expertly crafted, Personal Real-Estate Investment Strategy. We give you the best results because we have the knowledge and experience to create your best plan of action. We will guide you through those vital decisions of what to do, how to do it, and when to do it.
We know we are only as successful as our clients. It is by providing unparalleled service that we keep our clients for life. Working side-by-side, year-in and year-out, we will proactively manage, assess, and strategize your financial investments through all stages of the investment life-cycle.