How to make passive investments in real estate and get greater profitability for your money?
Updated: Apr 11, 2019
Passive investments are those in which the investor only contributes with capital and an experienced company performs and manages the business. In real estate investments, as in many other investments, a scale is very important. An investment of buying and renting an apartment may have a return of 4 to 6% depending on the place and the purchase price. These returns increase significantly if you join a group of investors and you can buy an apartment complex with 100 or 200 units.
ACORB Capital & Investments connects private investors with companies that have experience and a solid record of accomplishment in real estate investments in the United States.
Companies that develop these investments, which contribute capital and labor are called General Partners and the investors who contribute with capital and do not have to contribute with work are called Limited Partners or passive investors. The process of forming the business and bringing together limited partners is called syndication.
Types of passive investments in real estate
Passive investments in real estate can be in different types of properties, land, apartments, houses, commercial premises, storage units, etc. There are different types of investments to buy and wait: buy turnkey, value-added investments and construction and development investments.
Buy and wait investments are very common in lots of lands. The land is purchased in an area that is thought to be valued, for example, because the city expands in that direction. Then when it is appreciated, the time has come to sell and there may be a subdivided which increases profitability. They are very long-term investments and ACORB does not work with them.
Value-add investments are very common. The general partner looks for a property in which the profitability can be improved by making a certain investment. For example, an apartment building, in which rents are low due to the state of the building and/or bad administration.
After buying, the property is invested in the interior of the apartments, outside possibly services such as a laundry room, barbecues, and apartments that are empty are rented. Then increasing the rent according to the new apartment category and eliminating deficiencies increase the two values, the profitability per month and the total value of the building.
Advantage of passive investments in real estate
These investments have the advantage that they provide a flow of money to the investor almost from the beginning and then when selling the property the investor obtains the return of his capital plus an interesting gain since the property is worth more. These investments are very common and you can see an example at https://www.acorbllc.com/?lang=en.
You must create a free account to enter the member’s area. The objective in this type of investment is to obtain a 10% annual return on cash flow and then to sell the property at 5 years get a 20 to 40% more of the capital invested, which averages an annual return of 15%
Other types of investments are those of development. The general partner arms an investment by buying land and building a property. In this type of investment, the capital and all the profit are obtained at the end when the property is sold. The time depends on the size and complexity of the construction and goes from 1 year for small projects to 3 years for large projects, being 2 years a fairly typical term. In general, the aim is to obtain a return of 20% or more per year. You can also see an example of these investments at https://www.acorbllc.com/?lang=en. There are also mixed investments in which after the construction the property is rented or exploited.
In turnkey investments, the property is already being used and there is no need for investment to improve it. It also has the advantage that it has cash flow from the first moment, but the returns are lower. In general, ACORB does not work with them for this reason.
Real estate investments are backed up by the property and the experience of the general partners. In addition, insurance against fire and other insurance necessary for the construction and running of properties are taken. The experience of the general partners and the scale of the investment produce a higher return that is otherwise unattainable for the individual investor.