4 Benefits of Co-Investing in Real Estate
Should you invest in a real estate syndication deal? Keep reading to find out the advantages.
Commercial real estate is a valuable investment opportunity, but becoming the sole owner of a commercial property is often inaccessible for the average accredited investor. Owning and operating a commercial property requires time, expertise, and an enormous amount of capital.
Co-investing, on the other hand, allows you to experience the benefits of commercial real estate without the complexity. With a real estate co-investment, each investor owns a percentage of the property, proportional to the amount of capital they contribute.
Often a co-investment will be led by an experienced real estate sponsor, who manages the deal and coordinates with the various investors. This strategy offers many advantages to investors, and in this article, we’ll unpack five of the biggest advantages.
1. Decrease Your Investment Risk with Stable Assets
When you co-invest in a commercial asset, it allows you to access the advantages of larger deals than you could usually afford to invest in on your own.
In particular, this strategy allows you to invest in assets that are more stable and less correlated to the stock market than small commercial or residential properties.
At Excelsior Capital, we’ve found that commercial assets in secondary markets present a uniquely stable opportunity, particularly in asset classes like medical office buildings and flex/light industrial properties.
2. Invest Passively
Every real estate co-investment is different depending on the sponsor you work with. But in most cases, a real estate syndication is a completely passive investment.
When you work with an experienced sponsor like Excelsior, we do all the work of sourcing and vetting deals, managing the property, and coordinating with the other investors and partners. All you have to do is choose the deal you want to invest in and then sit back and wait for the returns to start coming in.
3. Choose the Deals You Invest In
Unlike a fund or real estate investment trust, co-investing allows you to choose the specific deals you invest in and how much you’d like to invest.
When you invest in a fund or REIT, the sponsor can allocate your capital to any deal or deals they choose. You’re essentially investing in a company or a fund manager, not investing in a property.
4. Access the Tax Benefits of Real Estate Investing
Because of this distinction between investing in a fund/REIT and co-investing in a property, the tax benefits between these two investment types are completely different.
Returns from a fund or REIT are treated as dividend income and not subject to the typical tax benefits of real estate investing. Co-investments, on the other hand, offer additional tax benefits, including depreciation and other valuable deductions. You can even do 1031 exchanges to reduce your taxes even further.
If you’re interested in learning more about Excelsior’s direct, co-investment opportunities, please fill out this form to get in touch with a member of our team.
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