Truth of the matter is commercial property investment has traditionally been the preserve of life insurance and pension funds and the sophisticated, hard nosed big fish of the rich list. The advent of property syndicate investments has given investors lower down on the food chain the opportunity of pooling resources to take advantage of the big money returns and capital security once thought to be the preserve of the rich. The rich use commercial property strategically in their wealth planning management. Here are 6 reasons why you too should invest in commercial property through the medium of property syndicate investments and use the same wealth building strategies and tactics of the rich.
1. Security - unlike most other forms of investment, the supply of land is limited. Also, some people simply love property because you can touch it and that makes them feel safe. Commodity and share certificates are simply promissory paper notes - just promises. The only thing that will wipe the value off your property completely is if it becomes permanently submerged. In finance, property provides ultimate security to which most lending is tied. If the creditor can not repay, the property will revert to the lender. Consequently, if you have a primarily defensive investment strategy, property will provide you with a level of basic financial security which no other form of investment can rival.
2. Capital appreciation - commercial properties normally appreciate in value. Syndicates will have an acquisition strategy which will build in a lot of value on Day 1. Conversely, a different strategy will seek to maximize returns on disposal. Commercial property will generally appreciate over time. By their nature, these investments are generally medium to long term - 5 to 7 years - in duration. This allows the acquisition fees to be absorbed and capital value to appreciate significantly over years before sale. Timing can also be used to take maximum advantage of market conditions during a sale campaign.
3. Investment Yield - Typical yields will depend very much on location. "A Location" or trophy properties in high profile locations will typically have a much lower yield because of acquisition costs. Very attractive yields of 7%+ can be had in "B Locations" however. Selected "B" Location objects should have substantial rent surpluses to offset against gearing and maximize the big money return at the end of the project. Syndicate managers will seek to improve yields during the investment term by increasing occupancy and obtaining modest rent increases, especially if the investment was acquired off market or rescued from insolvency.
4. Bank Finance - the rich and powerful life and pension funds by virtue of their sheer size can obtain very favorable fixed rate bank finance terms for their land deals. So too can you when you join a Property Investment Syndicate. Experienced syndicate managers work on the basis of strong ties with the security departments of a handful of German banks. All leverage involves risk and these banks are well situated to understand and appraise the nature of the investment syndicate's business proposition. Check the gearing ratio and be very cautious with your hard earned cash.
5. Due Diligence - When you decide to invest in a Property Syndicate Investment at home or abroad, you're buying into the specialist services of a wide range of skilled professional practitioners which otherwise would be unaffordable. Property developers and managers, engineers, bankers, tax accountants, tax lawyers and conveyance lawyers will appraise an opportunity in minute detail. These people know that the day you buy is the day you sell. They will turn every stone at acquisition to ensure a quick snag free sale down the road. These professionals operating as a team will combine to provide synergies which will deliver enhanced value and more money in your pocket at the end of the day.
6. Management expertise - When deciding to purchase an investment you may intentionally favor a property which lacks a particular feature or which could benefit from structural upgrading or added amenities. If the value of the improvement exceeds the cost you have just increased your equity stake in the holding. Investment managers in conjunction with other property professionals on the team will seek to improve equity by sticking to the schedule of maintenance and repairs, seeking to make cost effective structural improvements, rental covenant reviews and so on.