Residential development syndicates are often touted as highly lucrative, but are there other reasons sophisticated investors are choosing this investment type?
Many investors will, at some stage in their journey, consider developing a property on their own. But is direct development always the best strategy, or can joining a development syndicate be a more appropriate option?
Here are 6 top reasons to consider residential development syndicates as part of your investment strategy:
- Access to larger, higher-quality investments
Development syndicates will often be multimillion dollar projects that the large majority of individual investors simply couldn’t fund by themselves. Even for high-net-worth individuals, who could bank-roll such projects, the risk of putting all their funds into one project is simply too high. Development syndicates allow investors to access these larger, higher-returning investments that are otherwise out of reach for many.
- Lower capital investment
Instead of undertaking your own development or buying an investment property, which would cost potentially $1 million-plus, residential development syndicates generally require a minimum investment of between $50,000-$100,000, making the capital outlay significantly lower.
- Greater diversification of assets
As the capital outlay is lower, investors are able to spread their funds across multiple investments. This could be in several residential development syndicates or incorporating commercial syndicates or direct commercial or residential property investment into their portfolio as well. By holding a greater diversification of assets, investors are effectively mitigating their risks.
- Shorter-term investments
Residential development syndicates often provide investment terms of 2-3 years, providing returns in a much shorter timeframe compared to direct residential investment.
- Managed by professionals
Provided you engage a company with a good track record, residential development syndicates will be managed by a team of professionals who can utilise their expertise to secure the best results for the project. They will take care of researching and negotiating the acquisition of a development site to planning approvals and ensuring the designs are targeted to the right target market. For individual investors wanting to undertake a development, it can be extremely time consuming and difficult to manage all this on their own, which is why residential development syndicates can be a better option.
- Less stress than completing your own development
Residential development syndicates are managed by a professional team, meaning investors only have to provide the funds and wait for the returns at the end of the project. The syndicator will complete all the work, from finding and acquiring the site, to assisting with project designs and approvals as well as construction and sales of the project. Good syndicators will provide investors with regular updates regarding the progress of the project.
Residential development syndicates can offer unique opportunities to investors, but that doesn’t mean they are suited to everyone. It is recommended to speak to an advisor to determine how these residential development syndicates fit into your investment strategy.