Real Estate Investment Groups Rising
Real Estate Investment Groups are once again appearing to outstrip every other investment vehicles.
Attending a number of investment expos and seminars have brought to attention this one group that appears to even surpass the Private Banking Investments (those new Private Banking Players).
These groups are not necessarily REITs (Trusts) but certainly, they are marketing and promoting extremely hard. Mostly developed with Private Investment Funds they in a sense operate like country banks.
The UK has become a very popular target for these companies after property prices have taken a severe tumble there. Of course investment in the USA is also a common one now, but foreign investors may have to beware of some very punitive real estate withholding or imputed property taxes there.
This time, I won’t be mentioning these groups’ names but they do have a common M.O. or modus operandi.
Typical M.O. of these Real Estate Investment Groups
1) a grouped fund is operated as a financier to guarantee the purchase of the entire property or project at very low prices (some not so low).
2) They retail pieces of “real estate investments” to private investors, only using their good credit, not cash…
* yeah right – once you hold title to the property your rear end on the line for it and remember there is an opportunity cost…
3) Management and rental is not your problem, and you are obligated to resell the property back to the bank rolling company after X number of months or years.
Caution to any Investors
1) My immediate assesment of such an M.O. is that your credit is being used for a possible profit, “guaranteed” or not.
2) You are at open risk to the property, not the funding company.
3) However, the upside potential is being curbed when you are obligated to resell the holding back to the funding comapy.
4) The funding company and other invovled party is essentially using your credit to fund their project/s and gaining the lion’s share of the proceeds as a result at largely your personal credit.
5) Remember, even though it is their “cash” you are using for “no money down” it your risk – everything you use as credit is at risk.
6) My assessment is that this is a high risk enterprise if you go into it for your wealth building enterprise.
7) Should you wish to proceed – do the math; do your due diligence; ask many hard questions and ask this question “Can I trust them?”
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