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What Are Property Investment Companies and How Do They Work?

If you don’t have the time to search for houses, renovate them, and then sell them, property investment companies are for you. They do all the hard work and you get the ROI. But, are they really a simple way of getting a great return or should you tread with caution? Read on to find out.
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Property prices are soaring higher and there seems to be no stopping them. And this isn’t happening just on the coasts. Inland property prices have been steadily rising in the recent past and continue to climb higher.

Real estate is turning out to be one of the safest and most profitable investments that you can make. But, investing in real estate also requires time. You have to scout, recognize, negotiate, buy, renovate, and then rent or sell.

There’s also paperwork, rules, and procedures to consider.

What if you don’t have the time to take a bite of the profitable pie? What if you have a 9 to 5 job that requires your physical presence 5 days of the week? What do you do?

There are many ways you can still invest in real estate without spending all your time on it. You could hire a Clever Partner Agent who will do most of the work for you, from scouting for properties to helping you navigate the buying process.

Or else, you could hire the services of a property investment company.

What is a Property Investment Company?

Well, very simply put, they invest your money in real estate and give you returns on that investment for a fee.

In the real world, this usually translates to a flip. Property investment companies find old, unwanted properties and buy them using your money. Once the purchase is done, they renovate the entire place.

Depending on the state of the property, appropriate renovations are done. The house might need simple paintwork or require a complete renovation. Even though it is your money that’s used here, the advantage is that you don’t have to oversee the work.

Property investment companies take care of all the work for you. From hiring resources to managing the workflow and making sure all deadlines are hit - you don’t have to worry about any of it.

The Types of Properties You Can Buy

This is one of the advantages of investing through a company. Property investment companies usually have a huge portfolio of properties. And much like private buying, you can invest in any of them.

Rental properties, selling properties, single-family properties, multi-family rental properties - all are on offer.

As long as you can afford the properties and there are no legal barriers, all properties are fair game. Depending on what your interests are, you can choose the type of property to buy.

Some people are most interested in doing quick flips. So, they buy single or multi-family rental properties through property investment companies. When all the necessary work is done, they flip it for a juicy profit.

On the other hand, some investors want a stable side income. They usually prefer rental properties.

In essence, there’s really no limit to what you can invest in. As long as the company has the type of property you want, you can go ahead and invest your money.

Choosing a Property Investment Company

If you have decided to invest using a property investment company, just do a quick online search. You’ll see that there are literally hundreds of them.

Combing through every one of them in detail is almost impossible. So, here are a few tips to help you out.

Experience is Important

The fact is, if a company has been involved in a hundred deals, they’ll know what works and what doesn’t. This is especially true of property investment companies.

Remember, it’s not just about buying and selling. There’s a lot of work in between. Most properties will require some sort of renovation and experienced companies usually have a set of workers that they know. Things will move ahead swiftly and smoothly.

Your Goals Have to Match the Company’s Portfolio

Some companies only deal with properties that can be sold. If you want to buy a rental property, they are of no use.

Some companies only deal with commercial spaces and again, if you aren’t interested in such properties, skip the company.

Most companies that are experienced and have a good reputation don’t take on work that they normally don’t do. They will refuse. If a company seems to offer everything that you ask, that’s a red flag. Obviously, there are exceptions, but this is generally the way the industry works.

Property Management Matters

Some property investment companies don’t manage properties at all.

For example, if you buy a multi-family rental property, they will help you buy and they will renovate it for you. They don’t manage the property, meaning you’ll have to search for tenants, take care of paperwork, and do all the rest of the work.

If you’re new to real estate investment, it may be a good idea to hire a company that also manages your property for you. It might be slightly more expensive, but in the long run, it’ll save you a lot of time.

Don’t Forget the Company Fees

Thanks to the way real estate deals work, there’s no standard price that a company charges. Suffice it to say, depending on your requirements, there’s always room for negotiation.

However, the point to note is that fees vary from company to company. Factor in these fees before committing to property or indeed a company. While looking for the best deal isn’t wrong, rock-bottom prices usually come with riders.

Traditional Investing or Property Investment Companies?

There’s no doubt that property investment companies offer valuable services. However, not everyone needs the services.

For example, if you’re planning on buying a rental property, there are no instant returns for your renovating charges. Yes, you do get the rent, but recovering your money is going to take a long time.

So, maybe, depending on the city or the particular area, you’d be better off spending your money on a property that needs little to no renovation. This way, you don’t have to have an investment company at all.

On the other hand, you may not have the time to manage tenants or deal with all the paperwork that comes with a property. In this case, property investment companies are exactly what you need.

Unfortunately, there’s no ‘one size fits all’ answer here. But, the best way to go about it is to evaluate your needs very carefully. Time, need, and money are the deciding factors here. Once you know exactly what you want, the decision becomes very easy.


Thomas O'Shaughnessy
Thomas O'Shaughnessy

Tommy O'Shaughnessy is the Head of Research at Clever Real Estate, the free online service that connects you with top local agents to save on commission. Tommy's team of data scientists create surveys, gather data, and analyze trends in housing, real estate, and personal finance. He directs public relations efforts, acting as a "data communicator" between his team and the press. Clever studies have been featured in Politico, the LA Times, CNBC, Forbes, Yahoo Finance, and other publications.

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