Investors; If One is Good – A Dozen is Better

Second in a four-part series

Synergy: The working together of two or more things, people, or organizations, especially when the result is greater than the sum of their individual efforts or capabilities.

Synergy is a good way to describe the power of real estate investor groups. If one investor is good, a dozen or more investors working together is even better.

It’s simple.  Multiple investors working together can bring more money to the table, than an individual.  They also have the ability to borrow more funds and take on more debt and risk.  In addition, with the right members, an investment group could include attorneys, accountants, realty agents and other professionals to strengthen the team.

“Investors are buying in bulk,” said Tami Gosselin, a Century 21 M&M and Associates Realtor in Modesto.  “The minimum buy is $5 million.”

Gosselin, who works exclusively with investors, said $5 million could purchase 40 to 50 properties.  In addition, banks such as Citibank, Chase and Wells Fargo are interested in working with investor groups, as such large pool purchases helps them to clear out their inventory of REO — real estate owed — properties.

“They can buy from the banks at 50 cents on the dollar,” she said.

In bidding at the $5 million level, investor groups also have much less competition than a buyer competing for a $100,000 house.

Shannon Meredith, a Century 21 M&M Realtor based in Lodi, said she worked with a New York investor group from 2008 to 2009.  The group would “flip,” or resell the properties quickly.  Net profit per unit, after repairs and maintenance, would range from $5,000 to $10,000.

“I probably did eight to 10 deals with them last year,” she said.  “Some were high-end, up to $600,000.”

However, Meredith said the group eventually folded due to a financial mistake made by their in-house lender and being priced out of the market.

Meredith said there is a Modesto-based investment group actively purchasing area property.  She said she recently represented a seller, who sold the group a $275,000 single-family home in Lodi.

“They’ve got a well-oiled machine,” said Meredith.

Next Week: Flipping Real Estate

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