Full Ownership vs. Pooled Ownership Investments: Pros and Cons for Both
If you invest in large real estate syndications, you likely have encountered the concept of pooled ownership.
Pooled ownership involves combining your money with that of other investors so that the fund manager can leverage that capital to do bigger deals than you otherwise could do on your own.
This is great for multifamily syndications, big development projects, and other big commercial deals, but the concept has trickled down over time into the single-family residential (SFR) as well. In that space, it makes far less sense in most cases and can even place your capital at unnecessary risk.
Fund managers who advocate for pooled investments in the context of SFR investments tend to justify the concept by pointing out that having access to a greater amount of capital enables them to buy in bulk or otherwise leverage that buying power to create a situation in which they can get better prices on the properties they are acquiring. However, that “advantage” can quickly turn into a disadvantage for you, the investor, if the pooled investment funds buy a package of properties in which not all the properties are that great.
Another issue with pooled investments is that you, the investor, have to give up your control and your access to transparency. When you have full ownership of a property, even if you are a passive investor, you are able to monitor the activity on that property. You can reach out to your investment manager and ask questions. You can have peace of mind that your investment is proceeding according to plan. On the other hand, when you have pooled investments, you must track dozens of properties. If you have concerns, they will be more general in nature and, unfortunately, not as easy to alleviate or remedy because your fund manager will be keeping track of dozens of projects and is likely relying on better performance from one asset to balance out negative performance from another.
At Strategic Passive Investments, we do not offer pooled investment opportunities to our investors because we believe this does not serve them as well as 100 percent ownership. When you invest with Strategic, each acquisition will be purchased in your name (or the name of your business/investing entity) and will remain 100 percent yours for the entire transactional process, whether you choose to fix-and-flip, wholesale, rehab-to-rent, or something else entirely. Because SPI is a performance-based company, we do not collect our payment until you collect yours, and our payment is directly tied to your success.