Rental Pool: New Opportunities in Equity Investment
Today we find a growing interest in the so-called rental pool.
Today we find a growing interest in the so-called rental pool. Many people ask themselves, “What is a rental pool?” The term is ambiguous and as such, it will not be possible to find it in real estate investment books, real estate publications or on the Internet.
However, it is possible to find evidence of it through various success stories at a global and national level, in which the term is mentioned. Let’s now clarify, from our experience, how this excellent investment tool works.
A rental pool is a real estate investment scheme, in which a community of owners become shareholders of a property according to the amount of their investment or their participation in square meters of the total of a property that in turn is governed by a transparent administration. The ownership of this property may vary between offices, commerce, housing, mixed use and many others.
Having this definition clear, we can enter the process involved. The investor interested in patrimonial goods, having the capacity to buy from 50m2 (this will always depend on the design of the project), should be aware that the scheme in a rental pool consists of the acquisition of a portion of a property, usually a condominium.
The investor can become a founding partner of the property. This is guaranteed with his participation during the first stage of the project, which can be with a cash payment or through a down payment and monthly payments. However, your participation may still occur during the next stages of the project.
Once the property has been built, it is registered as a condominium, the proportional shares of the partners are deeded and the integral rent starts in an institutional manner. During the period of operation, the investor will obtain income from rents according to the occupation of the building, added to his proportion as a partner within it.
It is thanks to this professional administration of rents, with a clear management of accounts and corporate governance, that several clear objectives are established, such as:
- Market the property in a controlled manner, avoiding unfair competition between owners.
- Establish a technical decision-making committee, which approves budgets, monitors income, determines estimated amounts of rent, qualifies potential tenants, and so on.
- To carry out the integral administrative control; collection, income, expenses, distribution of utilities between the corresponding owners.
The benefits to the investor are diverse. When entering a rental pool there is a security of investment and income even when the space is not rented. You receive proportional utilities of the total rent of the property, maintenance costs are reduced, both fixed and variable, up to a third compared to the costs generated under an independent owner, and finally, the worry of renting or managing your property disappears, since it will be managed by professionals, who will give you your monthly check and generate a considerable capital gain.
There are several options for investment returns; in this case, we strongly recommend two planned business models previously calculated. The first one is proposed during a prolonged period of time with the objective of achieving a short-term income maturity keeping it for the benefit of the owner.
The second and most recommended is to structure the rents to a determined number of years to when reaching its optimal maturity, to place the property inside an Institutional Fund or Fibra offering to the investor a yield superior to the average of the market.