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Investment Groups

The purpose of forming investment groups is simple.

By pooling resources with other investors we are all able to achieve something none of us could achieve on our own. By pooling our resources we are all able to remove the barriers blocking our access to one of the lowest risk highest return local investment opportunities.

You’ve heard people say the rich keeping getting richer. Well there is a long history of high net worth individuals and institutional investors pooling their resources to invest in America’s best performing most stable real estate assets. They already own most of America’s High Ground. These are often large and expensive assets. Unfortunately, few people in Portland, Oregon can afford to buy these large buildings. As a result the prices of these buildings are relatively low and their returns relatively high compared to similar, but smaller, investments most local investors are competing for.

That means they’re getting higher returns without assuming higher risk. The principle holds true as you move down in the size building you’re looking at. The smaller an investment is the more people who can afford to seize the opportunity. The increased competition between this larger pool of investors drives up the price and reduces the potential returns. So what should we all do? We should apply the same simple principle that high net worth investors and institutional investors use.

By pooling our resources with other investors we are all able to invest in higher ground too. We are able to invest in well positioned quality buildings that offer stable cash flow and high returns. For more than thirty years Westland has been assembling small groups of investors for just this purpose.

These groups typically have a 7-10 year life span consisting of an 18-month period during which a property is fixed up and repositioned and then a holding period during which the property is managed for maximum cash flow until each of the 4-engines that drive apartment investment returns reaches its peak level. At this point the investment is producing the highest achievable rate of return to the group of investors who pooled their resources and it is at this point that the property is prepared for sale.

These groups are not what you’re investing in. The group is comprised of a few other investors with similar investment goals. As a group you will invest directly in a piece of real estate. Each member of the group will hold title to the real estate as a Tenant-In-Common. Westland’s Tenant-In-Common investment opportunities are not securities. They do qualify for 1031 exchanges. Here’s a little more detail about the nuts and bolts of how the groups work but if you’ve read this far the best next step is to contact a Westland representative for more detailed information about groups or to schedule a time to meet.

The Tenant-In-Common entities are each named on the deed and their percentage ownership is stated on the deed as well.

There is an operating agreement between the Tenant-In-Common owners that they all sign which spells out everybody’s rights and responsibilities. One owner is designated the manager. This is an unpaid position and can be passed among owners. This manager is responsible for contracting with a professional property management company to handle the day to day operations under the direction of all the Tenants-In-Common working through the designated managing owner.

The management contract is typically for a period of one year and can be cancelled at any time with sixty days notice. The contract typically requires the management company to get approval for all non-reoccurring expenses over $5,000.

Each year the managing member of the investment group revisits the management strategy with the property management company and reviews and approves the property’s annual budget provided by the property management company. This is done after each member has had an opportunity to review all reports and is done in close consultation with all members who wish to be involved in the process.

The managing member serves as the conduit through which information, news and correspondence can flow between the individual owners and between the owners and the property management company. The managing member is responsible for insuring all members receive their monthly income and expense reports from the management company. The managing member also visits the property at least twice each year and encourages all other members to join him or her.

In the event that one or more owners wants to buy or sell their percentage of ownership before the entire property is sold, the managing member works to insure the activities of the Tenants-In-Common conform to the procedures spelled out in the operating agreement.

All services the owners contract for as a group should have separate contracts with payments based on specific services rendered. For example real estate commissions earned from buying and selling a specific piece of real estate, professional property management fees, legal and accounting fees and fees associated with refinancing of existing debt. The group may contract for specific products or services from an individual member of the group if that member is affiliated with a business that can offer value to the group. The contract needs to stand on its merits and be open for review and separate from the ownership agreement.

That sounds complicated but it’s not. The idea is that we’re all in this together. Because we all have skin in the game and all stand to win, or lose, together we can all rest easier knowing our interests are all aligned. Each owner is paid a return that is directly correlated to their percentage ownership in the property. No owner will be paid a return in any way other than as a percentage of their ownership in the property. No hidden motivations.