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The two main benefits of co-investing in real estate

31/03/22  by IGOR GORBATSEVICH

Investing
Co-investment and crowdfunding platforms have democratised the investment process. They provide an accessible solution that caters to diverse investment amounts and risk appetites. All this without the extra complexity of owning the entire property outright. 

Co-investment allows investors to buy part of a property or group of properties, or provide part of a larger loan alongside other investors. Investors can either own a share of a property (equity) or offer finance in the form of a loan (bond). A large part of its popularity derives from its potential to generate income and capital growth. It can also provide liquidity and variable tax benefits. 

The difference between equity and bond co-investment 
When you buy equity in a property or development, you own a share of the asset. This is sometimes referred to as fractional ownership. Investors who own a share of the property stand to make a profit from asset values increasing and also from regular dividend-like payments such as rent. 

Bonds work in a different way. Instead of owning a piece of the underlying asset you loaning money to a developer or investment company. This company will then pay you a fixed or variable rate of interest on your cash. Variable returns carry more risk and thus earn a higher rate of interest. 

Both shares and bonds carry their own risk and reward profiles. For the right investor they both offer ample opportunities to diversify and generate returns from your portfolio. 

Benefits of the co-investing model 
The two main benefits of co-investing are the lower costs and the ability to share risk with other investors. For example, if you want to invest in a £1 million property on your own, you will need the entire £1 million. If you are co-investing with 100 other investors, on the other hand, you only need to put up £10,000. This means you can spread your £1 million over many projects, thereby diversifying your risk. 

Different financial structures and products can also offer different risks and rewards. Investing in a development that has not yet been built could be potentially risky for an unsophisticated investor. Other options such as mezzanine loans, carry protection mechanisms that lower potential risk. 

Providing access to new investment opportunities 
Co-investing is also accessible to many people that would not otherwise have access to the UK property market. By investing in a share or portion of a property development, rather than owning the whole thing, the time and effort of investment is reduced. Co-investing also ensures all legal requirements have been taken care of and the investment vehicle already exists, further simplifying the transaction. 

How Shojin uses co-investing to offer the best deals 
Shojin acts as your partner when investing in property. We analyse and monitor each investment and co-invest our own funds alongside you. Whether you invest in rental property, participate in secured lending or corporate bonds, there are a range of products that cater to different preferences in terms of risks, returns and timelines. 

Our co-investment model gives you the opportunity to invest alongside experienced property professionals. Being a co-investor also gives you access to exclusive deals and opportunities. Many of these will not be available on the public market. 

You can find out more about Shojin’s co-investment model and the hands-off experience that this provides here.