Whether you have been thinking of purchasing an investment property or you have been investing in real estate for your whole life, you have probably come across the terms equity REIT and real estate syndicate. Both of these investment methods can have an impact on your investment, depending on what type of property you want to invest in, how long you want to invest and plenty of other factors, so it is important to understand exactly what they are. So, what are the main differences between an equity REIT and a real estate syndicate? Take a look below to find out.
What is an equity REIT?
Before we get started, it is important to understand what each of these terms mean. An equity REIT gives investors the opportunity to invest in portfolios of real estate, with each company owning properties in a variety of real estate sectors. These properties can include office buildings, shopping centres and apartment blocks.
What is a real estate syndicate?
On the other hand, you have real estate syndicates. Real estate syndication is when a group of investors get together to combine their capital to buy or build a property. By using this method, buyers can have significantly more buying power than what they would usually have if they were a sole investor in a property.
Differences
Number of assets
One of the key differences between an equity REIT and a real estate syndicate is the number of assets you will acquire. Equity REITs are investments in a portfolio of properties across a variety of areas of real estate. By investing in a variety of properties, investors can develop a diverse portfolio of investments. Real estate syndications are different, as you invest in a single property within a single market. This gives investors a more personalised approach to their investment, as they will know all of the specific aspects of their property, as well as its business plan.
Tax benefits
The decision between an equity REIT and a real estate syndicate can also impact the tax benefits you can gain from your investment. One of the key factors of investing in property is the tax savings you can receive, especially depreciation. If you invest in a property directly, you will receive a variety of tax deductions. Although both equity REITs and real estate syndicates receive these benefits, you will not receive as much if you invest in an REIT. This is because equity REITs are investments in a company instead of directly into real estate, whereas real estate syndicates are direct investments into property.
Minimum investment
As equity REITs are shares, they can cost significantly less than an investment in a property or a real estate syndicate. Equity REIT shares can be as low as a few dollars, whereas a real estate syndicate investment is easily within the tens of thousands of dollars range. This can be a big deciding factor for investors, as they may only want a small investment as opposed to a larger investment or vice versa.