Skip Navigation Links

Property (Real Estate) Investment Clubs

Over the years members of The International Law Partnership Ltd. have assisted many Property Investment Clubs. In our view these can be a superb way to build up a portfolio of international property investments.

What is a Property Investment Club?

A Property Investment Club is simply a group of people who have got together for the purposes of investing in property (real estate).

It is modeled on the Share Investment Clubs that were common in the 1980's and 90's.

The members of the Club together make the investment decisions. They may (and often do) seek professional advice about what ot buy but, ultimately, it is they who make the choice.

The members of the Club also manage the property - though this is normally delegated on a day-to-day basis to a local property management company.

Warning! - Commercial Property Investment Clubs

Over the last few years a number of commercially operated companies calling themselves Property Investment Clubs and entered the market place.

These are often the exact opposite of the type of Property Investment Club described in this guide. They are expensive to join. Their administrative costs are enormous. They do not buy very good property because they are such big organisations. They are constantly challenged to buy enough to keep their members happy. As a result they tend to produce very poor financial performance for their members.

What are the advantages of investing via a 'proper' Property Investment Club?

Low cost of entry

If you wish to buy international property as an investment - and, even today, many people do because of it's strong performance over many years - it can be expensive. Even a small apartment in an emerging market might cost you £40,000/€50,000/$60,000. If you wish to buy a better resdidential property (which can often be a better investment than a cheap one) or if you wish to buy a shopping mall, a factory or a piece of development land the investment required can be huge. This is a lot of cash to invest in one project. If you do not wish to invest the cash you have to arrange mortgage finance for part of the price. This can be complicated or, in some cases, impossible and - in any case - many people are not comfortable about excessive borrowings.

If 10 people grouped together to form a Property Investment Club they need each only invest £4,000/€5,000/$6,000 to buy a cheap property or $50,000/€60,000/$75,000 for a much more substantial property investment. In either case, they then own 10% of the asset and they are entitled to 10% of the income it generates and 10% of its growth in its value.

Diversification

Investing only a relatively small amount in a project enables you to invest in a number of projects in different countries around the world. This diversification generally makes your investments less risky and it can often increase the overall performance of your investment portfolio.

Property Investment Clubs are usually set up as pure investment vehicles and not as a way of sharing the use of a holiday home (see our guide to Fractional Ownership if this is what you want to do). However, if you do own a share of a number of properties around the world, diversification also gives you a number of places to visit in order to check up on your assets.

Profit

Property Investment Clubs can be extraordinarily profitable. This is because investors are investing their own money. As a result they, generally, take great care in choosing the right properties in the right place and in making sure that they pay the right price for them. They are prepared to take time in order to sniff out true bargains. It is these properties that tend to generate the most rental income and the most capital growth.

Property Investment Clubs are also profitable because they have very low operating costs. The members of the Club do not charge for their time. They have no fancy offices or expensive staff. They do not provide a Bentley for the Chairman and they are not required to produce a profit for any shareholders because there are no shareholders. In other words, all of the profit goes to the members of the Club!

Simplicity

The Property Investment Club is a well recognised and very simple legal structure.

Their administration is also very simple. It usually comprises only calling a twice yearly meeting of members and, if the members want to do so, arranging for some appropriate advice.

Their accounts are also very simple. They are what is known as 'tax transparent', which means that the Club does not pay any U.K. tax on its income or capital gains. Before you get too excited, I have to point out that each individual member of the Club will have to pay tax on their share of the profit and gains! But this does mean that the accounting records of the Club are easy to maintain. Generally, the club will receive a payment by way of income from the managers of each of the properties that it owns, it will pay out the expenses of running the club (normally, very low) and it will divide what is left between its members.

How can The International Law Partnership Ltd. help Property Investment Clubs?

Our lawyer and other professional members can set up a Club for you.

This is a low cost operation, typically costing between £1,500 and £3,000.

Our members can advise you about your Club's property investment plans

Where should you buy? What type of property would be best for you? How should you structure the purchase to minimise your tax obligations? What should be your exit strategy? See our Guide to Property Investment.

We can help you locate suitable properties

In many cases our members can help you locate property to meet your chosen specification. See our Property Finding Guide.

We can deal with the purchase of any properties you decide to buy.

The lawyers who are the members of The International Law Partnership Ltd. will make sure that your purchase is done properly and safely. See our Guide to Buying a Property.

We can recommend and appoint a property management company

In many places the lawyers and other professionals who are the members of The International Law Partnership Ltd. will be able to use their local knowledge to recommend a suitable property management company to look after your property and deal with any rentals.

We can give ongoing assistance

Property Investment Clubs are such simple organisations, that they seldom require ongoing legal or accountancy assistance but, if you need it, the members of The International Law Partnership Ltd. will usually be able to provide it.

We can deal with the sale of your property

When the time comes to sell, our members can deal with the legal work on your behalf.

Next steps

Please look at the Legal Guides, videos, MP3 seminars and other materials set out to the right of this page.

If you would like us to help you, please complete our Client Pack and send it back to us. We will contact you to clarify your requirements and then introduce you to the person most appropriate to deal with your case.

If you do not find the information that you need, please send us an email explaining your problem and we will contact you.

© The International Law Partnership Ltd. Page last revised 8th February 2010