Real Estate Club Deal: Invest Together in Property
The real estate club deal allows you to invest in major real estate projects by joining forces with other investors. Instead of buying a small apartment alone, you participate in the purchase of an entire building or a shopping center.
This way of investing is developing more and more, as it opens access to projects that are usually reserved for major investors. Unlike a classic apartment purchase or SCPIs where you are a simple owner or shareholder, the club deal involves you directly in the important decisions of the project.
For example, with 50,000 euros, it is impossible to invest alone in Parisian real estate. But in a club deal, this sum makes it possible to participate in the purchase of an office building worth several million euros, alongside other investors who each contribute their part.
Definition and principles of real estate club deals
A real estate club deal brings together a small group of investors who pool their money to buy a high-value property. Each investor becomes a co-owner of the property, up to his financial participation.
Club deal projects are very varied. For example, we find:
- Office buildings in the city center
- Student residences near university campuses
- Logistics warehouses on the outskirts of major cities
- Well-placed shopping centers
- Luxury residential buildings
A club deal generally has between 10 and 40 investors who know each other or are put in touch by a specialized professional. The choice of the project is not random: the investors together select a property that offers good prospects for rental yield and added value on resale. They can also choose a property to renovate to increase its value.
How to create a real estate club deal?
Here's how to create a real estate club deal, step by step:
Step 1 - Form the investor group
The first step is to bring together people who share the same vision. You can form this group with your network or go through a specialist who connects investors.
Step 2 - Choose the project together
Once the group is formed, you define together:
- The type of property sought (building, business, offices...)
- The total target budget
- The expected duration of the investment
- Performance goals
- The strategy (simple rental, renovation, resale...)
Step 3 - Create the legal structure
The club deal generally takes the form of a SAS or an SCI. This makes it possible to:
- Raising funds from investors
- Define operating rules
- Organizing decision making
- Distributing the benefits
Each investor becomes a shareholder according to his contribution and participates in important decisions during meetings. Daily management is often entrusted to a professional for greater efficiency.
Step 4 - Research
Once these foundations have been laid, the group can start actively looking for the property that meets its criteria and launch the project.
What is a club deal loan?
In a real estate club deal, the loan makes it possible to increase the group's investment capacity. For example, a 5 million euro project can be financed with 2 million euros in contributions from investors and 3 million euros in a bank loan.The loan is taken out by the company carrying the project (SAS or SCI) and not by the investors individually. This has several advantages:
- The group can borrow large amounts
- Investors don't take on personal debt
- Banks are studying the whole project.
- Rates are often more advantageous than for individuals
To obtain this financing, the group offers banks:
- A detailed business plan
- The guarantees provided by the property
- The financial solidity of investors
- Projected rental income
- The planned exit strategy
How does the management of a real estate club deal work?
The management of a real estate club deal is done in three stages:
The acquisition: the group buys the property after the usual checks (audits, financing, negotiation). A professional manager takes care of the project from the start.
Current management: a professional manages on a daily basis: rental, work, accounting. Investors come together for important decisions like major jobs or income distribution.
The output: the group decides together when and how to sell: en masse, by cutting or by buying back shares between members. All the rules are set out in the shareholders' agreement from the start.
Why choose a real estate club deal?
Here are four main reasons to choose a real estate club deal:
- The strength of the collective: by pooling your capital with other investors, you have access to larger projects. An investment of €100,000 can thus be part of a project worth several million.
- Exceptional properties: this pooling makes it possible to invest in office buildings, hotels or shopping centers usually reserved for major investors.
- Controlled risks: cost sharing between investors and professional management secure the investment. You can also diversify your assets by participating in several projects.
- More control: Unlike SCPIs, you participate in important decisions: choice of property, work, rental strategy, time of sale. You follow the evolution of your investment directly.
Can I pool money with friends to invest?
A club deal between friends is possible, but requires a strict framework:
A legal framework
A SAS or SCI with articles of association and a shareholders' agreement that set the rules of the game.
A professional approach
- A qualified manager for daily life
- Clear common goals
- A check of everyone's financial capabilities
Clear rules
The pact must provide for conflict management and exit conditions to protect each investor. A club deal between friends can work, but only with a professional organization that protects everyone's interests.
The risks to be anticipated
The real estate club deal can offer great opportunities, but it also involves risks that it is essential to anticipate before you start.
1. The risk of illiquidity
Investing in a club deal often means making a long-term commitment. Unlike other products such as SCPIs, it is generally impossible to resell your shares or to leave the project before its end, which can last 4 to 10 years. This means your capital is locked in, which can be a problem if you need cash along the way.
2. Financial risks
As with any real estate investment, nothing is guaranteed. If the real estate market experiences declines, or if the project does not generate the expected income, your profitability may be impacted. For example, poor rental management or an unexpected event such as an economic crisis can reduce your earnings or even lead to losses.
3. Conflicts between investors
Making decisions together is sometimes a strength, but it can also become a challenge. Disagreements over the management of the property or the strategy to adopt can slow down the project or even create tensions. To minimize this risk, it is essential to define clear rules from the start via a shareholders' agreement.
4. Variability in profitability
The performance of a real estate club deal depends largely on the quality of the project, management and market conditions. A poorly chosen or poorly managed investment can offer a return that is much lower than your expectations. On the other hand, a successful project can generate significant gains. The challenge is therefore to carefully analyze each opportunity before engaging.
5. A flexible regulatory framework
The club deal offers some freedom in terms of organization, but this flexibility comes with less protection for investors. Unlike SCPIs, which are governed by strict rules, club deals rely heavily on agreements between co-investors. It is therefore important to fully understand the terms and conditions before signing.
Taxation of Real Estate Clubs Deals
The taxation of real estate club deals varies according to the legal structure chosen, generally SARL or SAS. This structuring determines the taxation of rental income and capital gains, both at the level of the company and at that of the investor. Some projects allow exemptions:
- Income tax (IR) or Real estate wealth tax (IFI).
- Optimization via PEA or PEA-PME : capital gains can be exempt after 5 years, up to a limit of €225,000.
It is important to be accompanied by a tax expert to anticipate expenses and optimize your investment. A well-controlled fiscal framework can make all the difference in terms of profitability.
Differences between a real estate club deal and a real estate investment club
One Club Deal Real Estate is generally a one-time investment, focused on a specific real estate project. Investors come together to finance a specific property or project, often within a defined period of time (generally between 4 and 10 years). Once the project is completed or the objective is reached, the investors separate and get their capital back.
On the other hand, a Real estate investment club is a more sustainable and diversified structure. It allows you to invest in various real estate projects over time. Club members generally continue to invest together for the long term, with a more flexible strategy and a wider risk distribution thanks to asset diversification.
These two types of structures share the objective of pooling resources, but their functioning differs according to the investment horizon and the diversity of the projects.The real estate club deal is a modern and collective way of investing in ambitious projects, sharing resources and risks with other investors. It offers access to high-value goods and allows you to maintain some control over important decisions. However, this type of investment requires good preparation and a clear framework to avoid the unexpected.
A successful real estate club deal starts with the right meetings. Take advantage of exclusive Overlord events!