What is the minimum amount to invest in real estate development
The micro-investment scheme for real estate allows you to access this business model from 100 thousand Mexican pesos.
Investing in real estate development is putting your money in a low-risk scheme. Real estate is in strong demand in the market and, being less volatile, is safer than other investment systems.
Beyond the process to detect the most profitable project for real estate development, this market is not exclusive to large sums of money.
There are different types of investments in real estate and from 100 thousand Mexican pesos you can already access this business model.
What are the types of investments in real estate development:
Investment schemes to enter real estate development can be classified into 4 types, each with its advantages, disadvantages and particularities:
- Own investment
- Investment Pool
- Crowdfunding
- Micro-investments
1. Own investment
It is the most conventional type of investment. In it, an amount of money is destined to develop a real estate project, which at the time of its sale ensures the recovery of the investment, plus of utility.
The investment can be to build from scratch or remodel an existing property, and depending on the available capital, develop one or several units.
Advantages:
- As an investor you access all the profits of the project
- You are exempt from paying IVA during the construction of the property and at the time of its sale in operations of less than 4.2 million mexican pesos
- You reduce ISR payments
Disadvantages:
- Requires an investment by a single person of at least 3 million mexican pesos
- As an investor you must take charge of the acquisition of the property, the payment of everything derived from the project and the execution of the work
- You assume all the risk of the business
2. Investment Pool
It is a scheme where a group of people buy real estate, build or remodel it and each of the investors acquires a private unit of the project.
This model is usually linked to constructions where the parts of the property can be individualized, such as apartments or condominiums.
At a legal level, this scheme is usually through a trust and requires that one or a group of investors take control of the business.
Investors are limited by the final number of private units, that is, if a building with 6 apartments is developed, there may be only 6 investors and each one must invest the proportional amount to develop the entire building.
Advantages:
- You can get a property at the developer price (30% less than the market price)
- You reduce the risk by being several investors
- The investment is according to a payment plan and you do not have to put all the money at once
Disadvantages:
- You need to have all the investors together to be able to start the project
- You must have investment capital above 2.5 million pesos
- Unforeseen events that exist must be covered by the members of the investment pool
3. Crowdfounding
Real estate crowdfunding is a system for investing in real estate development with small sums of money through companies that are responsible for selecting and executing the investments.
This type of scheme is used by real estate development companies and large real estate groups to fund all or part of the projects they are carrying out.
They are usually large projects such as apartment towers, hotels or shopping centers, and that the real estate group needs to fund to continue with the development.
Advantages:
- The minimum investments can be with very small amounts. In some cases, amounts that can be obtained at an ATM
- Joining the business is very simple and you can do it online
- It usually has fixed returns
Disadvantages:
- The return on investment is much lower, in some cases, the same as bank investment schemes or less
- The profits are linked to the amount to be invested. That is, if one invests little, the return will be low, with percentages from 5% or 6% in some cases.
- These schemes are usually not very transparent with the general information of the business and in some cases, it is not even known in which particular project your money is invested.
4. Micro-investments
It is a scheme similar to the investment pool, although the amounts are much smaller and it has a simpler legal model.
The projects that are developed under this scheme are smaller in size, usually for flipping-type businesses (acquire existing buildings, remodel and sell it) in high-speed resale areas to accelerate the return on investment.
The business is managed by a company that issues shares to each of the micro-investors in proportion to the amount invested.
The management company establishes from the beginning the amount to be collected to carry out the business: acquisition of the property, project, construction and sale.
Once the project is completed and at the time of its sale, the shares are purchased by the management company from each microinvestor for the initial amount plus the profit of the business.
The legal scheme is solid, since each investor is a shareholder of the company and, therefore, a proportional owner of the property to be developed.
Additionally, real estate development is managed by a specialized company, which constantly reports the progress and status of the business.
The profit percentages of this scheme are between 16% and 22%, always above conventional banking instruments such as Cetes or bank investments.
Invest in micro-investments from 100 thousand Mexican pesos
At Taller de Arquitectura A-001 we are committed to the micro-investment model to create types of profitable projects financed by small investors.
With sums ranging from 100 thousand Mexican pesos, this scheme allows you to put your money into a solid project, developed according to the needs of the market.
These needs are the result of sociodemographic studies of the market that allow us to know and decide the type of project that can provide the best returns.
Micro-investments are for investors who want to enter this business model with sums from 100 thousand Mexican pesos.
The first project financed with this scheme is already underway. This is Mérida UNO and the total money for the work was funded in just three months.
Mérida UNO, a success story of microinvestments
It is a project located in Mérida, in the state of Yucatán, an area in constant expansion and attractive for national and international tourism.
The advantage of developing projects in tourist areas is that the market is dynamic, and in this way the risk is reduced at the time of resale.
Based on the micro-investment model, a minimum entry of 100,000 pesos was made and with that money a house was bought in the center of Mérida. The property has already been deeded, and is in the design phase, prior to construction.
The necessary capital to develop this project was raised in just three months and the profits for investors are between 18 and 22%.
Advantages of the micro-investment model
With significant returns and development times of less than a year, micro-investments can be the first step to enter the world of real estate development investments.
Would you like to be part of the next microinvestment project?
Write to us and we will contact you to provide you with all the information you need to invest safely and calmly.
Oscar Renucci
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