The term “club deal” is a very general term to designate investors who come together to pool their investments. There are therefore a multitude of club deal variations.
For example, you can partner with 5 friends and form a “club deal” that will invest in real estate and/or the financial markets. In the same way, you can associate with 5 strangers in a club deal proposed and managed by a management company.
To be precise, you will be able to invest in real estate and on the financial markets by pooling your funds with those of other investors to acquire higher-value, often more profitable, assets.
It is therefore not an investment vehicle per se like the SCPI or the OPCI, but rather an investment method based on the pooling of investors’ capital. Unlike SCPIs, or OPCIs, which bring together hundreds or even thousands of investors, club deals are made up of 2 to a few dozen private investors and are not necessarily marketed and managed by management companies.
However, the entry ticket is much higher than for collective investments. With a minimum investment often greater than 150,000 euros, club deals are not open to all investors but present attractive returns, often between 6 and 10% depending on the strategy of the club and/or the management company. .
Today, there are mainly two types of club deals: club deals formed by individuals and club deals offered by management companies.
Club deal: a Special Way
The Operation of Club Deals is Special.
Investors will most often be associated with an SCI or SAS. Together, you will invest in different goods or on different financial support depending on the arrangements made by the associates when the club was created and throughout its life. For this, your company will use the equity made available by investors and may contract if necessary a credit that will be added to the capital provided by investors.
Debt is Created To Take Advantage of the Credit Leverage
In fact, taking out a loan most often increases the profitability of the investment. However, you will have to agree with all the partners on the club strategy and/or choose a club that has a strategy in line with your objectives.
Club Deal: Opportunities Usually Reserved for Institutional Investors
Club deals make it possible to invest in corporate real estate (offices, shops, activities, logistics, hotels, residential, etc.) and on the financial markets. Commercial real estate is generally more profitable than conventional real estate. However, prices are also significantly higher.
Therefore, this market is usually reserved for institutional investors. Investing through a club deal in this context, therefore, represents a real opportunity to integrate institutional quality assets into your portfolio.
Club deal: Pooling and Diversification
Security is reinforced by the pooling and diversification of the real estate and financial heritage. Indeed, according to the strategy of the club, you will invest in several goods of different natures. The risks will, therefore, be much more diluted than in a traditional real estate investment relating to a single property, this diversification is double since you will also diversify your financial investments.
In addition, the pooling of investment also makes it possible to pool risks, and therefore ultimately, to reduce them for each real estate investor.
Finally, in a club deal, between associates, you will be able to decide on internal measures allowing to reduce the risks (Reserve in part of the capital, investment ceilings, Progressive investment and all the measures which you will consider necessary to reduce the risks …).
Real Estate Club Deal: Risks
Despite the measures put in place to reduce risks, you still remain exposed to risks linked to real estate investment and risks linked to the financial markets. Among the risks that can materialize, you will find in particular:
- The fall in the value of your property (risk of capital loss)
- Rental vacancy
- Risks related to non-payment
- Investment management errors
- The risks inherent in the association
- Falling financial markets
- Risks linked to the psychology of financial markets
- A default by the issuer of your securities
- Liquidity risk