Consortium Investment: Is It Worth It to Buy Real Estate?

Consortium investment has been a popular alternative for those who want to purchase a property without having to pay high interest on traditional financing.

However, many people still have doubts about whether this type of investment is truly advantageous, especially compared to other options in the real estate market.

In this article, we will explore what is investment in a consortium, its advantages, disadvantages and whether it is worth using this model for the purchase of real estate.

What is Consortium Investment?

Consortium investment is a type of purchase where a group of people come together to acquire assets, such as real estate, through monthly installments. Instead of paying interest, the consortium's participants pay an administration fee, and the credit is released over time.

Participants have the chance to be awarded in two ways: by lottery or by bid, where they offer an additional amount to try to anticipate receiving the credit.
Management fee: Instead of interest, you pay an administration fee to cover the costs of the consortium.
Contemplation by drawing or bidding: Depending on the type of consortium, you may be awarded at random or by offering a bid.

How Does the Real Estate Consortium Work?

The real estate consortium works in a similar way to the traditional consortium, but with a specific focus on the acquisition of real estate. When you join a consortium, you pay monthly installments for a specified period, until the group is able to provide all the participants with the amount necessary to acquire the property.

Credit amount: The amount of the credit varies depending on the property you want to buy. This amount will be released when you are included in the consortium.
Bid or raffle: There is the possibility of being awarded in advance, either by lottery (where the participant is chosen at random) or by bid (where you offer a larger amount to anticipate the contemplation).

Advantages of Investing in a Consortium to Buy Properties

Investing in a consortium can be advantageous for those who wish to purchase a property in a planned manner, without paying high interest. Let's explore some of the main advantages of this type of investment.

1. Absence of Interest

One of the biggest advantages of investing in a consortium is that, unlike traditional financing, you don't pay interest on the value of the property. In the consortium, the only fee charged is the administration fee, which is significantly lower than the interest on a loan.

Interest savings: This makes the consortium an attractive option for those who are not in a hurry and want to save when buying a property without paying high interest.
More affordable installments: Consortium installments are usually more affordable, which can facilitate financial planning without compromising the monthly budget so much.

2. Financial Planning

Investment in a consortium is ideal for those who want to plan for the long term. With flexible terms that can range from 10 to 20 years, the consortium allows you to purchase a property without hurrying and without burdening your budget.

Fixed installments: Installments are generally fixed and adjusted annually, which facilitates financial control and long-term planning.
Financial discipline: The consortium helps create financial discipline, since you have to pay the installments monthly until you are contemplated. This can be an efficient way to force a continuous economy.

3. Early Contemplation Potential

Although the consortium is of a long-term nature, it is possible to be awarded early if you are drawn or bid. If this happens, you can anticipate the purchase of the property and take advantage of the opportunity to acquire the property before the deadline.

Monthly draws: The possibility of being drawn before the estimated time can accelerate the property acquisition process.
Bid: If you're willing to invest an additional amount, you can increase your chances of being awarded faster.

Disadvantages of Investing in a Consortium to Buy Properties

Despite the advantages, investing in a consortium also has disadvantages that must be considered before making the decision to invest in this modality.

1. Uncertainty in the Contemplation Deadline

The main disadvantage of the consortium is that there is no guarantee of when you will be awarded. As the contemplations take place by lottery or bid, it can be difficult to predict the exact moment when you will receive the credit to purchase the property.

No definite deadline: You may have to wait years to be contemplated, which may not be ideal if you have an urgent need to purchase the property.
Unpredictability: If you're unable to bid high enough, contemplation can take even longer, leaving you dependent on luck.

2. Administration Fee

Although the consortium does not involve interest, it has an administration fee that can vary between 10% and 20% of the amount of the credit. This cost is diluted in monthly installments, but may represent a significant amount over the payment period.

Additional cost: The management fee increases the total cost of the property, which may reduce profitability compared to other forms of investment.
Less flexibility: In some cases, the administration fee may be considered a high fixed cost, especially if the consortium spans many years.

3. Inability to Use Credit Immediately

In the consortium, you do not have immediate access to property credit, as is the case with financing. To start using credit, you need to be contemplated, which can cause some frustration for those who want to make the purchase quickly.

Wait until you are contemplated: Even if you have the amount of credit available, you cannot use it until it is contemplated, which can make the process take longer compared to other financing options.

When Is Investing in a Consortium Worth It?

Investment in a consortium can be a great option for those looking to acquire a property in a planned manner, without haste and with lower costs. It's worth it for people who:

They have no urgency: If you can wait to be contemplated, the consortium offers an excellent way to acquire a property in an economic way.
They are looking for an interest-free alternative: By opting for the consortium, you avoid paying high interest that would be charged in a traditional loan, which can generate significant savings over time.
They want financial discipline: The consortium helps create financial discipline, since monthly installments are mandatory and you must commit to paying them until you are contemplated.

However, if you need a property urgently or don't want to wait to be contemplated, other financing or investment options may be more suitable for your profile.