With the recent episode of great growth in real estate values in Edmonton (North America for that matter) a lot, and I mean a lot, of Real Estate Investment firms have popped up out of the woodwork. How does one determine which ones are a good investment, and which aren’t? Well, at the outset, I should say I don’t know. If I knew that, I wouldn’t tell the world, I would just invest all my money quietly in those firms. So, I don’t know the future, but I can provide some sound advice to help evaluate real estate investment firms.
First, remember that real estate is a long term investment. Any real estate investment that "projects" abnormally high returns deserves an extra amount of your due diligence. During the last few years, you may have noticed that many real estate investment firms were projecting significant rates of return. Now would be a good time to speak of "projections". Whenever evaluating an investment based upon projected future income, you really need to compare their projections to long-term averages. Any investment projecting returns (occupancy rates, rents, etc.) above long-term averages for more than five years should be scrupulously analyzed.
Secondly, determine who exactly is offering you the investment. What is their role in the investment - broker, owner, financier, developer? Then determine what your role is in the investment. Where is all the money coming from? How much is coming from investors? How much are the promoters investing? How much ownership and what kind of ownership do the investors (that’s you usually) have? If the investors are providing the majority of the funds, do they have the majority of the ownership? To make a long story short, if you and the other investors are providing the majority of the funds, do you have the majority of ownership? There is an old saying, "When a person with money meets a person with experience, the person with the money ends up with an experience, and the person with experience ends up with the money".
Okay, now that you have determined your share of ownership, what is your share of control? Note that this is a double-edged sword; you are likely not as sophisticated in real estate management as the promoter and if they are indeed a reputable promoter, you need to leave them alone to do their job. If they turn out to be somewhat less than sophisticated and reputable, what recourse do you have to get out or rectify the situation?

Check the returns you are expected to earn against your form of investment. If you are investing in an ownership capacity, you should be garnering a better rate of return. If you are in a lender position, you can expect lower returns. In either scenario, your risk level should match the return level - for example, if you are acting as a lender, the structure of the investment should ensure you get paid first if things go awry.

Promoters are usually offering a project of some sort. Do a little due diligence behind the scenes. Who currently owns the land/property? Who is selling what to whom? Numerous "Real Estate Investment Corporations" sell land owned by corporations they are associated with to you, the investor, at a higher price than they recently paid. So basically, their return on investment is assured, while yours is subject to the vagaries of the markets. In otherwords, they are profitting immediately in the flipping of the land and then through commissions earned in sales to you, and, if that wasn’t enough, they often manage projects and earn management fees. I’m not saying these are not good investments, but I don’t know, I’m going to say I would think twice about investing in this arrangement.

There are many good real estate investment corporations out there, just make sure to do your due diligence to ensure you find the right ones for you.