{"id":189096,"date":"2026-08-24T11:46:19","date_gmt":"2026-08-24T17:46:19","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=189096"},"modified":"2026-08-24T11:46:23","modified_gmt":"2026-08-24T17:46:23","slug":"the-returns-bell-curve-how-i-spread-risk-and-returns","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/the-returns-bell-curve-how-i-spread-risk-and-returns","title":{"rendered":"The Returns Bell Curve: How I Spread Risk and Returns"},"content":{"rendered":"\n

In real estate, high minimum investments aren\u2019t just a barrier to entry\u2014they’re also a barrier to diversification. Whether you buy investment properties directly or invest passively in syndications, funds, or JV partnerships, you likely need to cough up $50,000 to $100,000 or more. That includes the down payment, closing costs, and initial repairs, or the required minimum set by the operator. <\/span><\/p>\n\n\n\n

Those kinds of minimums make it really hard to diversify. This is why I invest $2,500 to $5,000 at a time instead, as a member of a co-investing club. By doing so, my returns form a healthy bell curve, reducing my risk and letting me approach real estate investing more like stock investing. <\/span><\/p>\n\n\n\n

The Returns Bell Curve<\/span><\/h2>\n\n\n\n

All investments come with risk. Some inevitably underperform, others overperform, and most land somewhere in the middle of the returns bell curve. <\/span><\/p>\n\n\n\n

\"IRR<\/figure>\n\n\n\n

As real estate investors, we do our best to analyze and understand the risk of any given investment. But we can\u2019t eliminate it <\/span>entirely<\/span>. <\/span><\/p>\n\n\n\n

Of the 54 passive real estate investments I\u2019ve made, four have underperformed badly. Others have surpassed expectations. That\u2019s investing. <\/span><\/p>\n\n\n\n

But when I invest $5,000 at a time, I don\u2019t lie awake at night chewing my fingernails when one of them goes sideways. That wasn\u2019t true when I was investing $50,000 to $100,000 in properties as an active investor. Back then, I had plenty of sleepless nights. <\/span><\/p>\n\n\n\n

Nowadays I <\/span>just<\/span> average <\/span>out<\/span> the returns at the end of the year, knowing that occasionally a deal will stumble<\/span>, <\/span>even as another overperforms.<\/span> <\/span><\/p>\n\n\n\n

Averaging Leads to Above-Average Returns<\/span><\/h2>\n\n\n\n

In my co-investing club, the combined average return of all deals is 16.39%. <\/span>That includes both realized returns on <\/span>the<\/span> deals that have gone full cycle and <\/span>the<\/span> projected returns on <\/span>the<\/span> deals that are still running.<\/span> <\/span><\/p>\n\n\n\n

Stock indexes like the S&P 500 work the same way. Even in good years for the market, typically 25% to 30% of the stocks in the index lose money. In bad years, that number can <\/span>look more like<\/span> 75%. Over time, however, the S&P 500 has generated an <\/span>average annual return of around 10%<\/span><\/a>. <\/span><\/p>\n\n\n\n

That\u2019s pretty good, and I do put around half my money in the stock market. But I still do better with my private real estate investments. <\/span><\/p>\n\n\n\n

Diversifying Across Every Axis<\/span><\/h2>\n\n\n\n

Because I invest $2,500+ at a time in real estate <\/span>investments<\/span>, I can <\/span>create<\/span> an incredibly <\/span>diverse portfolio<\/span><\/a>.<\/span> <\/span><\/p>\n\n\n\n

That starts with property type. I own an interest in over 5,000 <\/span>multifamily<\/span><\/a> units, but I also have exposure to industrial properties, retail, raw land, mobile home parks, single-family homes, and hotels. <\/span><\/p>\n\n\n\n

We also diversify geographically. <\/span>All these<\/span> properties are spread across the <\/span>entire<\/span> U.S. <\/span>We<\/span> even invested in a project in Canada.<\/span> <\/span><\/p>\n\n\n\n

I also invest in both equity and debt. While many of my investments are private equity real estate syndications or <\/span>private partnerships<\/span><\/a>, sometimes the co-investing club invests in secured notes at a fixed interest rate. Most recently, we invested with a land operator on a note paying 15% interest, secured by real property at a 55% LTV. <\/span><\/p>\n\n\n\n

Then there\u2019s the time commitment. Most real estate investments are long-term, often five years or longer. <\/span>But our co-investing club goes out of its way to find <\/span>some<\/span> shorter-term investments <\/span>as well<\/span>.<\/span> That 15% note has a term just over one year. <\/span><\/p>\n\n\n\n

By mixing this up, we ensure our money comes back in staggered amounts, rather than all at once in a tax-heavy wave. <\/span><\/p>\n\n\n\n

Staggering Tax Benefits<\/span><\/h2>\n\n\n\n

Most investments we make come with huge depreciation write-offs in the first year, typically 65%-80%. <\/span>These <\/span>help<\/span> offset other <\/span>taxes on investments<\/span>.<\/span> <\/span><\/p>\n\n\n\n

This helps us practice the \u201c<\/span>lazy 1031 exchange<\/span><\/a>\u201d strategy. As one investment goes full-cycle and pays us out, we\u2019ll owe taxes on the profits. But by making a new investment in the same calendar year, the depreciation write-off helps offset those taxes.<\/span><\/p>\n\n\n\n

And because we vet one or two new investments every month, we always have new investments on the table to put our money back to work.<\/span><\/p>\n\n\n\n

The Advantages of Dollar-Cost Averaging<\/span><\/h2>\n\n\n\n

Because I invest $2,500+ in each new deal, I can practice dollar-cost averaging, investing in at least one new real estate deal every month. <\/span><\/p>\n\n\n\n

You would have to be fabulously wealthy to invest $50,000 every month in a new deal. But dollar-cost averaging helps protect me from timing risk. Just as with stocks, no one knows where the market will go next (even though too many investors think they do). <\/span><\/p>\n\n\n\n

I invest in stock index funds every month, specifically to avoid timing the market. I do the same thing with my real estate investments, as a slow-and-steady drip of new investments. <\/span><\/p>\n\n\n\n

Sometimes market timing turns against me (like in 2022). More often, it moves in my favor. But by investing steadily every month, I take my emotions out of the equation and focus on \u201ctime in the market\u201d rather than \u201ctiming the market.\u201d<\/span><\/p>\n\n\n\n

Real Estate Replaces Bonds in My Portfolio<\/span><\/h2>\n\n\n\n

Bonds serve several purposes in the average investor\u2019s portfolio:<\/span><\/p>\n\n\n\n