Crowdfunding vs Performing Note Investing
Looking for the Pros and Cons of putting my money into real estate as a Passive investment either with a Crowdfunding site like Fundrise or investing in Performing Notes
I know NPNs are more profitable but with a busy career I would need to stick with Performing Notes.
Please let me know what you think!
Mike
@Michael Gil I do not know much about crowdfunding but I like buying performing notes. Honestly I like performing more than NPNs.
@Wesley Wells awesome, mind if we connect? Ive done alot of reading and research but the due diligence process is intimidating, I want to make sure I dont make a “rookie” mistake
Michael, I invest in both, and am happy to share my personal pros and cons (as well as my due-diligence techniques). But first, the answer is different depending on a lot of things and the biggest is whether you are an accredited investor or nonaccredited. Which are you?
@Ian Ippolito What has your experience been with Fundrise. I'm a non-accredited investor. I've considered performing notes, but I don't quite have enough to purchase a performing note.
This is just my opinion as a conservative investor. Someone who’s more aggressive will have a very different opinion.
As an accredited investor, I feel Fundrise funds don’t compare favorably with the many other options. They have extremely low sponsor skin in the game, very high fees, and they have significantly less experience than some of the top-tier sponsors. So it’s very hard for me to find a reason to pull the trigger on them.
On the other hand, non-accredited investors don’t have as many choices. In this case, I personally feel that they do have a debt fund which might be a good choice for a non-accredited investor, after making a larger core investment in another fund like Blackstone’s core plus strategy fund BREIT.
However, what Fundrise tries to do is take your investment and split it up into all of their funds, some of which are engaging in much riskier strategies such as more speculative value add or opportunistic. It’s actually very difficult to pick and choose the best individual funds for your particular situation and requires bypassing their wizard and playing around with the site. Most probably go through the wizard and don’t understand the risk they are taking.
The company itself has a colorful past. The former CEO was either ousted or replaced by his brother. The CFO was accused by the company of blackmailing them over the quality of some of their deals. And they completely abandoned the accredited investor market that they were once and to focus on non-accredited.
I will give them credit for being very good marketers with very slick website and presentation.
Have you considered going with a sponsor in syndicated deals outside of crowdfunding? I'm interested going the performing note route myself.
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