Los Angeles · Member since 2019 · 4 posts · 0 votes
I'm a noob, but also an accredited investor. I'm wanting to get into real estate investing, and wondering about the pros and cons of private placements via RealtyMogul (or similar) versus buying directly.
Ideally, I'd like to be as passive as possible, but trying to weigh that with the returns of purchasing directly.
For example, one possible investment on RM targets a 17.2% IRR and 7.2% cash on cash -- which is higher than I'm seeing where I'm currently looking (San Antonio).
On the surface, the RM option seems so much easier. Am I missing something?
If you are looking into the San Antonio Market, I would recommend a direct buy and hold. Most of the cash flow properties I work with are a min. 10% cap rate and up words of 30% IRR. For example, there is a duplex for $175k in a good neighborhood in need of a rehab of about $15k and each side will rent for $1050 and $1100. I just sold a 4 plex for $122 and he is putting $40k into it and it appraised at $311k and will be renting them for $3050 a month. If you are looking to do higher, there is a 16 unit complex that is for sale for $12900000 and is getting about $12k a month in rents. There are alot of cash flow opportunities and you can be passive with a good Property Management company. Let me know if you need any referrals for one. Arissa
If you are looking into the San Antonio Market, I would recommend a direct buy and hold. Most of the cash flow properties I work with are a min. 10% cap rate and up words of 30% IRR. For example, there is a duplex for $175k in a good neighborhood in need of a rehab of about $15k and each side will rent for $1050 and $1100. I just sold a 4 plex for $122 and he is putting $40k into it and it appraised at $311k and will be renting them for $3050 a month. If you are looking to do higher, there is a 16 unit complex that is for sale for $12900000 and is getting about $12k a month in rents. There are alot of cash flow opportunities and you can be passive with a good Property Management company. Let me know if you need any referrals for one. Arissa
With a little time and energy invested into finding and underwriting deal sponsors I think you'd be much better off with Private Placements if you truly want passive. RM is merely one option among many! BP is a great place to start the journey.
My advice. Use platforms like RM, Crowdstreet and Realcrowd to underwrite 100 placements before participating in one! There's also plenty of sponsors here who can supply more deal flow. Just remember to choose your partner (sponsor, gp) wisely. :)
@Ginger Zumaeta, I own both active investments via private placements/syndications and directly owned real estate. In my opinion neither is 100% superior to the other and both have their pros and cons. A lot also depends on where you are coming from and what you're looking for.
When you buy directly, you have the most control. You can also structure the deal exactly like you want. For example I'm very conservative and I can set up properties with no debt, which is something that 99% of private placements want have. Also if you are cash poor, this is a way to put in sweat equity to build wealth.
On the other hand, investing directly requires you to put a lot of time and effort. If you don't have the time, inclination or desire to do this, it may not be the right choice for you. Also, since you are just starting out, there is probably a decent chance that you will make some rookie mistakes and they could end up being very expensive. Also, unless you have a lot of money, most people we putting their eggs all in one or two baskets, which increases risk.
The other choices is investing passively to private placements. Here the advantage is that you can hire someone that has years more experience than you can ever hope to have. You can also diversify into many properties, for the same price as purchasing one on your own directly, which is better portfolio protection. You can also get into property types that would be too expensive or difficult to do on your own such as office buildings, retail, self storage, etc.
The downside is that you have to be able to vet a manager and then turn over complete control to them. This isn't something that everyone can do. You also have to pay the manager, which is a disadvantage if you are cash poor.
As far as that particular Realty Mogul deal, I can't comment on it because I don't know any the specifics. I have talked with more than a thousand investors about numerous platforms, and there have been some stories about deals on RM that have gone bad. You may wish to take a look at one of the platforms that has more positive feedback from investors like Crowd Street, Arbor Crowd or Real crowd.
@Ginger Zumaeta: I am on the same spot, I prefer private placement. Maybe one or two out of state property. I don't like to deal with the tenant. These days are not too difficult to find double-digit fixed-income private placement offering. I am looking for discussion from the group of investors that have or shared the experiences.
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