Investor · Lake Oswego , OR · Member since 2015 · 81 posts · 33 votes
I was following another forum where the topic of syndication came up as a way to move into bigger deals. I have also been looking at some crowd sourcing platforms recently with the intent of moving money into larger apartment deals, storage and commercial opportunities. It appears with the crowd sourcing, say through groups like CrowdStreet that you have a way to better diversify through smaller units to buy in ($10-50K).
I am looking for feedback on why a syndication might be a better route than a crowdsourcing platform. Terms, waterfall provisions, ability to recover money should the sponsor fail to execute? Thanks for your input.
Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
9y
@Mark Gibbs, in my experience, it comes down to returns, due diligence and sponsors (not necessarily in that order).
These vary greatly by CF platform as well.
There is a thread on BP on the results from $2mm being invested in CF websites, its long but a good read and the spreadsheet in the first post is priceless.
Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
9y
@Mark Gibbs I can't really answer this but I think it's a great topic because I've been wrestling with it myself. Up until a year ago I had been avoiding both because I had plenty of my own opportunities to invest in. But that has slowed down and I also see that eventually I'll want to invest much more passively.
I've come close to investing in syndications a few times and there are a couple I'm considering right now but I guess I'm a control freak because it's hard for me to turn over a $100k chunk to someone and just trust them to manage it well. So I've yet to pull the trigger on one.
Crowd Sourcing on the other hand, because the amounts are lower it's easier for me to put $5-25k to work at a shot and not worry about it so much because if one goes bad it's not the end of the world. But I do think you pay for this in returns.
I'm a finance guy and have pored through the financial statements on some of these and because of the additional layers the expenses are just higher.
So generally I'd say, unless you're very familiar with the sponsors and have a lot of confidence in them, the risk is higher with the syndication but so is the return. The crowd source opportunities would be a bit lower risk due to vetting and greater diversification but will be lower return due to higher costs.
For me personally, doing my own deals is both higher return and less risk as long as I am ok putting up with the work and hassle involved. So I'll continue mostly doing that as long as I'm enjoying it and just dabble in the other two.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
@Mark Gibbs Let's start at the top, why do you think that either of those options would be (for you) better than investing in a publicly traded REIT that doesn't have lock up provisions, is inherently diversified, and goes after those large deals you appear to be seeking?
There are reasons, don't get me wrong, but I'd be curious what *your* reasons are for bypassing those REITs. That might help you decide which path to go down.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
9y
They're similar. Returns usually be slightly less with a crowd fund. I think the main difference is that the crowd fund is much less personal. as for the minimum, it depends on the syndicator and crowd fund
Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
9y
Mark Gibbs crowdfunding is good because they do all the legwork to find the deals. He bad part is they the platform is not doing it for free. I have talked to many CF investors and they are usually making high single digits for private money lending where as you can make 20-50% if your source your borrowers yourself. The Mfh reposition syndications is the the same but higher projected returns 10-15% Irrs compare with 15-25% with going direct with the lead.
Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
9y
@Mark Gibbs, in my experience, it comes down to returns, due diligence and sponsors (not necessarily in that order).
These vary greatly by CF platform as well.
There is a thread on BP on the results from $2mm being invested in CF websites, its long but a good read and the spreadsheet in the first post is priceless.
Investor · Lake Oswego , OR · Member since 2015 · 81 posts · 33 votes
9y
Thank you everyone for the feedback.
@Andrew Johnson my take on REITS is that since they are pools, you might reduce your risk but it also puts you into investments that you would otherwise not participate in. If I can look at a crowdfunded deal in an area I know I feel more comfortable. I think comparatively the return on REITS is even lower than crowdsourced investments.
@Percy N. Thanks for the link on CF platforms, Interesting to check out.