Crowd Street or Self Owned RE

10 Replies

Let's say that you were not purchasing properties needing lots of rehab or trying to actively flip. Rather wanting cash flow in good neighborhoods with appreciation and cape rate contraction. 

Why would one purchase commercial or residential real estate when they can invest in private funds provided by Crowd Street, MHP funds, Senior Living Funds, etc, or even a bond portfolio. Let's say these investments yield 9-12% cash flow with around 15-20% ytm/ irr and can be reinvested on average every 4 years. 

If this discussion has been had in length elsewhere, you can post that link here too.

Thanks!!

9-12% cash flow can be easily beaten by buying turn key rental properties. 

Pros for real estate:

1- Depreciation would allow you to offset taxes thus increasing your net.

2- leveraging increases your cash on cash returns.

Pros for a passive investment:

1- it will take less time and energy. If you’re a high earner this may be justified. 

Personally I want to have more control and the opportunity to maximize my returns through value add investments... it’s fun for me!

Hey Cameron.  I am looking for syndication opportunities with experienced sponsors who can generate the types of returns you are mentioning (without unrealistic financial assumptions).  Feel free to share opportunities here or PM me.

@Amad Osman these funds are leveraged and pass depreciation along to passive investors (and many are value add too).

TK rentals carry a lot of risk most investors don't realize until they're stuck in a bad deal.

Value add (if executed well) will certainly provide higher returns. Just bear in mind it's a full time job and akin to running a business. I have definitely been through some dark, tough days to get to where I'm at now. Today we are approaching 150 million in assets and just over 50 employees mostly focused on management and execution of our model.  Here's a podcast I was just on (The Real Estate Way to Wealth and Freedom Ep 54) where I got to go through my journey from 1 duplex to 2,000 units. @Jacob Ayers is a great host!

iTunes: https://itunes.apple.com/us/podcast/the-real-estate-way-to-wealth-and-freedom/id1232102347?mt=2

Stitcher: http://www.stitcher.com/podcast/jacob-ayers/the-real-estate-way-to-wealth-and-freedom?refid=stpr

Google Play: https://partnerdash.google.com/music/podcasts/portal/u/0#p:id=playpodcast/series&a=101507527

@Mike Dymski that’s very intriguing. I spoke with a rep at Realty Mogul who mentioned something similar. Definitely an investment vehicle I need to learn more about. Thx

Originally posted by @Amad Osman :

@Mike Dymski that’s very intriguing. I spoke with a rep at Realty Mogul who mentioned something similar. Definitely an investment vehicle I need to learn more about. Thx

Many passive investors (like myself) invest directly with deal sponsors rather than through the crowdfunding sites.  The crowdfunding sites provide a service to connect sponsors with capital and they are compensated for it.

It boils down to whether you want to be active or passive in the real estate game. Growing your own portfolio takes a lot of time and a hands on approach. However, over time you should be able to realize gains greater than if you were to invest passively. If you are highly skilled in some other trade or business, you can continue to focus on that and grow your high earning ability and use your excess capital to build a passive real estate portfolio. 

@Cameron Mehta , I own both private/self owned rental properties, and also invest passively  and crowdfunding/syndications. Both have their strengths and weaknesses and I think a diversified portfolio should have both. The rental properties give me maximum control, but also require you to look after them (either keeping an eye on the manager, or perhaps doing more if you take on more of the responsibilities).

The passive investments have no control, but also require no effort. Also, passive investing allows me to diversify into hundreds of properties for the price of a single direct own property,  as well as diversifying across industry types, asset types and geography. It also allows me to invest in property types that I couldn't do on my own because the amount of capital required would be too much.

Also, you're not comparing apples to apples on the returns. 90% of crowdfunding investments are value-added strategies,  which is a riskier strategy (requires the price of the property to go up) than directly own rental properties (when they are based primarily on income). You should be comparing the returns of a core plus strategy passive investment, to the returns of an established rental property, to get a closer and more fair comparison: since both involve an income-based strategy, rather than value-added.

@Mike Dymski

I work for a private firm and principal investor who does just what you are interested in for commercial and multi-family real estate around Kansas City. We are also a property management firm, which helps us protect our investments even more.

If you are interested, I would love to connect with you. I had previously send you a colleague request and cannot do so because it is already pending.

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