Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 16%
$32.50 /mo
$390 billed annualy
MONTHLY
$39 /mo
billed monthly
7 day free trial. Cancel anytime

Let's keep in touch

Subscribe to our newsletter for timely insights and actionable tips on your real estate journey.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions
Followed Discussions Followed Categories Followed People Followed Locations
Innovative Strategies
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated about 7 hours ago on . Most recent reply

User Stats

6,272
Posts
9,912
Votes
Don Konipol
#1 Innovative Strategies Contributor
  • Lender
  • The Woodlands, TX
9,912
Votes |
6,272
Posts

How I’m passively investing now - after 48 years as a real estate investor.

Don Konipol
#1 Innovative Strategies Contributor
  • Lender
  • The Woodlands, TX
Posted

For most of my 40+ years investing in real estate I’ve stuck to direct investment in real property and direct investment in notes, with some limited partnership interests thrown in.  The one kinda hybrid has been investing as a limited partner in my own syndications and funds - in which I am heavily invested. 

Having a rather FULL perspective of private syndications, I see a real problem for investors in analyzing these investments.   Even the syndications that comply with Reg D tend to provide less than enough hard information from which to base a decision.  The fact that syndications tend to be for newly acquired real estate, often with a “plan” (as Mike Tyson said “everyone has a plan - until they’re punched in the face”) to “turn around”, “improve”, or “add value” to the subject property.  But few sponsors are able to offer long term track records of success with the type of specific property and type of operation being offered. 

A further problem is that Reg D requires NO ongoing reporting of financial, market, or operating information.  And when things go south, communication often becomes nothing more than terse statements “approved” by the sponsor’s legal counsel.  Add lack of liquidity, and investing in syndications can be like entering a fight with your hands tied behind your back. 

Now that I’m seeing a near future of being less active in direct investing, I am more and more interested in investing in REITs.  If one thinks of these as individual real estate portfolios rather than as speculative stocks, and therefore has the ability to ignore short to intermediate term market fluctuations, I believe  they can offer a superior investment opportunity for passive real property investment. 

I’ve eliminated all MORTGAGE REITs (mREITs) from my consideration because they’re much too speculative - they borrow 4 - 9 times their capital base.  But that leaves 160 U.S. based REITs, and over 900 REITs worldwide. 

The way REITs are structured nowadays, more than 90% of them are internally managed, eliminating the inherent conflict of externally managed REITs, and aligning the interests of management and shareholder to a much greater degree. Further, most REITs are specialized, investing in only one particular property sector, and often concentrated in a particular geographic area. A ton of information is available for each REIT, including net asset value, discount or premium to price, historical earnings and cash flow, projected cash flow, historical price movements, etc. I have put together a personal portfolio of 15 REITs covering apartments, industrial, healthcare, net lease, casino, infrastructure, and timberland. The average discount to net asset value is 36% (THEORETICALLY) I paid 64C for each $1.00 of assets); the average LTV utilized by the REITs I invested in is 30% (REITs with LTV above 50% are "suspect") and my dividend yield on the total portfolio is just over 7%.

I’ll let you know how it goes - as any investment risk is inherent. 

Let me know what you think? 

  • Don Konipol
business profile image
Private Mortgage Financing Partners, LLC

Loading replies...