REIT investing - Good or bad idea

24 Replies

I recently saw an add or a post about Rad Diversified. It's a REIT and they claim their return was 36% last year. They specialize in tax deed purchases, rehab, tenant occupy then cash out and refi and repeat the process. Anyone have any experiences with them?

@Dan Jennings

Curious if anyone read their sec filings

https://sec.report/Document/0001104659-21-070365/?_gl=1*e1b0t0*_ga*U0FnQjFTc05Gb2t3WmVFcUFHZzlHcXhBdW1URDJSZHhHLWg2U2h0SS1pd2ZDVDNSYkprM0tNU3ZzTE1vdDdfQg..

“As a result of the foregoing, the Company reported a net loss of $616,388 in the year ended December 31, 2020 versus a net loss of $68,202 in the year ended December 31, 2019.”

Originally posted by @Chris Seveney :

@Dan Jennings

Curious if anyone read their sec filings

https://sec.report/Document/00... a result of the foregoing, the Company reported a net loss of $616,388 in the year ended December 31, 2020 versus a net loss of $68,202 in the year ended December 31, 2019.”

INCREDIBLE!! They've been able to return 36% to investors on a net loss?? We need them to run this country!

They're taking massive fees 2% on assets they manage, 20% on increases in net asset value, large salaries for only $7-8m assets, they are self dealing with a $2m in promissory notes that pay Dutch's other entities 10.95% interest. 

i think the 36% return might be before all these fees or for his 3 other entities that lent the company money at a very high rate.

source: their sec filings https://sec.report/CIK/0001721...

@Dona Cardenas

No familiar. For me, I rather invest in a reit etf or more private reit like fund rise. House brand names.

I would never get into syndication or smaller private reits. Risk seems too high for bad actors.

My real estate slice of portfolio only includes public market REITs and Reit ETF, private reits like fund rise, or properties i own myself.

according to their accountant, the 36% return is net of fees. 

here is the info I received : 

"To answer your question as succinctly as possible, on January 1, 2020 we were still selling shares at $10.00 per share. Your sample $10,000.00 investment would have purchased 1,000 shares. As of January 1, 2021, we were selling shares for 13.67 per share. The increase was $3.67 per share, which is 36.7%. Your 1,000 shares would carry a value of $13,670.00 as of January 1, 2021.
Our price per share is calculated as follows:

  • Total value of all assets (LESS) Total Liabilities (EQUALS) Net Asset Value (also referred to as Net Equity).
  • Net Asset Value (DIVIDED BY) Total Number of Outstanding Shares (EQUALS) Net Asset Value Per Share (aka Net Equity Per Share or Book Value per Share).
  • Our Net Asset Value per share becomes our new stock price per share. Calculations are made quarterly, within one month after the end of each quarter.

No recurring distributions or dividends have been paid to date. If you have any further questions or comments, please feel free to reach out. Thank you for your interest, and we look forward to working with you."

Originally posted by @Shaun R.:

according to their accountant, the 36% return is net of fees. 

here is the info I received : 

"To answer your question as succinctly as possible, on January 1, 2020 we were still selling shares at $10.00 per share. Your sample $10,000.00 investment would have purchased 1,000 shares. As of January 1, 2021, we were selling shares for 13.67 per share. The increase was $3.67 per share, which is 36.7%. Your 1,000 shares would carry a value of $13,670.00 as of January 1, 2021.
Our price per share is calculated as follows:

  • Total value of all assets (LESS) Total Liabilities (EQUALS) Net Asset Value (also referred to as Net Equity).
  • Net Asset Value (DIVIDED BY) Total Number of Outstanding Shares (EQUALS) Net Asset Value Per Share (aka Net Equity Per Share or Book Value per Share).
  • Our Net Asset Value per share becomes our new stock price per share. Calculations are made quarterly, within one month after the end of each quarter.

No recurring distributions or dividends have been paid to date. If you have any further questions or comments, please feel free to reach out. Thank you for your interest, and we look forward to working with you."

So if they haven't distributed yet, it's a 36.7% paper gain, right? I mean you can't realize that gain until you sell your shares and if it's not a publicly traded REIT, I imagine there is not much of a market for reselling them.

Originally posted by @Shaun R.:

according to their accountant, the 36% return is net of fees. 

here is the info I received : 

"To answer your question as succinctly as possible, on January 1, 2020 we were still selling shares at $10.00 per share. Your sample $10,000.00 investment would have purchased 1,000 shares. As of January 1, 2021, we were selling shares for 13.67 per share. The increase was $3.67 per share, which is 36.7%. Your 1,000 shares would carry a value of $13,670.00 as of January 1, 2021.
Our price per share is calculated as follows:

  • Total value of all assets (LESS) Total Liabilities (EQUALS) Net Asset Value (also referred to as Net Equity).
  • Net Asset Value (DIVIDED BY) Total Number of Outstanding Shares (EQUALS) Net Asset Value Per Share (aka Net Equity Per Share or Book Value per Share).
  • Our Net Asset Value per share becomes our new stock price per share. Calculations are made quarterly, within one month after the end of each quarter.

No recurring distributions or dividends have been paid to date. If you have any further questions or comments, please feel free to reach out. Thank you for your interest, and we look forward to working with you."

Curious what the agreement says for recurring distributions and if they are making all of this $ then why have distributions not been made? To me anyone promoting a 36% return I would question and want to understand the risk. Can it be achieved yes (I have done it in a fund) but would I promote that as normal - hell no. 

@Dona Cardenas

I like investing small amounts in publicly traded reits like VNQ (vanguard). They are up 30% in the past 12 months. My return has been 24%.

Regarding other REITs: I looked at VNQ and REZ. The last 12 months were very good for them. However, if you zoom out a little, you can see they did poorly: dipped as much 30% and in 5 years only grew 20-30% (NOT annual). Dividends yield is in the 2% range. So I think RAD gives much better return if they can continue that trend. I think that's everybody's concern. They are young and not as transparent as a traded REIT. But they are more stable because their share price is based on quarterly asset valuation which is not going to drop 40-50% in one month as the others did in March'20.

My assumption is we can trust everything in the SEC filings.  I think it's worth investing a small amount to get inside and see how it goes.

RAD Zoom meeting tonight:
Thank you for your interest in RAD Diversified.This is an open invitation.We will have a Zoom meeting where Dutch Mendenhall will discuss many aspects of RAD.RAD is transparent, and we don’t hide anything.This is your chance to ask whatever questions you have in regards to RAD.Join us and others just like you!See you at the meeting.ZOOM Link:https://us02web.zoom.us/j/85971272592

@Dona Cardenas

I personally think actually owning physical real estate is the best way to go especially using leverage. Once you combine cash flow, appreciation, debt reduction, tax benefits, equity, depreciation, inflation hedge, rental increases over time, etc. I think the numbers will far out perform a REIT even with a mediocre deal.

Originally posted by @Ryan Johnstone :

David Fisher, you mentioned receiving a statement but did they do a distribution as well?  Someone in the thread mentioned that RAD has not done distributions.  How do you get your profits?

No distributions as of yet, just an increase in the share price. Honestly I haven't really explored yet how to cash out and get any profits.