Why I'm Passing on Open Door Capital Fund 3

[Hamilton Hitchings]

First, I want to say a thank you to BiggerPockets and Brandon Turner for all they have done to help educate investors and of course I love watching and learning from Brandon's videos. Thank you.

When I read that Open Door Capital was offering another fund, I was excited but on reading the docs. However, I decided to pass for the following reasons:

1) The principals running the fund are not putting in any of their own money

2) They take 10% of the initial raise to pay themselves and fees, so you're starting down 10%

3) I would have rather seen 80/20 for 8-15% and 70/30 thereafter

At a high level, I love they are opening this up to all investors and its clear its super profitable for them. However, its really items #1 and 2 that were a deal breaker for me but even if this had not been the case, we still might have considered a bit too risky and might have passed anyway. I'd love to hear other folks thoughts.

[Brandon Turner]

Hey thanks for the post about the fund! That said, just to clear up a couple quick things:    

First, I AM investing in the fund. I invest in all of my funds. I think the docs say that we don't "Have" to - but I am. I mean... that's the whole reason I got into this - I make too much money and need to invest it somewhere I trust. And I trust myself and my team ;) Anyway - I'm in! 

Secondly - I'm not sure where 10% came from for fees. The acquisition fee is 2.5% upfront, not 10%, and that's fairly standard across syndications and funds. Some are lower, for sure, but mobile home parks have significant upfront costs that apartments don't, so it's designed to mostly cover salary overhead. There is an asset management fee as well on the income collected (which is also standard), but the targeted returns have those fees already assumed and accounted for.  So while I'd love to take a 10% upfront fee and be able to afford another dozen team members, that's just not the case. Hope that helps clear some things up! 

Thanks!