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  • Heloc to syndication

    My house is paid off, but I got to thinking, that it seems like I have a bunch of money that is sitting dormant and losing investing opportunity costs. since interest rates are so low now (2.5% mortgages or 3.5% heloc), I Was contemplating taking out an interest only 6 year balloon payment heloc or mortgage and investing those funds into a real estate syndication where I could earn 12-18% +/- by investing in a value-ad multifamily syndication. Why 6 years, because most of the real estate syndication deals I've been part of are typically 5-6 years from purchase to sale/cash out. Am I being too aggressive?

  • #2
    12-18% projected returns? What possibly could go wrong?

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    • #3
      Originally posted by Hank View Post
      12-18% projected returns? What possibly could go wrong?
      12-18% is going to lag the current market. We now talk in multiples, not percentages.

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      • #4
        Originally posted by Hank View Post
        12-18% projected returns? What possibly could go wrong?
        Yeah, I am in one of those "can't miss" syndication deals, two+ years in, and have not seen a penny. I am glad that I did not stake the farm (or house) on it.

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        • #5
          I've been thinking of dipping my toe in the RE syndication pool myself. Y'all aren't exactly making it seem like the water is fine..

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          • #6
            Originally posted by Hank View Post
            12-18% projected returns? What possibly could go wrong?
            well if you get 5-6% preferred return, plus appreciated asset sale at the end spread over the holding time AND depreciation to offset income--yeah its not too hard to get that type of return

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            • #7
              Originally posted by VagabondMD View Post

              Yeah, I am in one of those "can't miss" syndication deals, two+ years in, and have not seen a penny. I am glad that I did not stake the farm (or house) on it.
              what syndicator did you go through? and what was the asset purchased?

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              • #8
                Originally posted by DollaBill$ View Post

                what syndicator did you go through? and what was the asset purchased?
                That is not the point. The risk with these real estate investments is similar to the risk of investing in stocks (perhaps greater when you consider the illiquidity). Would you take money out of your house to invest in the stock market?

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                • #9
                  Originally posted by VagabondMD View Post

                  Yeah, I am in one of those "can't miss" syndication deals, two+ years in, and have not seen a penny. I am glad that I did not stake the farm (or house) on it.
                  I'm in one of these as well, but have been getting distributions once a quarter. Yours must be set up a bit different I wonder?

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                  • #10
                    DollaBill$, in theory that wouldn't be a bad idea, but I see a few red flags, for sure. First, if you are taking money out of your house, you need to really underwrite the syndicator. How certain are you that they will get you your money back? Second, if you are taking money out of your house, you need to know you could cover the debt if the syndication went sour and you got 0 Dolla bills back.
                    The thing that makes me most nervous here is building in a balloon payment for yourself. Don't do that. If the syndication doesn't run as intended, gets delayed, whatever, then you are screwed.

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                    • #11
                      Originally posted by DollaBill$ View Post
                      My house is paid off, but I got to thinking, that it seems like I have a bunch of money that is sitting dormant and losing investing opportunity costs. since interest rates are so low now (2.5% mortgages or 3.5% heloc), I Was contemplating taking out an interest only 6 year balloon payment heloc or mortgage and investing those funds into a real estate syndication where I could earn 12-18% +/- by investing in a value-ad multifamily syndication. Why 6 years, because most of the real estate syndication deals I've been part of are typically 5-6 years from purchase to sale/cash out. Am I being too aggressive?


                      For some more data and a write up of how WCI's real estate stuff has done, sign up for the real estate news letter:
                      https://www.whitecoatinvestor.com/fr...ly-newsletter/

                      ... but yeah, agreed with the above. I wouldn't sign up for that balloon payment.

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