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Anyone try the crowd sourced real estate investing yet?

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  • #46







    Thanks for sharing my post.

    There are risks with all investments (if there wasn’t then the return should be zero) but these platforms are taking something that requires a good amount of work and making it easier. Who that attracts and how the investments change over time becomes less predictable. That being said, I think the risk in crowdfunding is further concentrated in the REITs because they are trying to make it even easier with lower thresholds. I decided to liquidate my crowdfunded REITs and I shared my thoughts in this post

    https://www.dadsmakingcents.com/liquidating-my-crowdfunded-reits/
    Click to expand…


    That is a good article, thanks for putting that up Dr. Linus.

    I watch a-reits as a general property market indicator and have been eliminating property leverage since last year by selling off non-essential property. I think reits may well have peaked. I could be wrong though.

    What I am wondering about bloggers on crowdfunding RE is why you would invest in this over listed reits ? The return on US listed reit index (eg VGSIX) is 10% over the last 20 years. This is on 30% leverage, compared to ? average 60% on crowdfunding sites ?

    I thought these were a good summary:

    https://seekingalpha.com/article/4051897-reits-vs-real-estate-crowdfunding

    https://investor.vanguard.com/mutual-funds/profile/VGSIX

    https://seekingalpha.com/article/4061688-real-estate-crowdfunding-riskier-think
    Click to expand...


    I'm very much a novice in the real estate investment space.  I had previously held REITs, but right now don't have a good REIT option within my 401K offerings.  I could place it in my backdoor Roth space, though, but right now that's just a very small percentage of my assets.  REITs in a taxable account are fine I guess but not ideal.

     

    So for taxable investments I *think* there can be some tax advantages to individual properties, including depreciation deductions and 1031 exchanges.  I am just now diving in individual properties via syndications (37th Parallel) and looking into a few other options (MLG Capital, MG properties, Origin Investments, etc).  I may be completely wrong here, too, but I feel like it's possible that these individual properties may have less correlation than the stock market than that of something like a Vanguard REIT fund.

     

    However, the time-sink of these real estate deals is partially souring me.  I have a very busy practice and busy home/family life with young children. There's something to be said about just buying a REIT at Vanguard.

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    • #47
      The illiquidity of those syndications would be my biggest concern.  I just have a small portion of my portfolio invested in a boring Vanguard REIT for now...

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      • #48
        Dont_know_mind , I appreciate his healthy dose of skepticism and has definitely made me cool my head after a whirl wind weekend of me reading ALOT into RE investing. And now at the juncture of whether to do old fashioned direct property buying/management vs crowd funding vs syndication.

         

        One question I have: Do these crowd funding sites disclose failure rates or deals that have gone sour? Or express a % of investment that was lost vs total investment to date? Obviously looking as an outsider you see and read all the pretty marketing, but maybe I haven't dug deep enough. I assume if you do sign up for one of those crowd fund sites that you have to dig through a lot of legalese/agreement to find some numbers on the failure rate for those deals?

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        • #49




          Don’t_know_mind: can you elaborate on “95% of my wealth is in real estate?” Are these single family homes you rent out, or partnerships in apartment bldgs. or offices? And curious as to why no/little in public markets such as stock index funds and bonds..?
          Click to expand...


          It’s a long story, but the short of it is that I’m probably in the top 5% in terms of returns from real estate investing and the bottom 5% in terms of returns from stock market investing and my portfolio reflects that.

          Currently, other than the house I live in I have 1.5-2M in residential rental property, 6-8M in land banked for rezoning, 1M in cash, 300k equity index funds, 400k in a medical practice.

          All the real estate I have is held directly and I have no partners. Unlike others, I don’t really care about cashflow or yield. I am mainly interested in after tax total return. In this environment, it means capital gain as it gets taxed at preferential rates to income. There are others who do things differently, many roads to Dublin as they say.

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          • #50




            Dont_know_mind , I appreciate his healthy dose of skepticism and has definitely made me cool my head after a whirl wind weekend of me reading ALOT into RE investing. And now at the juncture of whether to do old fashioned direct property buying/management vs crowd funding vs syndication.

             

            One question I have: Do these crowd funding sites disclose failure rates or deals that have gone sour? Or express a % of investment that was lost vs total investment to date? Obviously looking as an outsider you see and read all the pretty marketing, but maybe I haven’t dug deep enough. I assume if you do sign up for one of those crowd fund sites that you have to dig through a lot of legalese/agreement to find some numbers on the failure rate for those deals?
            Click to expand...


            Focus more on the sponsor, not on the site/platform. This is a very timely and well-done post:

             

            https://millionairedoc.com/2018/09/04/in-commercial-real-estate-bet-on-the-horse-and-the-jockey/

             

             

            You can get the information from the sponsor, if they're reputable they'll be very upfront with their track record. I had access to one provided by one of the more popular sites and it was strangely incomplete. I'll leave it at that.

            Comment


            • #51







              Dont_know_mind , I appreciate his healthy dose of skepticism and has definitely made me cool my head after a whirl wind weekend of me reading ALOT into RE investing. And now at the juncture of whether to do old fashioned direct property buying/management vs crowd funding vs syndication.

               

              One question I have: Do these crowd funding sites disclose failure rates or deals that have gone sour? Or express a % of investment that was lost vs total investment to date? Obviously looking as an outsider you see and read all the pretty marketing, but maybe I haven’t dug deep enough. I assume if you do sign up for one of those crowd fund sites that you have to dig through a lot of legalese/agreement to find some numbers on the failure rate for those deals?
              Click to expand…


              Focus more on the sponsor, not on the site/platform. This is a very timely and well-done post:

               

              https://millionairedoc.com/2018/09/04/in-commercial-real-estate-bet-on-the-horse-and-the-jockey/

               

               

              You can get the information from the sponsor, if they’re reputable they’ll be very upfront with their track record. I had access to one provided by one of the more popular sites and it was strangely incomplete. I’ll leave it at that.
              Click to expand...


              Thanks for that link.

              Yeah looks like very careful due dilligence is good rule of thumb.

              Comment


              • #52
                When markets turn getting your cash from a unlisted trust can be a nightmare. There should be a illiquidity premium over listed REITs for this reason. You should be adequately compensated for this illiquidity premium. In a usual syndication, you would expect long term lock up on investment and understand the risks involved. I would not invest in a vehicle that allows regular redemptions.

                The haircuts on early redemption in the CF space seem low. If one invests in an illiquid asset like property, they cannot expect to just redeem without getting a major haircut. I wouldn’t invest in any vehicle that allowed an investor to do so - where does the cash come from? I would guess (but I could be completely wrong) that this sort of setup is going to be quite vulnerable to an adverse liquidity environment triggering a run on funds.

                A trust unitholder can't typically demand or expect exiting unless its listed or its unlisted and the manager allows the redemption. They don't have to otherwise and can defer the issue endlessly. You then become a passenger or unsecured creditor.

                Most properly constructed unlisted property syndicates have a defined term - e.g. 5 or 7 years and full liquidity event is achieved when the property is sold. Even the ones with limited redemption facilities clearly disclose the amount available for redemption and have robust clauses that can prevent a 'run' on redemptions.

                For some reason people assume that they are secured creditors and that they have rights to redemption. However, the structure of the financing may indicate that they are unsecured creditors and their trust deeds may indicate that the the trustee has the power to defer redemptions indefinitely, at their discretion.

                 

                 

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