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  • #61
    Originally posted by Lordosis View Post

    Nuts I got it wrong. I was doing it from memory.
    "Stink, stank, stunk!"
    The kids don't care.

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    • #62
      Originally posted by VagabondMD View Post

      I think it is too soon to call this a “worst investment ever.” They may get a “lousy and erratic communication” honorable mention. I think it will work out okay in the end.

      I have changed my private real estate investment fund selection process and am favoring companies with a longer track record, better communication and greater transparency. I will let you know when I find one.
      I agree that it is too soon to call this the "worst investment even" and I wrote this post! LOL. I'm far from ready to commit to a statement like that. WAY too soon.

      If you want great communication and better transparency I suggest MLG if you're not already invested with them.

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      • #63
        Originally posted by Nysoz View Post
        SPY in the same time frame is 65% and VNQ is 31% appreciation with whatever dividends those pay out.

        Are the main benefits of these funds tax benefits and doesn't it also get some sort of additional return once the investment liquidates?
        The main benefits are diversification and potential for higher returns due to illiquidity. You should get paid more for an investment that is illiquid.

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        • #64
          Originally posted by Lordosis View Post

          Because a yield like that means at least equity level risk. However the risk is not apparent therefore I am fearful of what it might actually be.

          Basically anything that promises high returns has me very skeptical.
          "Did you know that the first Matrix was designed to be a perfect human world? Where none suffered, where everyone would be happy. It was a disaster. No one would accept the program."

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          • #65
            Originally posted by HM7 View Post


            3. In the same email Alan mentioned that distributions were not given previously due to "earlier investors were being caught up on their pref distributions".
            What does that mean? Are they paying investors who got into the fund earlier? Is it paying the pref on fund I investors (this is currently Fund II)?
            Yes, they are paying investors who got into the fund earlier. They start accumulating pref from the moment they invest their funds. If you invest later you get yours later. Since pref distributions typically build up to the stated pref over time through the course of the investment the earlier investors will typically remain ahead of you until all pref is paid out. As an example, if a fund has an 8% pref, the full pref usually isn't paid at 8% right away. They often "catch up" on the pref as properties are sold during the duration of the investment. You may only receive pref at 3.5%, for example, early on in the fund. People who had capital calls before you will start their build up of pref towards the 8% prior to you. Thus, they will receive a larger distribution than you until they are caught up to the 8% pref.

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            • #66
              Originally posted by SteffanW View Post

              Yes, they are paying investors who got into the fund earlier. They start accumulating pref from the moment they invest their funds. If you invest later you get yours later. Since pref distributions typically build up to the stated pref over time through the course of the investment the earlier investors will typically remain ahead of you until all pref is paid out. As an example, if a fund has an 8% pref, the full pref usually isn't paid at 8% right away. They often "catch up" on the pref as properties are sold during the duration of the investment. You may only receive pref at 3.5%, for example, early on in the fund. People who had capital calls before you will start their build up of pref towards the 8% prior to you. Thus, they will receive a larger distribution than you until they are caught up to the 8% pref.
              I know it’s not, but this the way you explained early investors/adopters getting preferentially paid first sounds a little MLM/pyramid-schemey to me. Hopefully future distributions don’t depend on new investors joining the fund..

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              • #67
                Originally posted by TheDangerZone View Post

                I know it’s not, but this the way you explained early investors/adopters getting preferentially paid first sounds a little MLM/pyramid-schemey to me. Hopefully future distributions don’t depend on new investors joining the fund..
                It does kind of have the pyramid-schemey feel to it the way they pass on new money to older investors initially. However, that's not how it pans out at the end even if things go badly. After all, there are tangible assets with value here. If things don't work out then those are sold off and things will be even out eventually anyway. You have to realize that even the people getting their money back before you do (because they invested earlier) doesn't mean they are coming out ahead. They are still just trying to get their investment money back initially. Everyone should catch up on what is owed when some of those big properties sell (even if they sell for a loss in the end.). Earlier investors don't come out ahead of later investors if things go badly. The later investors would simply get a larger proportion of what remains after the sale of the assets. Earlier investors should get their money first. You can't just have them investing their money with no returns on that money.

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                • #68
                  Originally posted by SteffanW View Post

                  The main benefits are diversification and potential for higher returns due to illiquidity. You should get paid more for an investment that is illiquid.
                  Vnq is the same asset class essentially, returned more, and is more liquid.

                  So what draws people in are just the hope/potential of better returns?

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                  • #69
                    Originally posted by Nysoz View Post

                    Vnq is the same asset class essentially, returned more, and is more liquid.

                    So what draws people in are just the hope/potential of better returns?
                    REITs, such as VNQ, return about 5% per year on average. When you say returned more I'm not sure what time horizon you're referring to but it sounds like you're looking at the return since around or shortly after the market bottomed out during the pandemic. If you broaden that score to view REITs you'll see the average return is 5% per year. Judging what REITs are likely to do in the future based on a very short time horizon is comparable to driving down the freeway using only the rear view mirror to view the road.

                    Real estate equity funds tend to have much higher returns on average and you do tend to get higher returns on average than one typically sees in more liquid investments such as REITs / stocks. You're getting paid for your illiquidity.

                    Here is one of Jim's article's mentioning this effect:
                    https://www.whitecoatinvestor.com/ho...ate-investing/
                    "I personally believe that there is an illiquidity premium. If you are willing to tie your money up for years without liquidity, you should be paid for it. Investments that require illiquidity should have a higher overall return. But if liquidity is something that is very important to you, private real estate syndications and funds are not a great way for you to invest. Even if the long term returns and tax advantages are great, it won't be worth it to you."

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                    • #70
                      Just because something is illiquid doesn't mean guaranteed higher returns. There is no such thing as a free lunch in investing. It may have expected higher returns, but obviously that hasn't been true over the past few years.

                      Also, historical return for REIT index is 9%. YTD VNQ is up 33.6%!

                      Comment


                      • #71
                        Originally posted by Nysoz View Post

                        Vnq is the same asset class essentially, returned more, and is more liquid.

                        So what draws people in are just the hope/potential of better returns?


                        That's the key Nysoz, they are not essentially the same asset class, on many levels.
                        One level, VNQ hold office, industrial, retail, hotels. These funds do not.
                        Another level, VNQ hold large cap buildings, these are smaller (and potential more profitable). They hold more 100-300 unit apartment complexes and do so more directly. I don't think VNQ is holding these mult-family apartment complexes.
                        VNQ has a significant correlation to the S&P500, these funds less so.


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                        • #72
                          Don't look now, G ! CityVest Pathfinder just today dropped a bit north of 10% my initial investment into my checking account.

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                          • #73
                            Thank you for alerting me to this. I just checked my bank account, and can report a similar distribution of roughly 10%.

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                            • #74
                              Originally posted by xraygoggles View Post
                              Just because something is illiquid doesn't mean guaranteed higher returns. There is no such thing as a free lunch in investing. It may have expected higher returns, but obviously that hasn't been true over the past few years.

                              Also, historical return for REIT index is 9%. YTD VNQ is up 33.6%!
                              Nobody said anything about guaranteed returns. Illiquidity does tend to yeild higher returns, however, and for good reason.

                              The 10-year return for VNQ is 9.72%, not REITs as a whole. The benchmark 10-year comparison is at 5.52% (see attachment). There is no reason to presume VNQ will outperform the benchmark simply because it has historically.
                              Attached Files

                              Comment


                              • #75
                                Originally posted by SteffanW View Post

                                Nobody said anything about guaranteed returns. Illiquidity does tend to yeild higher returns, however, and for good reason.

                                The 10-year return for VNQ is 9.72%, not REITs as a whole. The benchmark 10-year comparison is at 5.52% (see attachment). There is no reason to presume VNQ will outperform the benchmark simply because it has historically.
                                Hmm - I'm not sure how that website is calculating the returns, but doesn't make sense. Also, VG probably does the best job out of any company at getting as close to index returns as possible, b/c of their low expense ratios.

                                Here is the actual Vanguard website's returns:

                                Click image for larger version  Name:	reit.jpg Views:	4 Size:	28.5 KB ID:	311067

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