What is your why? (Compared to VTI)

[Tim]

Risk-adjusted return, but otherwise I agree with you.

There’s a reason you don’t chase yield in the bond markets. If this private placement is such an awesome opportunity, why doesn’t the sponsor get cheap financing from a bank and keep more to the profit for himself or herself?

There is a reason private offerings are made to accredited or qualified investors.

[Hoopoe]

Risk-adjusted return, but otherwise I agree with you.

There’s a reason you don’t chase yield in the bond markets. If this private placement is such an awesome opportunity, why doesn’t the sponsor get cheap financing from a bank and keep more of the profit for himself or herself?

They do use banks. Usually 65-75% of the purchase price is tied to traditional financing methods. The rest is where the investment from syndication investors comes in with the sponsor usually having some of their own funds in the game as well. I’m not an expert in the field but I always thought that the addition of extra investors is about scale and diversification. Usually the CEO of a group like Don Wenner of DLP or David Scherer of Origin are going to be pretty wealthy. I doubt that they are 100 million a year into various properties wealthy. Same for stocks and indexes. Buy VTI and own a tiny bit of many companies. Work well for small and large investors. Even for the very wealthy doesn't make sense to buy all of them.

[Tangler]

I think the diversification advantages are largely overstated. While this asset class may perform differently than the total domestic stock market, you hardly can rebalance your opaque, long duration private real estate holding. You’re along for the ride for however long it takes your investment to go round trip.

Also, virtually none of these syndicators who have to advertise were along in their present form before the global financial crisis in 2008. Hardly any of them have been tested by fire in a full housing boom and bust cycle. Sure feels like we’re in one part of that cycle right now, though my crystal ball is cloudy about when or whether we’ll see another serious housing bust.

Housing bubble?

I think you may be correct. My Norwegian sister is considering moving back to the he USA and I went house hunting with her.

I live in Boston area and prices have always been high.

She was looking at houses in AL on the gulf coast and they are now almost as expensive as cape cod. A house that was 300k in 2019 is now selling for 1.1M.

I told her I would not buy anything in AL now but that I suck with timing so I could be wrong.

Is a house in AL worth that much?

Is RE overpriced ?

How will rising rates affect people’s ability to afford the all important monthly payment?

JL Collins has a newish book on the topic:

How I Lost Money in Real Estate Before It Was Fashionable: A Cautionary Tale
https://www.amazon.com/dp/173772412X...QDYJ2T3APKQH2G

[nephron]

I don't trust these private equity deals enough to invest a substantial sum into. I look it like buying individual stocks, even if you pick the next google or amazon, unless you've tied a large percentage of your net worth into the stock (not usually advisable), it's probably not going to move the needle very much so it's probably not worth the effort. I also don't like the added complexity a lot of these deals seem to add to your personal taxes.