Origin vs MLG. Also a question about MLG Fund structure.

[Eimaise]

Fairly new at this so I have some beginner questions.

I'm hoping to invest in private real estate and have been interested in doing so for some time. I'm trying to choose between MLG Capital and Origin. I've watched the webinars and read on their websites. I feel like I'm leaning toward MLG's Fund VI.

1) Any big reason why someone may choose Origin's income plus fund vs MLG's Private fund? Or are they both functionally pretty similar?

2) I have 75K-100K to invest in this asset at this time. I see people out there saying that this "small" of a value may not be worth it due to fees, etc. Is this true? Could it make sense to put 50K in Origin and 50K with MLG?

3) Regarding MLG's two funds (private fund vs dividend fund), I'm trying to discern if it would make more sense to invest in one over the other. It seems to me the main advantage of the private fund is that the losses pass through to me as the investor to help offset passive income generated by the rest of my portfolio. I'm not sure how much of a big deal this is for me honestly. I don't think I have much in the way of passive income at this time based on how the IRS defines it.

Thanks for any advice!

[deanyar]

One difference is that with MLG, be prepared to file a zillion (or so) state tax forms from the K1s...whereas with Origin Income Plus fund, they are consolidated. Also, the Origin fund is evergreen, whereas the MLG is not (at least I do not think it is...)

[The White Coat Investor]

1. No. The origin income fund is evergreen and more focus on income (includes some preferred, it's not all equity like MLG's Fund VI). You'd make the decision between the two based on what you want. If more income/less risk/lower return go with income plus. If less income/more risk/higher return you'd go with the Fund VI.
2. Do what you want. What's "worth it" is highly personal. But you have to think about things like the hassle of dealing with another investing account and filing taxes in multiple states etc. It also has a lot to do with your wealth level. If one can afford $500K chunks, then that's an option, but if you can't, well, you do the best you can.
3. This is a getting maximum depreciation pass thru vs filing multiple state tax returns decision. I chose the regular fund for Fund IV. But I've certainly had to do a lot of state tax returns because of that investment. Those aren't free whether you do them yourself or pay someone else to do them.

[bovie]

Be aware that Origin has just entered into a "strategic transaction and partnership" with a wealth management firm...

[Molar Mechanic]

Don't underestimate the tax complications that can come with a fund that invests heavily in states with income tax filing, but at the same time, MLG absolutely can let you invest into a structure that will give you a single 1099. This is ideal for IRA/401k investments, but for small investments it may be a good idea to save the tax complications. For larger investors and those with many investments across multiple timelines, the K1 tax filing MAY be beneficial as you can use losses from one entity to delay taxes against another.

[The White Coat Investor]

That's a good point. A smaller investment may be better for the 1099/dividend fund.

[Eimaise]

Thank you all for the helpful feedback. Despite reading about these investments and trying to educate myself, I still missed details.

I am looking more for a larger long term return rather than a passive income stream at this time which I suppose is why I’m leaning toward the MLG fund. The dividend fund seems like a better choice for me as I have no other passive income at this time and would also prefer to keep things simple tax-wise. I’m early in my career (3.5 years out of residency) and plan to keep working for a good number of years hopefully, so I may end up using more of an income fund like Origin in the future.

[Eimaise]

Be aware that Origin has just entered into a "strategic transaction and partnership" with a wealth management firm...

Thank you. Do you think this is ultimately a negative thing?

[The White Coat Investor]

Thank you. Do you think this is ultimately a negative thing?

Nobody likes changes but it certainly doesn't appear to be a negative in the short term, possibly not in the long term, and maybe even a positive in the long term. Michael Episcope just agreed to come back on the podcast to talk a bit about it. In the meantime, they put out a webinar about it that you can watch.

[CordMcNally]

Nobody likes changes but it certainly doesn't appear to be a negative in the short term, possibly not in the long term, and maybe even a positive in the long term. Michael Episcope just agreed to come back on the podcast to talk a bit about it. In the meantime, they put out a webinar about it that you can watch.

Would you expect them to come out and say that they view this as a negative?

[The White Coat Investor]

Would you expect them to come out and say that they view this as a negative?

Of course not. That was my opinion above, not theirs.

[bovie]

Thank you. Do you think this is ultimately a negative thing?

TBD. I don't think it's definitely a positive thing, though.

[Eimaise]

One difference is that with MLG, be prepared to file a zillion (or so) state tax forms from the K1s...whereas with Origin Income Plus fund, they are consolidated. Also, the Origin fund is evergreen, whereas the MLG is not (at least I do not think it is...)

This is helpful information. So with the Origin income plus fund, you only get a single K1 form per year? How do they manage to do that since the fund seems to invest in real estate in multiple states?

[deanyar]

This is helpful information. So with the Origin income plus fund, you only get a single K1 form per year? How do they manage to do that since the fund seems to invest in real estate in multiple states?

So, this is from their FAQ section on their IncomePlus fund... " What tax forms will I receive? The Fund will issue federal K1s to all investors on an annual basis. Since the Fund utilizes a REIT subsidiary, the burden of having to file K-1s in each state that the Fund owns property is alleviated."
That is about as much as I know/understand...

https://www.fplcapital.com/wp-content/uploads/2019/10/Origin-IncomePlus-Fund-FAQ.pdf

[HM7]

Question about the 1099 dividend fund, I've never invested in one.
Do you lose out on the depreciation benefits you would otherwise get on a fund structured with K1 reporting?
My opinion would be that you are losing the full benefit of the investment if you are not getting the depreciation.
With the 1099, do you get any depreciation?


Another question, since the Origin fund is evergreen, do they have gated redemptions like BREIT (Blackstone)? BREIT, had a redemption issue because too many people wanted their investments redeemed. They have it capped it at 5% per quarter.