Crowdfunding real estate?

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sox2017
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Crowdfunding real estate?

Post by sox2017 » Sat Mar 18, 2017 9:07 am

I know it's not exactly Bogle-like, but does anyone have any experience with any of the crowdfunding real estate sites (such as Realtyshares, Peerstreet, etc.)?

Some of the pros and cons I can think of off the top of my head, but wanted to see someone's real experience -

Pros:
- Diversification from stocks and bonds
- Nice yields (currently 8%+)
- Steady cash flows

Cons:
- Illiquid (can't sell until maturity and on equity deals, this could drag on for years)
- Default risk
- Late cycle investing (would I be dumping money into these late in the economic cycle)
- Must be an accredited investor (I am, but a lot of people will not be able to invest because of this)

I must admit, the temptation is there to try out these platforms with a small amount of the overall portfolio, but the biggest question in my mind is still around "what am I missing?". If these deals were good, why wouldn't the banks just fund these deals directly? Why involve retail investors unless these deals are all the "leftovers" that no one wants?

Any insight would be appreciated

jebmke
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Re: Crowdfunding real estate?

Post by jebmke » Sat Mar 18, 2017 9:09 am

Small amounts wouldn't move the needle on your total return. So why bother?
When you discover that you are riding a dead horse, the best strategy is to dismount.

sox2017
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Re: Crowdfunding real estate?

Post by sox2017 » Sat Mar 18, 2017 9:21 am

jebmke wrote:Small amounts wouldn't move the needle on your total return. So why bother?


Could significantly bump up cash flow though.

On a $1M portfolio, let's say you allocate 15% to these. This is an extra $9000 in annual cash flow vs. standard funds (8% - 2% x $150k).

jebmke
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Re: Crowdfunding real estate?

Post by jebmke » Sat Mar 18, 2017 9:51 am

I can convert 100% of my portfolio to cash in a couple of days. Taxable cash flow isn't a feature that has value to me.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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abuss368
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Re: Crowdfunding real estate?

Post by abuss368 » Sat Mar 18, 2017 9:55 am

Honestly I understand your point in terms of cash flows. Because yes, it is all about the cash flows. I like real estate. Personally I would rather allocate a material portion to both U.S. and International REITs.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

staythecourse
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Re: Crowdfunding real estate?

Post by staythecourse » Sat Mar 18, 2017 9:58 am

sox2017 wrote:
jebmke wrote:Small amounts wouldn't move the needle on your total return. So why bother?


Could significantly bump up cash flow though.

On a $1M portfolio, let's say you allocate 15% to these. This is an extra $9000 in annual cash flow vs. standard funds (8% - 2% x $150k).


One thing I have learned is it is true there is no free lunch. Yes you are right the cash flow would increase, BUT at the same time you are increasing other nonsystematic risks, i.e. manager risk, company risk, etc... It isn't like you increase the cash flow withOUT additional risk taking. If that is okay go for it, but one needs to be aware of additional risk they are taking.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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willthrill81
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Re: Crowdfunding real estate?

Post by willthrill81 » Sat Mar 18, 2017 10:25 am

jebmke wrote:I can convert 100% of my portfolio to cash in a couple of days. Taxable cash flow isn't a feature that has value to me.


Would it really be a disadvantage to 'only' be able to convert say 80% of your portfolio to cash in a few days? Is it necessary for that number to be 100%? I've not really considered it before, but I don't see why offhand.

I've done some very cursory analysis of crowdfunded real estate, and it seems to be of potential interest. The devil may be in the details though. How long will it take you to get your money to work? Are IRAs a realistic possibility in conjunction with this type of investment (I certainly wouldn't want this in anything not tax advantaged unless I was in retirement and needed the cash)? What if the dividends are lower than you anticipated and you want to sell (it doesn't seem like you can, not easily at least)?

I don't think I'm going to be an early adopter. It sounds too much like a non-traded REIT.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

jebmke
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Re: Crowdfunding real estate?

Post by jebmke » Sat Mar 18, 2017 10:32 am

willthrill81 wrote:Would it really be a disadvantage to 'only' be able to convert say 80% of your portfolio to cash in a few days? Is it necessary for that number to be 100%? I've not really considered it before, but I don't see why offhand.

My point was that a taxable free cash flow by itself isn't of value to me. I have held lower liquidity investments in the past but not for the cash flow. Therefore, IMO this item needs to be evaluated in terms of general contribution to risk and return for the entire portfolio and keeping in mind the potential impact on taxes.
When you discover that you are riding a dead horse, the best strategy is to dismount.

sox2017
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Re: Crowdfunding real estate?

Post by sox2017 » Sat Mar 18, 2017 11:44 am

abuss368 wrote:Honestly I understand your point in terms of cash flows. Because yes, it is all about the cash flows. I like real estate. Personally I would rather allocate a material portion to both U.S. and International REITs.


That's what I go back and forth on as well. I already have between 5 -10% allocated to REITs. Yields are a lot less though (understanding of course there is more risk with the higher yield crowdfunded option).

Also, public REITs have become so highly correlated with the larger market. Not exactly a major diversifier anymore.

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willthrill81
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Re: Crowdfunding real estate?

Post by willthrill81 » Sat Mar 18, 2017 1:47 pm

sox2017 wrote:
abuss368 wrote:Honestly I understand your point in terms of cash flows. Because yes, it is all about the cash flows. I like real estate. Personally I would rather allocate a material portion to both U.S. and International REITs.


That's what I go back and forth on as well. I already have between 5 -10% allocated to REITs. Yields are a lot less though (understanding of course there is more risk with the higher yield crowdfunded option).

Also, public REITs have become so highly correlated with the larger market. Not exactly a major diversifier anymore.


I agree that 'mainstream' REITs have less appeal than they once did. They are too highly correlated with corporate stocks, and the dividends aren't that attractive in comparison to their volatility IMHO.

However, there are over twenty REITs of different flavors, though mostly mortgage backed, with dividend yields over 10% right now (at least four are over 15%). If I wanted more REIT exposure, I might consider putting 1-2% each in several such REITs, preferably those that have had stable or increasing dividends for the last decade and several different real estate sectors in the process. You might be surprised to see how many of these REITs have been steadily paying over 10% for the last decade.

https://www.valueforum.com/reits/high-yielding.mpl
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Valuethinker
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Re: Crowdfunding real estate?

Post by Valuethinker » Sat Mar 18, 2017 1:49 pm

sox2017 wrote:I know it's not exactly Bogle-like, but does anyone have any experience with any of the crowdfunding real estate sites (such as Realtyshares, Peerstreet, etc.)?

Some of the pros and cons I can think of off the top of my head, but wanted to see someone's real experience -

Pros:
- Diversification from stocks and bonds
- Nice yields (currently 8%+)
- Steady cash flows

Cons:
- Illiquid (can't sell until maturity and on equity deals, this could drag on for years)
- Default risk
- Late cycle investing (would I be dumping money into these late in the economic cycle)
- Must be an accredited investor (I am, but a lot of people will not be able to invest because of this)

I must admit, the temptation is there to try out these platforms with a small amount of the overall portfolio, but the biggest question in my mind is still around "what am I missing?". If these deals were good, why wouldn't the banks just fund these deals directly? Why involve retail investors unless these deals are all the "leftovers" that no one wants?

Any insight would be appreciated


I suspect that this could turn into a remarkably efficient and low cost way to defraud people.

I don't believe an external investor, not involved in the actual selection and management of the assets, will be able to identify the better investments and protect themselves against fraud or just plain bad management.

And even if all is pukka, as we say in Brit-speak (it's a word we got from India when we ruled it, you'd say "kosher" which is a word you got probably from the local butcher ;-)) you are still taking an undiversified risk, highly specific, which could give you *zero* returns-- as such schemes did for some of my acquaintances in the late 1980s (my brother stopped my father from investing in a couple of commercial property Limited Partnerships).

If you can handle the tax issues, why not just invest in REITs? You then have the liquidity, and the maximum possible diversification.
Last edited by Valuethinker on Sat Mar 18, 2017 2:10 pm, edited 1 time in total.

mrsytf
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Re: Crowdfunding real estate?

Post by mrsytf » Sat Mar 18, 2017 2:05 pm

The white coat investor dabbled in a few and writes about his experience here. He's hinted at an update shortly. This is from May 2016.
http://whitecoatinvestor.com/our-real-estate-empire/

I have 10K in peer street. Im less than a year in and a few on my investments are suppose to be coming due in a few months. Initially I switched on auto investing. As it turned out 6 out of 6 possible investments ($1000 each) were quickly deployed in properties in California. This made me nervous. Wanted more geographical diversity. Turned off auto investing and cherry pick properties now but I've missed out on quite a few that I would have chosen because they were swooped up by the auto investors. As it stands now I'm not happy with the geographical diversity I have right now. Too many are weighted in FL and CA. But so far everything is going ok, no defaults. Not sure if I will continue with peerstreet or look at the other ones. I like the idea of real estate but not interested in the work. I'm ok with risk. If it works out my return is 9.5% Also ok with the fact that I am leaving my due diligence to others.

Valuethinker
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Re: Crowdfunding real estate?

Post by Valuethinker » Sat Mar 18, 2017 5:59 pm

mrsytf wrote:The white coat investor dabbled in a few and writes about his experience here. He's hinted at an update shortly. This is from May 2016.
http://whitecoatinvestor.com/our-real-estate-empire/

I have 10K in peer street. Im less than a year in and a few on my investments are suppose to be coming due in a few months. Initially I switched on auto investing. As it turned out 6 out of 6 possible investments ($1000 each) were quickly deployed in properties in California. This made me nervous. Wanted more geographical diversity. Turned off auto investing and cherry pick properties now but I've missed out on quite a few that I would have chosen because they were swooped up by the auto investors. As it stands now I'm not happy with the geographical diversity I have right now. Too many are weighted in FL and CA. But so far everything is going ok, no defaults. Not sure if I will continue with peerstreet or look at the other ones. I like the idea of real estate but not interested in the work. I'm ok with risk. If it works out my return is 9.5% Also ok with the fact that I am leaving my due diligence to others.


Illiquid
You don't control the nature or management of the investment
You get a higher interest rate, but you may get little or nothing in default

Do they let professional fund managers onto these platforms-- can they "cherry pick"?

Really given all these factors, a great investment, what's not to like ;-) ?

mrsytf
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Re: Crowdfunding real estate?

Post by mrsytf » Sat Mar 18, 2017 6:12 pm

I don't mind illiquid, not at this stage in my life. I have an ample emergency fund of approx 1 year and a $200,000 credit line on my credit cards alone. I also have a HELOC of $150,000. If I manage to blow all that money, as a last resort I also have family that love me and have their act together financially to bail me out in a very bad situation. That's nearly half a million cash I can tap into and love is priceless. I don't invest long term with liquidity in mind.

I also have a high tolerance for risk, hence my peer street experiment.

sox2017
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Re: Crowdfunding real estate?

Post by sox2017 » Sat Mar 18, 2017 6:49 pm

Valuethinker wrote:
mrsytf wrote:The white coat investor dabbled in a few and writes about his experience here. He's hinted at an update shortly. This is from May 2016.
http://whitecoatinvestor.com/our-real-estate-empire/

I have 10K in peer street. Im less than a year in and a few on my investments are suppose to be coming due in a few months. Initially I switched on auto investing. As it turned out 6 out of 6 possible investments ($1000 each) were quickly deployed in properties in California. This made me nervous. Wanted more geographical diversity. Turned off auto investing and cherry pick properties now but I've missed out on quite a few that I would have chosen because they were swooped up by the auto investors. As it stands now I'm not happy with the geographical diversity I have right now. Too many are weighted in FL and CA. But so far everything is going ok, no defaults. Not sure if I will continue with peerstreet or look at the other ones. I like the idea of real estate but not interested in the work. I'm ok with risk. If it works out my return is 9.5% Also ok with the fact that I am leaving my due diligence to others.


Illiquid
You don't control the nature or management of the investment
You get a higher interest rate, but you may get little or nothing in default

Do they let professional fund managers onto these platforms-- can they "cherry pick"?

Really given all these factors, a great investment, what's not to like ;-) ?


Theses are asset backed investments so the chance of getting little or nothing in default is low. Not saying that getting 50% back in a default is great, but these likely aren't going to zero since there real estate, no?

sox2017
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Re: Crowdfunding real estate?

Post by sox2017 » Sat Mar 18, 2017 6:52 pm

mrsytf wrote:The white coat investor dabbled in a few and writes about his experience here. He's hinted at an update shortly. This is from May 2016.
http://whitecoatinvestor.com/our-real-estate-empire/

I have 10K in peer street. Im less than a year in and a few on my investments are suppose to be coming due in a few months. Initially I switched on auto investing. As it turned out 6 out of 6 possible investments ($1000 each) were quickly deployed in properties in California. This made me nervous. Wanted more geographical diversity. Turned off auto investing and cherry pick properties now but I've missed out on quite a few that I would have chosen because they were swooped up by the auto investors. As it stands now I'm not happy with the geographical diversity I have right now. Too many are weighted in FL and CA. But so far everything is going ok, no defaults. Not sure if I will continue with peerstreet or look at the other ones. I like the idea of real estate but not interested in the work. I'm ok with risk. If it works out my return is 9.5% Also ok with the fact that I am leaving my due diligence to others.


Did you mainly invest in the debt or equity deals? The debt deals specifically to flippers is what I'd probably stay clear of personally. Equity deals with preferred dividends where you're investing with an xperienced developer (who has most of the equity in the project) seems to make the most sense to me. They at least have a lot of skin in the game.

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Re: Crowdfunding real estate?

Post by AustinAttorney » Sun Mar 19, 2017 12:27 am

Personally, I find real estate crowdfunding intriguing. I've signed up on the RealtyShares and PeerStreet platforms. so far, however, I've only invested $2K on RealtyShares into an asset-backed hard-money loan with one-year term at 10%.

Given the illiquidity and tax treatment of income, seems to me these are best suited for self-directed IRAs and 401Ks for either: (a) investors who are years from retirement and don't need liquidity or (b) investors in or near retirement who want an income stream generated within their tax-advantaged accounts.

It stands to reason that the lack of liquidity is compensated by increased expected returns, and if you can accept the illiquidity, you should be compensated for it.

I could see, sometime in the near future, building a portion of my portfolio to hold a number of crowd funded real estate investments in both mortgage-backed short-term loans and maybe some equity. Keeping my exposure low in crowdfunded real estate now, as 25% of my currrent retirement portfolio is invested in an LLC whose sole asset is a mortgage-backed promissory note at 8% not Boglehead-like, I know), and thus I feel largely overweighted in this asset class.

Even though I'm not investing in much, it is fun to see the deals that come up on the platforms.

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in_reality
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Re: Crowdfunding real estate?

Post by in_reality » Sun Mar 19, 2017 5:39 am

AustinAttorney wrote:Given the illiquidity and tax treatment of income, seems to me these are best suited for self-directed IRAs and 401Ks for either: (a) investors who are years from retirement and don't need liquidity or (b) investors in or near retirement who want an income stream generated within their tax-advantaged accounts.


Yeah but you can't claim the loss if it defaults in a tax sheltered account.

Anyway, read the fine print. Returns are estimates. You are responsible for doing the due diligence.
[60% US _ 26% DEV _ 14% EM] | (-16% LC _ +8% MC _ +8% SC) | [47% FND/VAL _ 40% MKT _ 7% MOM _ 6% REIT] | (+/- 5% or *25% rebalancing bands)

Valuethinker
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Re: Crowdfunding real estate?

Post by Valuethinker » Sun Mar 19, 2017 8:17 am

mrsytf wrote:I don't mind illiquid, not at this stage in my life. I have an ample emergency fund of approx 1 year and a $200,000 credit line on my credit cards alone. I also have a HELOC of $150,000.


None of that is helpful in that they are for living expenses and emergencies-- precommitted. *Unless* your assets cover your liabilities several times over. Because at some point, you have to repay that debt.

If I manage to blow all that money, as a last resort I also have family that love me and have their act together financially to bail me out in a very bad situation. That's nearly half a million cash I can tap into and love is priceless. I don't invest long term with liquidity in mind.


Unless they happen to not have the money. A reason my family is able to maintain its equanimity (despite strong characters, and feuds lasting decades long) is by-and-large, we are all financially independent (separation by multiple time zones helps ;-)).

I have to admit if I was your adviser, those words you penned would chill my spine. I know a lot of lawyers and accountants, and family fights are often their bread & butter.

I also have a high tolerance for risk, hence my peer street experiment.


Nothing safe as houses, right? ;-).

There's risk and uncompensated risk.

Risk which is not fully diversified is uncompensated risk. So I do hold exposure to private equity (Private Equity Investment Trusts, here, may cause you serious tax headache in the USA, also I believe they try to avoid having US shareholders) via diversified vehicles. It does not diversify across the asset class, but there's a lot of underlying investments (probably 100+ in each trust, middle sized European Leveraged Buy Outs (LBOs)).

I could make a similar argument for investing in Frontier Markets e.g. Nigeria.

I can also see a logic in owning and managing either commercial property or rental property, yourself.

It is the halfway house that concerns me. Where you are neither fully diversified (REIT funds) nor "put your eggs in a very few baskets and watch them very carefully" a la Warren Buffett-- where you have genuine influence & control. This is halfway there.

In the UK, these vehicles also allow institutional investors, who then "cherry pick" the best deals. After all, they are paid full time salaries & bonuses to pick investments. Good luck as an individual investor on that case.

In the jargon, I suspect you are buying beta, but not alpha.
Last edited by Valuethinker on Sun Mar 19, 2017 8:32 am, edited 1 time in total.

Valuethinker
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Re: Crowdfunding real estate?

Post by Valuethinker » Sun Mar 19, 2017 8:23 am

sox2017 wrote:
Valuethinker wrote:
mrsytf wrote:The white coat investor dabbled in a few and writes about his experience here. He's hinted at an update shortly. This is from May 2016.
http://whitecoatinvestor.com/our-real-estate-empire/

I have 10K in peer street. Im less than a year in and a few on my investments are suppose to be coming due in a few months. Initially I switched on auto investing. As it turned out 6 out of 6 possible investments ($1000 each) were quickly deployed in properties in California. This made me nervous. Wanted more geographical diversity. Turned off auto investing and cherry pick properties now but I've missed out on quite a few that I would have chosen because they were swooped up by the auto investors. As it stands now I'm not happy with the geographical diversity I have right now. Too many are weighted in FL and CA. But so far everything is going ok, no defaults. Not sure if I will continue with peerstreet or look at the other ones. I like the idea of real estate but not interested in the work. I'm ok with risk. If it works out my return is 9.5% Also ok with the fact that I am leaving my due diligence to others.


Illiquid
You don't control the nature or management of the investment
You get a higher interest rate, but you may get little or nothing in default

Do they let professional fund managers onto these platforms-- can they "cherry pick"?

Really given all these factors, a great investment, what's not to like ;-) ?


Theses are asset backed investments so the chance of getting little or nothing in default is low. Not saying that getting 50% back in a default is great, but these likely aren't going to zero since there real estate, no?


In principle commercial real estate is lower risk than stocks-- leases rank ahead of equity investors as a claim on assets.

HOWEVER the flip side of that is CRE investors *leverage*. A lot. That's how they increase returns, but also downside.

If I am in the equity strip of a deal, then a relatively small drop in the value of the investment (say -20%) wipes out my equity. In fact, deals can get leveraged to 90%, I believe, so -10% drop. And bankruptcy of a single major tenant, or void period, or unanticipated capital expenditure can wipe me out quite easily.

We also have the manager problem. I don't get paid until the manager gets their fees, which may be excessive. But are easily at least 200 bips + performance fee (ie 2.0% pa).

OK what if I am in the debt? Well I've never looked at this things in detail, so with that caveat: if there is bank money in the deal, it will rank ahead of mine. So 50% (at least) to 80% of the value of the property is inaccessible to me (will also include accrued interest, so a bit worse than that).

And banks have enormous resources, both internally and in their legal advisers, to make sure that *they* get paid back. And if you look at say the RBS Global Restructuring Group, about which there is much litigation (in the UK) they used that power to push businesses under, to secure and sell the assets- -they were incentivized to realize the loan book quickly, and the employees duly did so (no doubt pocketing huge bonuses).

If there is securitization going on, then this can get orders of magnitude more complex (in the division between originator, servicer, and recipient of the cash flow).

Valuethinker
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Re: Crowdfunding real estate?

Post by Valuethinker » Sun Mar 19, 2017 8:30 am

AustinAttorney wrote:Personally, I find real estate crowdfunding intriguing. I've signed up on the RealtyShares and PeerStreet platforms. so far, however, I've only invested $2K on RealtyShares into an asset-backed hard-money loan with one-year term at 10%.

Given the illiquidity and tax treatment of income, seems to me these are best suited for self-directed IRAs and 401Ks for either: (a) investors who are years from retirement and don't need liquidity or (b) investors in or near retirement who want an income stream generated within their tax-advantaged accounts.


It is a given, here, that it's better to realize capital rather than chase yield, in terms of portfolio management. Our failure to do so is simply the result of behavioural bias (irrational).

It stands to reason that the lack of liquidity is compensated by increased expected returns, and if you can accept the illiquidity, you should be compensated for it.

I could see, sometime in the near future, building a portion of my portfolio to hold a number of crowd funded real estate investments in both mortgage-backed short-term loans and maybe some equity. Keeping my exposure low in crowdfunded real estate now, as 25% of my currrent retirement portfolio is invested in an LLC whose sole asset is a mortgage-backed promissory note at 8% not Boglehead-like, I know), and thus I feel largely overweighted in this asset class.

Even though I'm not investing in much, it is fun to see the deals that come up on the platforms.


Beware the Dunning Kruger effect and "dabbling".

If you are really good at analyzing these deals, do a Steve Eismann (Ed Baum in the movie The Big Short). Become an analyst (sell side) or work for a buy side firm doing these deals, where your analytical and legal insights are really useful and you can leverage them to make y-uge amounts of money.

But if you are not, or you do not have the *time* to analyze these deals in detail, or you are only good at the legal side but not at the financial side- -remember you have to understand both the legal side re the banking docs, company construction etc but also the actual RE ownership side re leases, landlord liability, the local RE market for that kind of property.

Whenever I look in detail at any business I am struck at just how complicated that business is, and how many factors there are to consider, and risks to manage. Which is why successful people in, say, Commercial RE, work 12+ hours a day.

If you are going to dabble, don't bet more than you can afford to lose. And remember Warren Buffett's various musings on his worst investment decisions ever. From wikipedia:

n 1962, Warren Buffett began buying stock in Berkshire Hathaway after noticing a pattern in the price direction of its stock whenever the company closed a mill. Eventually, Buffett acknowledged that the textile business was waning and the company's financial situation was not going to improve. In 1964, Stanton made an oral tender offer of $11 1⁄2 per share for the company to buy back Buffett's shares. Buffett agreed to the deal. A few weeks later, Warren Buffett received the tender offer in writing, but the tender offer was for only $11 3⁄8. Buffett later admitted that this lower, undercutting offer made him angry.[8] Instead of selling at the slightly lower price, Buffett decided to buy more of the stock to take control of the company and fire Stanton (which he did). However, this put Buffett in a situation where he was now majority owner of a textile business that was failing.

Buffett initially maintained Berkshire's core business of textiles, but by 1967, he was expanding into the insurance industry and other investments. Berkshire first ventured into the insurance business with the purchase of National Indemnity Company. In the late 1970s, Berkshire acquired an equity stake in the Government Employees Insurance Company (GEICO), which forms the core of its insurance operations today (and is a major source of capital for Berkshire Hathaway's other investments). In 1985, the last textile operations (Hathaway's historic core) were shut down.

In 2010, Buffett claimed that purchasing Berkshire Hathaway was the biggest investment mistake he had ever made, and claimed that it had denied him compounded investment returns of about $200 billion over the subsequent 45 years.[8] Buffett claimed that had he invested that money directly in insurance businesses instead of buying out Berkshire Hathaway (due to what he perceived as a slight by an individual), those investments would have paid off several hundredfold.


Some of us will die with this tattooed on their foreheads. Buying Nortel at $25 per share cost my estate roughly $160k (2^5 decades is 16x on your money), and some of my venture capital style investments in the dot com period several times that.

On the Nortel I got no tax writeoff. On the latter I got some great tax credits, so that makes it all worthwhile. Right? Right? :oops:

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Re: Crowdfunding real estate?

Post by LarryAllen » Tue Jul 25, 2017 4:25 pm

Anybody have any good, or bad, reports from investing in crowdfunding recently? I am very interested in them but trying to do some due dil.

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Re: Crowdfunding real estate?

Post by Hogan773 » Wed Jul 26, 2017 9:26 am

jebmke wrote:Small amounts wouldn't move the needle on your total return. So why bother?
I keep coming back to this thought too. What's the point of messing around with 5 or 10 or 15K in one of these high-expense and low-transparency vehicles? I would never think for one moment to invest $1,000,000 into one of these, so if I don't trust it for a big amount of money, why is it OK to "dabble"? Is "dabble" just another word for "gamble" or "play with my money"?

sox2017
Posts: 20
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Re: Crowdfunding real estate?

Post by sox2017 » Thu Jul 27, 2017 8:28 am

LarryAllen wrote:Anybody have any good, or bad, reports from investing in crowdfunding recently? I am very interested in them but trying to do some due dil.
After a decent amount of due diligence, I decided not to pursue these investments. Although intriguing, there were a few reasons why I decided against this, 1) my understanding is that commercial cap rates are at historical lows - not a great starting point for higher future returns, 2) zero liquidity, 3) a 5 or 10% allocation to these would not move the needle, and 4) high fees.

Just too many unknowns and risks for me for an 8 or 9% yield.

LarryAllen
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Location: State of Confusion

Re: Crowdfunding real estate?

Post by LarryAllen » Thu Jul 27, 2017 8:44 am

sox2017 wrote:
LarryAllen wrote:Anybody have any good, or bad, reports from investing in crowdfunding recently? I am very interested in them but trying to do some due dil.
After a decent amount of due diligence, I decided not to pursue these investments. Although intriguing, there were a few reasons why I decided against this, 1) my understanding is that commercial cap rates are at historical lows - not a great starting point for higher future returns, 2) zero liquidity, 3) a 5 or 10% allocation to these would not move the needle, and 4) high fees.

Just too many unknowns and risks for me for an 8 or 9% yield.
Good thoughts.

misterno
Posts: 348
Joined: Sat Mar 08, 2014 7:55 am

Re: Crowdfunding real estate?

Post by misterno » Thu Oct 12, 2017 3:59 pm

willthrill81 wrote:
Sat Mar 18, 2017 1:47 pm
sox2017 wrote:
abuss368 wrote:Honestly I understand your point in terms of cash flows. Because yes, it is all about the cash flows. I like real estate. Personally I would rather allocate a material portion to both U.S. and International REITs.
That's what I go back and forth on as well. I already have between 5 -10% allocated to REITs. Yields are a lot less though (understanding of course there is more risk with the higher yield crowdfunded option).

Also, public REITs have become so highly correlated with the larger market. Not exactly a major diversifier anymore.
I agree that 'mainstream' REITs have less appeal than they once did. They are too highly correlated with corporate stocks, and the dividends aren't that attractive in comparison to their volatility IMHO.

However, there are over twenty REITs of different flavors, though mostly mortgage backed, with dividend yields over 10% right now (at least four are over 15%). If I wanted more REIT exposure, I might consider putting 1-2% each in several such REITs, preferably those that have had stable or increasing dividends for the last decade and several different real estate sectors in the process. You might be surprised to see how many of these REITs have been steadily paying over 10% for the last decade.

https://www.valueforum.com/reits/high-yielding.mpl
Interestingly, I checked top 5 stocks listed on the link and compared them to SP500 index and their returns are way way lower. I was just wondering if the dividends on these REITS are reinvested in the yahoo graph. I assumed it was but I am not sure.

Can someone enlighten us?

gxa
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Joined: Wed Jun 22, 2016 3:28 pm

Re: Crowdfunding real estate?

Post by gxa » Thu Oct 12, 2017 4:43 pm

I recently had an investment complete a cycle at Realty Mogul. As an equity investor I received approximately 1% return monthly for almost two years and just received all of my principle back. This 12% annual return (albeit taxable) was exactly what was anticipated at the start. :D

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