Most of my portfolio is pretty boring. 60% of it is invested in stock index funds and 20% of it in low-cost bond funds. That never really changes, so there is little point in writing frequently about it. However, about twice a year I update readers on my other investments. This 20% is primarily invested in real estate investments, but the main aims of this portion of my portfolio is high returns, low correlation with stocks and bonds, and getting paid for illiquidity. Many of these investments are not available to you, but there are often similar investments that are if you are interested. Bear in mind all of these are completely optional. If your written investment plan avoids them completely, you are probably going to be just fine so long as you fund the plan adequately. Returns discussed in the post are as of February 11th, 2019.
The Vanguard REIT Index Fund
My investing policy statement dictates 5% of my portfolio be invested in this fund. I've owned it since November 2006. My annualized dollar-weighted returns since that time are 7.76%, dragged down significantly by 2018 when it returned -7.63%. It is up almost 13% already in 2019. Remember that with dollar-weighted returns, in a portfolio that is rapidly increasing in size, recent returns have a much larger influence on the annualized returns than you might expect. I'm a little underweight here right now, with only 3.24% of my portfolio invested here, so that probably worked out in my favor in 2018 and against me last month.
Peer to Peer Loans
Remember these? I added these to my portfolio back in 2011 and exited (or rather, started exiting) in late 2016. I used primarily Lending Club but also Prosper. They actually treated me quite well.
- 2012: 12.65%
- 2013: 13.16%
- 2014: 11.34%
- 2015: 9.99%
- 2016: 7.09%
I decided I wanted out because I didn't like the very concentrated platform risk and it seemed silly to be taking that kind of risk for 8-10% returns when I could invest in hard money loans backed by a forecloseable property instead. It turned out to be far more illiquid at that point than it had been years earlier when I started investing in this asset class. Nevertheless, I was able to liquidate 90%+ of it within a few months and invest it elsewhere as planned. But I still have money there that I won't see for years. That's not such a huge deal in my Prosper account. It was never more than a small taxable account, but just before I decided to get out, Prosper decided they weren't going to let you sell your notes on a third party platform. So as they are paid off, I periodically transfer the money to my checking account. I currently have $107.23 in that account spread across 11 current notes and one late note. I won't get my last dime back until October 2021. My annualized returns with Prosper? 6.02%. Not too shabby.
The Lending Club account was more problematic. I also had a small taxable account there that actually liquidated pretty quickly. But the larger Roth IRA account was a lot harder to liquidate. I sold very few at a premium, a bunch at par, and even more at a small discount. It became obvious I wasn't going to sell any more unless I was going to give them away, so I decided to just keep trying to sell them at par and wait for them to mature. There were two problems with this approach. The first is that to move cash out of the account requires an IRA rollover, which is a pain and comes with a $25 fee. The second was that once my balance fell below $5K, the self-directed IRA holding the assets started charging a $100 annual fee that had previously been waived/paid by Lending Club. Despite having all of my notes for sale for nearly all of the last two years, I still own 52 current ones and seven late ones, for a total of $1273.74. A $100 annual fee on a $2000 account is the equivalent of a 5% ER, so needless to say my returns the last two years have not been stellar (-5.22% in 2017 when I was selling a lot at a discount and -1.60% in 2018 when I wasn't), but at least they've only been on a relatively small amount of assets. Most of the money was moved out within just a few months. I'm still trying to sell those last 59 notes, but if I can't, I'm stuck here until October 2021 too. My overall Lending Club annualized return was not bad, 7.96%.
Partnership Office Building
I still own part of my partnership office building. The value is only assessed once a year, so no real change here. The tenant is great! The return has ranged from excellent to poor over the years. Last year it was poor due to a bunch of upgrades. 9.25% annualized overall.
Indianapolis Apartment Building
This was the one bought through RealtyMogul in 2014. It got behind on payments for a while but caught up. Over the years it has sent me $2,030 on my $10,000 investment. The next distribution is due later this month. It was targeting a 7-12% cash on cash return (and a 15% IRR). I've seen 4.89%. I should have a payment hit about the time this is published. They tell me the cash on cash return has been 5%, which is about right. The estimated hold was 5-7 years, so we'll see what the overall return is in another year or two.
My Local Grocery Store
I no longer own my local grocery store. As discussed in this post, this RealtyShares investment went round trip. It called for an 18.2% IRR and I calculate my own at 17.8%. I'm pretty happy with that, even with RealtyShares on their way out of business.
Houston Apartment Building
This is one I bought through Equity Multiple just over a year ago. It offers a 10% preferred return and until recently that was exactly what I had gotten. It's hard to come to any definitive conclusions until it goes round trip. It's a 3-year hold so that date is still a couple of years away. They're aiming for a 15% return. However, I just got a notice this month that demonstrates well what risk showing up looks like in this type of investment.
Over the course of the last few months, we have been working closely with the Sponsor to finalize their 2019 budget which includes a renovation schedule for the remaining units. As mentioned in previous updates [The property is in Houston where there was a hurricane], one of the difficulties that the Sponsor ran into was lack of available subcontractors to effectively work through renovations. As a protective measure, the Sponsor has continued to lease out the Property to tenants on a month-to-month basis in order to generate cash flows and meet debt service.
The plan moving forward will be to renovate 65 units over the next 9-12 months while leasing out finished units at market rates. Eight units are currently under renovation and are scheduled for completion in early March. As part of the new plan to address labor shortage, the Sponsor has informed us that they have signed employment contracts with electricians, plumbers, and HVAC crews in addition to contracting a larger team to handle carpentry and other renovation work. The Sponsor may add 2-3 more skilled laborers over the next couple weeks to help expedite the entire process and is committed to adhere to the schedule. After many discussions with the Sponsor, we now have a concrete plan in place to complete the unit renovations.
Additionally, we have discussed cash flow distributions with the Sponsor extensively. As noted in previous updates, the initial Interest Reserves have been fully paid out at as of November. Per our Partnership Agreement, cash flow distributions to investors thereafter would be funded by available cash flows of the Property. Based on the current plan, distributions are projected to be partial with the remaining shortfall accrued until additional units are renovated and sufficient cash flows are generated. Delays in unit renovation have no doubt negatively impacted the timing of distributions to investors but all accrued amounts on Preferred Equity will be fully repaid ahead of any distributions to the Sponsor.
While the news on current distributions is disappointing, the Houston market continues to be strong and the prospects for an attractive exit remains optimistic.
As you can see, the return is now dropping below the pro-forma and I doubt it will be made up. Will there still be a positive return? Probably. Will it be 15%? Probably not. Is there anything I can do about it? Absolutely not.
Origin III Fund
This was my first real estate equity fund. I prefer funds to picking the properties individually. I like the professional management, diversification and sometimes additional liquidity. This one is sure taking its time getting fully invested though. It's been doing capital calls for 16 months now and I'm still only 63% invested. That's fine, I'd rather they not rush it if they don't have good deals to buy and I've got plenty of other places to invest the money in the meantime. Return so far is only 1.54%. The first distribution is supposed to be in about 6 months. Hopefully, we can get fully invested by then! The goal with this one is to double my money over 7 years or so. We'll see how it goes.
Fort Worth Apartment Building (37th Parallel)
This was purchased in February 2018. It reliably makes a payment once a quarter. Cash on cash return so far is 3.84% (although that will jump up closer to 6% between now and publication of this post when the 4th quarter payment is made.) I think this one is a 10-year hold. We'll see how it goes. So far it is at pro-forma or very slightly above.
Realty Shares Lover's Lane
This was a $5K loan to a home flipper through RealtyShares. They took the optional extension for an additional 4 months but always paid as agreed. I made 8.69% and got all my money back last October.
RealtyShares BarTree
This was another $5K loan to a flipper through RealtyShares that also took the extension. It had always paid as agreed until January when it missed a payment for the first time. I'm looking forward to getting my principal back soon given RealtyShares's recent issues (basically they're finishing up their current investments and then going out of business). This is my last RealtyShares investment. 7.24% annualized return so far. Recent notices demonstrate what risk showing up looks like in this asset class. Remember this is a one year investment beginning June 2017.
June 2018:
The sponsor reports that the property is for sale with three other apartment complexes. Several offers were received, the highest of which is $4.4MM or about $28,000 per unit. The sponsor has decided to exercise its 6-month extension to have more time to complete marketing, negotiate offers, and close the sale. The rationale is that with more time to market the property, the sponsor may close on a better offer. The properties can be purchased individually or in a portfolio. The listing price for this property is $1,306,565.
September 2018:
The property is now under contract. The sale price is $1.25MM and the sale is expected to close within 60 days. Your investment will be returned in full with accrued interest upon closing. RealtyShares will update you when the close is confirmed.
January 2019:
The sale fell through. The borrower offered this property with two others he owned in Texarkana to sell as a package. The borrower felt that a sale at a higher dollar amount would attract a wider buying audience. What they found is that a $5MM purchase price was too large for smaller buyers and too large for larger regional buyers. They are back on the market selling the three properties individually. The property is now on the market for $1.2MM. The loan has been extended until June to allow for the consummation of a sale.
RealtyShares Church's Chicken
This one gave me my principal back in July, always paid as agreed. I made 9.76%
Fund That Flip Jay Road
This is is a $5K hard money loan through Fund That Flip and has had some issues. It made a late payment back in August, then in October filed for an extension. The rehab has been completed but they were still trying to sell the property. They missed their December payment, which was probably a bad sign. Then they finally sold the property in January and I got paid all the interest I was due plus penalties. Final return? 11.29%.
Fund That Flip Fox Lane
This $5K loan through Fund that Flip also filed an extension, but at least they're making all their payments. One was a week late, but I'm more concerned that the project on a 1-year loan is only 48% complete after 15 months. Not looking good there. 9.27% so far. At least the late payment and loan extension fees go to the investors.
Fund That Flip 527 East
This one actually completed the project and paid back the loan at the expected time. 10.93%.
AlphaFlow
In late 2017 I got sick of picking these hard money loans myself and decided to outsource it. First stop? AlphaFlow. They basically pick the loans from the various crowdfunding companies and charge me an additional 1% for removing hassle, providing liquidity, and providing diversification. So far, so good. 7.64%. My $22K is spread over 109 notes.
Broadmark II Fund
One of my favorite investments, this is a hard money loan fund that loans to developers in Utah and Colorado. 9.57% so far. They claim returns around 11%, but that's not what I'm calculating it out as. Part of that may be due to the Colorado taxes being withheld for me, but most of it is just the fact that the reporting comes back a month late and that's what I use to calculate my return. They changed to REIT status recently, which should qualify this income for the 199A deduction.
Arixa Secured Fund
This is another hard money loan fund, lending in California. I calculate my return at 6.02%. That's always about a month behind just because of the way they report it to me, but they're only claiming a 2018 return of 7.7%. I find it interesting that most real estate investments calculate returns differently than XIRR. I guess I shouldn't be surprised. I asked recently why their returns were lower than Broadmark's. Fund manager Dan Frankel said this:
It is all about the risk of their loan portfolio versus ours. Lenders can charge higher rates in states like CO and UT because these states will experience more significant value degradation (on % terms) in a down turn, compared to major job centers in coastal CA. We would charge much higher rates in those states as well.
Whether you buy that or not, it appears to be yet another great financial reason not to live (or invest) in California I guess. 3.6% sunshine tax. Either way, I do prefer owning dozens of these loans via these funds rather than a handful of loans picked individually, and for about the same amount of management fees either way.
My Next Real Estate Investment
I mentioned this one on the podcast a couple of weeks ago, but I'll be picking up another hard money loan fund in my portfolio in the next month or so. You are welcome to join me if you like. I'm not yet sure if it will replace AlphaFlow or Arixa eventually but for now it will just be in addition to it. The fund I will be indirectly investing into is the DLP Lending Fund. I won't be investing directly into it because the minimum investment is a little rich for me ($500K). The fund lends primarily in Pennsylvania, New Jersey, and Florida. While the PPM allows for a small percentage of the fund to be invested in mezzanine loans, the fund is currently 100% invested in first position real estate investment loans and plans to stay that way. The fund also uses some leverage. There is a 10% preferred return and they aim for 11%+ returns. Since they started in 2014, they have averaged 14.3% returns.
So how am I investing in it if I don't want to put $500K in? That's where CityVest comes in. Some of you may recall another fund I mentioned in December in connection with CityVest, one of my site's sponsors. 40-50 of you invested in that fund, but I wasn't one of them. CityVest was started by Alan Donenfeld after he recommended his anesthesiologist brother invest in good private real estate funds and then found out his brother, despite being an accredited investor, could not invest in them due to the high minimums. CityVest bands together groups of accredited investors like physicians into an “Access Fund” that then invests in the larger fund. The benefit is a lower minimum investment and usually another price break. The downside is another layer of fees. Here is the deal with the CityVest DLP Access Fund:
DLP Lending Fund
- 1% + 80/20 split after the 10% preferred return (First 10% to you, next 2% to manager, then 80/20 above that)
- $500K minimum investment
5% exit fee[Update 2/19: This fee no longer exists for any investors and was never for more than the first year anyway.]- 90 day liquidity
- Monthly distributions
CityVest DLP Access Fund
- $500/year fee
- 0.75% annual fee
- $50,000 one-time organization fee split among all investors in the Access Fund
- $50K minimum investment
5% Exit fee waived[Update 2/19: No longer needs to be waived.]- No liquidity for 3-4 years
- 100 total investors
- Quarterly distributions
WCI Deal
- First year annual fee reduced to 0.375% from 0.75%
- $25K minimum (instead of $50K)
Now I don't want to put $500K into this fund. I wouldn't be able to be sufficiently diversified if I did that. But I do want to minimize the fees that come from going through CityVest. There are three ways to do that.
First, I negotiated a lower annual fee for the first year, in addition to a lower minimum ($25K instead of $50K). You have to go through the WCI links to get that. If you go straight to CityVest, you don't get it.
Second, I want the fund to “fill,” meaning I want all 100 investor slots that its structure allows to be filled. The more people that invest, the lower my portion of that $50K one-time fee becomes. I also want people to invest more money rather than less. If all 100 investors only invest $25K, that's a $2.5M fund and that fee is 2%. If all 100 investors invest $100K, that's a $10M fund and that fee is 0.5%. I think the fund will end up being about $5M honestly, so a 1% fee.
Third, I want my $500 annual fee to be as small of a percentage of my investment as possible. I can do that by investing more than the minimum $25K. Katie and I decided to invest $100K, so that fee is only 0.5% per year.
So my total fees for year one will be
- 1% DLP fee
- 0.37% CityVest annual fee
- ~1% CityVest organization fee
- 0.5% CityVest administrative fee
- Total 2.87%
My fees for years 2-4 will be the
- 1% DLP fee
- 0.75% CityVest fee
- 0.5% CityVest administrative fee
- Total 2.25%
In addition, the DLP manager will earn 20% of returns, although they will not receive any until the investor receives the 10% preferred return.
If they can manage to do what they have done the last four years, I would expect returns of around 12%. This investment will be very tax-inefficient by its nature (hard money loan interest is taxed as ordinary income- no depreciation), but the fund will be taking care of the state tax returns in Pennsylvania and New Jersey using composite returns.
If you wish to join me in this investment with $25-100K+ of your money, you may do so through this link. Yes, you must be an accredited investor. Now don't be stupid and invest some huge percentage of your portfolio in this; diversification still matters. I only have 5% of my portfolio in real estate debt and even that is split among 4 different managers.
In case it isn't incredibly obvious, I GET PAID IF YOU INVEST WITH CITYVEST THROUGH THE AFFILIATE LINKS ON THIS PAGE. Affiliate marketing is one of the ways this for-profit website makes money. So obviously I have a huge conflict of interest in this regard and I have no legal fiduciary duty to you. You can read more about my conflicts of interest here. You can get started investing with the link below or you can call up Alan Donenfeld at 212-593-1600 and let him know WCI sent you to get the WCI deal. If you want to learn more, there is a webinar on Tuesday and Wednesday this week at 2 pm EST.
Invest in the CityVest DLP Access Fund Today!
Physician on FIRE
Moving away from the real estate debt, let's talk about my best investments — the WCI Network. Physician on FIRE continues to send me quarterly checks and I calculate out my ROI at an annualized 289%.
Passive Income MD
My best investment, however, is the king of cash flow himself. Nothing better than getting passive income from Passive Income MD. 851% annualized return there. I highly encourage you to continue to support these fine websites.
I invest in real estate in hopes of high returns, low correlation with stocks and bonds, and being paid for liquidity.
Overall, the returns on the 5% of my portfolio invested in real estate debt were 9.13% in 2018. The returns on the 10% of my portfolio invested in equity (heavily boosted by WCI Network returns) were 85%.
Most of my investing money the last few months has been going into stocks to try to rebalance the portfolio. Strong performance from real estate/alternatives combined with poor stock market performance has forced me to do that. But I'm sure I'll be looking at more real estate investments soon. If you're interested in real estate investing, take a look at some of my affiliate partners (More details found on this page.)
EquityMultipleWhat do you think? Do you invest in anything besides index funds? How have those alternatives treated you? How have you chosen to invest in real estate? Comment below!
Do you feel ready to learn more about real estate? WCI's No Hype Real Estate Investing course is the best on the planet. Taught by Dr. Jim Dahle and more than a dozen other experts, this course is packed with more than 27 hours of content, and it gives potential investors the foundation they need to learn about all the different methods of real estate investing. If you’re interested in real estate investing, you can’t afford to miss the No Hype Real Estate Investing course.
Featured Real Estate Partners
I was interested in the real estate numbers until you got to the very end and shared PIMD and POF’s numbers. Holy cow! That’s a strong business deal there.
I anticipate being able to start participating in some of these other asset classes in the next couple of years, but am sticking to my index fund portfolio for now as I begin cash flowing what was previously my large student loan payment.
Thanks for the information on your deals. How much work do you feel has been involved in following along with the various deals that you’ve taken part in? I’m very much a believer in “Set it and forget it” investing, and I am curious how much “forgetting” you get to do in real estate funds like this.
TPP
Yes, websites have been good to me, but they’re win-win-win-win-win deals. No losers there.
Most of these (not the websites) are pretty much set and forget it after the initial purchase. There’s nothing you can do anyway, you’re pretty much locked in for a few years, for better or for worse. But it’s just mailbox money at that point.
Thanks for sharing these details. It is great for people to see what is out there. I didn’t know you had so many crowdsourced investments. All those investments are interesting but there is no way I could manage all those details, let alone calculate my returns along the way. Impressive.
I too invest in real estate but in much bigger chunks so there is less to manage and fewer tax and accounting forms for me to juggle.
Are you disappointed with the 37th parallel returns so far? or is it just too early to tell?
I’ve exited more deals than I’m currently in. I had lots of little $5K deals but am out of all but one or two of them. I agree it’s nicer to get bigger chunks-less to keep track of.
No, I’m not disappointed with 37th Parallel so far. Why would I be? It’s at pro-forma. I think I get a check deposited today which should bring it up to 6% cash on cash and I think the property is at 94% occupancy up from 91%.
Okay, but does that include the value of the awesome custom Yeti cups? 🙂
I don’t think I got a cup actually.
What are the tax implications for the real estate funds? Being geographically diversified do you end up needing to file taxes in several different states? Also, I see some of these funds are structured as REITs (RealtyMogul has this), what are the pros/cons of selecting one of these private real estate funds that is structured as a REIT or not? Finally, if one is looking to trial some of these funds but prefers a very low minimum while testing it out, which companies would you recommend?
Sometimes no return is required (Texas for instance), sometimes the fund/LLC files a composite return, sometimes I’m already doing a return for that state etc. I expect to do three state returns this year — UT, MN (PoF), and CA (PIMD). While it’s a drag to pay another $30-40 to Turbotax, it really is very easy.
If you’re looking for low minimums, the crowdfunding sites are your best bet as you can get in for $2-20K. Here’s my list:
https://www.whitecoatinvestor.com/recommended-real-estate-crowdfunding-companies/
Hi WCI. It would be great if you could write a post about the basics. For example, how to put your money in these stocks and bonds? As in, the process. For residents and fellows on the cusp of attendinghood, this would be really helpful. Let’s say we’ve paid off our loans our student loans, maxed out all the retirement accounts etc now we still have money left to invest. Idk how to even buy a stock or a bond. Can you consider a how to/101 post? Go to this website. Click this. Do this. Pleaaaase:)
If you don’t even know how to buy a stock or bond you’d better stick to mutual funds!
“Go to this website. Click this. ” hmmm, is this spam and your link didn’t come through? Anyway, as I just taught my fledgling leaving the nest, pick a mutual fund firm- we use Vanguard but others have their pluses and some might be cheaper/ lower minimum starting investment than Vanguard- and start an account.
In something like the US stock market: get one of their index funds, eg “500 Index fund” (that’s S&P 500) and then continue adding to it regularly, even better with an automatic investment each month.
If a company and fund’s minimum investment seems too big for you consider starting an IRA there which may have a lower minimum investment- maybe next year if you’ve already done 2019. My fledgling- now making engineer not doctor money- started her own IRA in a ‘lifestrategy” fund- it alters % in bonds vs stocks based on years to retirement- and we gave her (which I think she almost emptied 4 years later to buy her house, but they haven’t closed the account and she’s adding to it again) a regular (US stocks) fund ($3K minimum, above her price range right out of college) as a graduation present.
Be nice Jenn. She’s a real person, not a spammer. We all had to put in our first buy order once.
Welcome L.R. Congratulations on nearing the completion of your training. I would suggest reading the white coat investor book and the posts on the front page that are for people getting started. Also register for the forum. There are lots of people who will give you excellent advice there (although it will be honest if you are screwing up you will be told).
Many people (including myself) use vanguard and invest in their ETFs (or mutual funds). Just go to their website and create a free account. I like VTI for US market exposure. Vanguard’s website is pretty straightforward and you can call their customer service if needed.
I know not every post on the site is at the super basic level. This one is actually fairly advanced. Keep in mind I’m writing for different audiences. You may find these more useful than today’s post given where you’re at:
https://www.whitecoatinvestor.com/investing-101/
https://www.whitecoatinvestor.com/my-favorite-mutual-fund/
But the actual mechanics of buying a mutual fund are very easy. It’s very similar in a taxable account to doing it in a Roth IRA or a 401(k), which it sounds like you’re already doing. Here’s your chore for today: Go to Vanguard.com. Open a brokerage account. Buy $1,000 of VTSAX. If you get stuck at any point, call up Vanguard at 1-800-528-4999. Once you do this once, you’ll realize it’s no big deal. Might as well get used to it, you’ll be doing it multiple times a year going forward for decades.
Thank you… and thank you for this website. I’ve been following your advice. You’re changing people’s lives. Sounds corny but it’s really true. I’ll check out the links you mentioned. Thanks !!
Thank you for your kind words.
That really is a pretty impressive diversified real estate allocation you have there Jim.
I had been primarily investing with 37th parallel since May 2017 and have had an awesome experience with them.
This past year (and going forward) I am doing some added diversification as I did not want it all concentrated in one syndication (although how they set it up the syndication company could go belly up and the previously formed individual llc assets would be unaffected).
I have dipped my toes in the MLG IV fund (Peter from PIMD was a major influence for that) and exploring other options as well but have not committed money to them as of now.
My partnership in my medical building has been my best performing asset to date.
We are looking to diversify our portfolio with some real estate. We’re not interested in direct ownership or active management and are looking for either the syndication route or crowdfunding. Aren’t the hard money loan returns a little low for you (if not using a Roth)? I would think you’d want at least a double digit return to make the investmebt class worthwhile after tax.
Yes, I’d prefer 35%+ returns.
Seriously though, I’ll take what I can get. If you know a fund guaranteeing double digit returns, I’ll take a look at it. But when you consider some smart people expect returns of 4-9% out of stocks and 1-5% out of bonds,
https://www.bogleheads.org/wiki/Historical_and_expected_returns
I don’t see returns of 7-11% as being terrible.
Yes, paying taxes sucks, but it beats the alternative.
Yes, hard money loans are very tax-inefficient AND have a high expected return and thus are a great candidate for tax-protected accounts.
To rephrase my questions: Wouldn’t it make more sense to be on the equity side of real estate as opposed to the debt side? You get the returns mostly tax free through depreciation. Or is the debt side less risky (as in the stock/bond world) and a part of your overall portfolio?
Just trying to get a sense of what you are doing for the private real estate investing and why.
I think the risks are different. I see them as two different asset classes. So I invest in both. Yes, I think the debt side is less risky. Far more risky than treasuries obviously, but you are also compensated much better. Yes, the equity side is more tax-efficient.
I am glad you are doing this so we can all live vicariously though you. I could not imagine putting 5K here and 10 K there. I look to simplify things but it is good that this works for you and like I said you are paving the way for those who want to get more complicated.
Keep up the good work!
There are always target retirement/life strategy/lifecycle funds for those who put a high value on simplicity.
https://www.whitecoatinvestor.com/7-reasons-i-dont-use-target-retirement-funds/
I prefer to directly own the real estate assets myself as I have more control over its performance and can force appreciation and cash flow by adding value through better management, upgrades etc… I do not manage and use professional property managers as I don’t want that job nor do I have the talent for it. I manage the managers. I have helped other docs by setting up 3 syndications in which they invest along with me and that allows us to buy larger properties that are more efficient to run. If you want to own real estate, to me that is a better route than funds over which you have no control.
How much control does an LP in your syndications really have? About as much as they would have in a fund, no? What’s the difference? Well, in the fund they get a little more diversification. Most docs aren’t going to syndicate themselves.
They are a little more liquid as They can sell shares to the other investors if they want out (one did that when he moved to CA) and have ready access to me if there any questions before or after the purchase. I send them the monthly reports from the management company and a report along with the quarterly distributions. I have some who have invested in all 3 syndicates so they get some diversification that way.
Okay. I do that in my syndicates. But I prefer a little more diversification. If I can spread $100K over 15 properties instead of 1, that’s a little better I think. I would guess most people would feel the same.
At my stage (and after the recent stock market correction) I am looking at the alernative investment/Real Estate area as a hedge to the direction of the stock market. I started in this space with Rich Uncles student housing private REIT a year ago that earns a 6% monthly dividend and am now going a little bigger with the CityVest DLP Acess fund. This area will still only comprise about 5-6% of my total portfolio that is largely of Stocks and Stock mutual funds in retirement accounts. I have to admit that I am a little nervous and excited with the CityVest venture but at least I have a little confidence that the WCI network is putting their own money in and therfore has put their own reputation on the line as financial bloggers.
Im also invested in that texarkana property through realty shares with you Jim. I hope it closes soon, Im really worried about the money i have invested through realty shares, even the notes that are paying are not hitting my account from realty shares for several months later. I’m hoping someone takes them over to help wind things down as there is zero customer service response and im not sure what recourse individual investors have if notes stop paying since i don’t suspect realtyshares will spend money on the legal services to pursue judgments
As I was at the accountants last week getting taxes ready (I know I know but with MIL paid as nanny living in our rental property as part of her salary and a a couple other confusing investment things it’s worth it) she made a comment that implied REITs are being taxed more favorably with the new tax laws that I didn’t quite follow. Something about 20% haircut off the top I think having to do with the pass through deduction. Obviously in the middle of tax season trying to tease this out at my tax appt wasn’t going to happen so I thought I’d start here before I consider an investment in DLP.
We are both employed, would meet accredited investor criteria, have some small business/real estate investments but aren’t self employed and don’t really do anything that gets significant 199a (or whatever that number is). So I guess my question is “has something changed that makes REITs more favorable compared to this/ other nonREIT real estate investments?” And the bigger question of “how do REITs make me money compared to these non-REIT investments? Is there a substantial difference?
Thanks for the update on your Real Estate performance. The numbers look very encouraging, but I don’t see anything listed where you lost money on the investment. I’m new to the site, so maybe you covered this in the past or maybe you have learned how to avoid losing investments at this point, but is there anything not included that was a significant loss?
I just found the site and podcast about a month ago. Thanks for all that you do!
So far I haven’t aside from the 78% I lost in the Vanguard REIT Index Fund in 2008. Of course, I didn’t sell and it came roaring back, so that was only temporary.
Give it time. There is enough risk there that I’ll lose money eventually. We all look like geniuses in a bull market.
All my money is in Real estate both as a limited partner and as a deal sponsor. Have any refi’s/sales been done on any of your RE holdings yet? Once that happens, you probably won’t want to invest in anything else.
Sounds great. I’ve had sales but no refis. The one round trip equity deal made 17%.
We just sold a 17 unit in Houston we purchased in 2013 and made 281% or about 56% per year. Collectively, we sold/refi’d about 10 deals so far and made anywhere from between 200-300% returns. I shoveled the money from the refi’s/sales into new deals to build my wealth faster. I’m a partner in over 2000 apartment units.
Pretty awesome returns! Congratulations.
I’m very interested in cityvest. One thing I can’t find the answer to (I emailed Alan but haven’t heard back) is an elaboration on the state tax returns. Pennsylvania and New Jersey are taken care of- about how many additional state tax returns will I be filing if I invest? Thanks!
That’s it. It only invests in PA, NJ, and FL (which has no state taxes.)
Fantastic! Thanks.
What is going on with CityVest’s DLP offering? Has it been extended? What happens with the funds accepted for investment prior to closing, are they earning some kind of interest?
I think it did get extended a couple of weeks because a few people committed never funded, but I think it closed earlier this week. I don’t know about the interest. I would expect not but would be pleasantly surprised if so.
Anybody invest with Cityvest/DLP access fund?
Their website says it is supposed to be live 1 June but so far nothing is updated.
Sent them 50K back in April…should I be nervous?
I’m in the same situation. I have no information, but I’m not nervous yet. I’m assuming it’s like every other IT project and is delayed. It would be nice to have a little more communication though.
Every time you get nervous, pick up the phone and call Alan and tell him you’re feeling nervous because you haven’t heard from him. 212-593-1600. He picks up every time I call.
I have twice as much as you invested in the fund and also have not received anything yet, but I’m not particularly nervous. If you want daily updates, daily liquidity, and fancy websites, stick to mutual funds.
But I agree with you that communication could be better.
I don’t see anyone asking for daily updates, daily liquidity, or fancy websites. That is deflection. I see people making rational inquiry as to why a fund requiring a substantial technology fee on top of the other fees has no promised dashboard or clear communication about the lack of information and a reasonable timeframe for resolution. It doesn’t seem to be a case of unreasonable expectations by investors so much as reasonable and timely inquiry into the progress of expectations set by CityVest itself, and confusion as to the lack of any reasonable response.
How would you like your response? Most of the people above have had theirs by email within the last week. If you would like yours by email too, email Alan (or me and I’ll forward it).
I agree the communication and delay in setting up the website is disappointing.
Same boat here. I noted in a forum post where others were asking the same question that the CityVest Dashboard is now redirecting to Crowd Engine. I hope that is a sign that they are progressing but the lack of any communication with investors is perplexing. Maybe WCI can get some info?
Thanks guys. Glad to not be alone, though I called Alan yesterday and emailed earlier this week and had no replies to either. I agree more communication would be most helpful.
That’s concerning. Let me see if I can help you get in touch.
What info are you looking for and have you tried calling Alan?
Thank you WCI! Is FSRNX Fidelity® Real Estate Index Fund the equivalent of Vanguard REIT index fund that you mentioned in y our post?
Pretty easy to compare using Morningstar. Just Google “Morningstar FSRNX” and look at the performance page. Then do the same for “Morningstar VGSIX”. If the performance numbers are pretty much identical, then I would consider it equivalent.
https://www.morningstar.com/funds/xnas/vgsix/quote
https://www.morningstar.com/funds/xnas/fsrnx/performance
The returns are pretty significantly different (the Vanguard fund returned 6% more over the last year and 0.73% more per year over the last 5 years) so I wouldn’t consider them equivalent. If you want to get into the why, the answer is usually in the portfolio and the expenses.
The portfolio tab reveals the top 10 holdings are very different, so that likely explains the different performance. They’re both very low cost so the fees probably aren’t making much difference.
Fidelity’s prospectus says: Fidelity® Real Estate Index Fund seeks to provide investment results that correspond to the total return of equity REITs and other real estate-related investments.
Principal Investment Strategies
Geode normally invests at least 80% of the fund’s assets in securities included in the Dow Jones U.S. Select Real Estate Securities Index℠. The index is a market capitalization-weighted index of publicly traded real estate securities such as real estate investment trusts (REITs) and real estate operating companies.
The Vanguard prospectus says:
Principal Investment Strategies
The Fund employs an indexing investment approach designed to track the
performance of the MSCI US Investable Market Real Estate 25/50 Index, an index
that is made up of stocks of large, mid-size, and small U.S. companies within the real
estate sector, as classified under the Global Industry Classification Standard (GICS).
The GICS real estate sector is composed of equity real estate investment trusts
(known as REITs), which include specialized REITs, and real estate management and
development companies.
The Fund attempts to track the Index by investing all, or substantially all, of its
assets—either directly or indirectly through a wholly owned subsidiary (the underlying
fund), which is itself a registered investment company—in the stocks that make up
the Index, holding each stock in approximately the same proportion as its weighting in
the Index. The Fund may invest a portion of its assets in the underlying fund.
So they’re following different indices and it appears, at least based on the last 5 years, that the Vanguard one is better. It is also a bit more of an index fund as it invests all of its assets in the index and the Fidelity fund only invests 80%.
Hope that helps.
Thank you WCI for the amazingly clear analysis! Iappreciate your time and help.
Thanks WCI! Is FSRNX – Fidelity Real Estate Index Fund the equivalent of Vanguard REIT Index Fund?