Gamma KnivesParticipantStatus: PhysicianPosts: 140Joined: 06/25/2017
I have been considering adding ~20% real estate to my asset allocation. Right now I am essentially 100% index funds (have a small amount in vanguard REIT). The reason for the shift is for diversification (I say shift but I would not sell assets to make the change just alter where I place future funds). However, I have no interest in direct ownership (I have a busy practice and don’t want to be managing a property).
I was hoping to get the community’s thoughts on syndication funds both in general and if anyone has specific recommendations (or avoids). One company I had been looking was origin (https://origininvestments.com/) after reading some posts from them on this site.
I like the idea of a fund because it is not a single property which (hopefully) reduces the risks and I don’t have to be evaluating multiple deals. I have also been thinking about the drawbacks:
– Risk of fraud. I feel a bit nervous about sending off a big chunk of money to a private company. Obviously I would do my best due diligence but how do I really know the money is going where they claim it is. I put this at the top because it is the risk of losing all the money invested.
– High minimums at many sites. My portfolio has gotten large enough that 20% allocation can meet the minimums at many sites but it does mean I would be putting all my money in their basket (at least to start).
– Fees. These products have higher direct fees compared to an index fund.
– Less liquidity. I am early career and don’t anticipate needing liquidity but still a drawback.
– Taxes. It seems some funds are designed to be more tax efficient and others generate lots of taxable income which I do not want (I am not looking to try to put tax advantaged funds in).
What are your thoughts? Are the cons and risks too great to make it worthwhile? Is there a better approach to hands off real estate investment? Should I just stick with equities?June 10, 2019 at 3:48 pm MST #220818ScopemonkeyParticipantStatus: PhysicianPosts: 70Joined: 12/28/2017
Gamma, read through the entirety of this posting: https://www.whitecoatinvestor.com/forums/topic/what-i-realized-about-crowd-funding/
A lot on there about syndications, not just crowdfunding, including the book I noted that is comprehensive, and a site that deals with your budding interest. With due diligence one can minimize some of the drawbacks you noted including risk of fraud and tax concerns. Some of the ones I’m in (including MLG, which the PassiveIncomeMD wrote about on a post and invests in as well) generated income but with a paper loss due to depreciation, thus wiping out taxes on other gains..GParticipantStatus: Physician, Small Business OwnerPosts: 1546Joined: 01/08/2016
My only RE syndication has been through cityvest, starting 6 mo ago. So far, I am wishing that I stuck to VGSLX/VGRLX and individual timber/farmland REITs.
All of that is heretical, I know.June 10, 2019 at 6:09 pm MST #220854