Hi All,
I've been investing in and sponsoring private placement real estate deals over the past 5 years and I want to know what you think about this type of investing.
In my view, the last 10 years have seen the most dramatic shift in capital sourcing ever. Large scale projects are now accessible everyday people (well, people able to do $50k+ investments) via sponsors and syndicators. Want to invest in a stadium build? You can now do it. Want to invest in a high rise? You can now do it.
Absurdly (again, in my view), most investors plow money nearly 100% of their investible capital into large scale wealth managers or index funds which have low and volatile returns, respectively.
For middle market real estate projects, even in the worst case scenarios, investors can expect 6% compounding annual returns with base case returns around 17%. In good cases, obviously much higher. Morgan Stanley can't produce that because their is too much competition for limited assets. An index fund can't reliably produce that because of the volatility.
I'm not denying that there are Bernie Madoff's out there, and index funds/wealth managers are quite idiot proof, but with the return differentials being what they are (~17% IRR private placement, ~12% long term index fund, ~6% large wealth manager) and the risk of a hard asset going to 0 extremely unlikely, and numeriacally neglible if you diversify across multiple projects over your career, I'm wondering why more don't explore this option.
What do you think?
Have you done Private Placements into hard assets?
Where did you learn about your project?
How'd it go?
Submitted June 19, 2018 at 10:58AM by HobbesNYC https://ift.tt/2MHhwGG
