Opinions on crowdfunded REIT's vs. syndication deals?

[Nate R.]

I have been looking at some of these offerings from Fundrise and Realty Mogul such as Mogule Reit II and they look quite good.

If my goal is to be a passive investor, why wouldn't I buy a REIT vs. invest in syndication deals? The syndications have much higher minimums and are inherently concentrated / undiversified, whereas the REIT's are diversified geographically and have low minimums, so I can diversify across different funds, real estate sectors, etc.

I have invested in two syndication deals in the past, one of them was a home run, the other has been disappointing. At least with the REIT's, the manager has the ability to go where the best deals are, whereas with syndications I am limited to my network and deal sponsors who will take me in their deals. I am not yet accredited.

The only good reasons I can think of are:

1) If I can find a deal that is better than the market average. The odds are stacked against me here since I can't get into most deals.

2) Tax treatment. REIT's get no depreciation. Although, syndications rarely do 1031 exchanges so all those deferred taxes will come due when they get sold.

3) To get investing credibility with lenders and brokers, since I can say I was a partner in a MF deal, in case I want to purchase a MF property as an IRO in the future.

4) To develop contacts with sponsors and investors who might be able to help me in the future, by being advisors or key principals.

[Andrew Johnson]

Nate Reed I have a strong suspicion that some of the preferences towards syndications is emotional. You could buy a publicly traded REIT tomorrow but it doesn’t as cool, sexy, exclusive as a syndication. And you get to “prove” how smart, savvy, etc. you are by cherry picking your particular deal and/or sponsor. Now I’ll be the first to say that (like individual stock picking) you can get a higher return.

That said, if you know a trust a sponsor/lead and they’ve done well you at least know whom you’re trusting your decisions to. You can probably even speak to that person. You go into a giant fund, a publicly traded REIT, etc. and that goes away.