Theoretical Discussion: Progressive Scaling in Syndications

[Jake S.]

Hey community,

I'm intrigued by the concept of progressive scaling in real estate syndication investments and wanted to open up a discussion. In theory, when diversifying a substantial investment across multiple syndication deals, what factors do you believe are crucial for determining the optimal number of deals?

Considerations may include the balance between diversification and quality opportunities, risk tolerance, market conditions, and the potential benefits of progressively scaling down the investment size.

For those experienced in real estate syndication or investment theory, what insights can you share on the concept of progressive scaling and its impact on portfolio optimization?

For example, Investment account starting at say, $1m and dedicating 10% to each syndication and progressively scaling that down to say 3-5% per syndication as one approaches $10m+.

At what point would you consider being in too many? I was leaning towards the idea of 20 max across 5-10 operators.

Looking forward to your thoughts and experiences!

[Chris Seveney]

@Jake S.

Rule of thumb is never to have more than 10-15% of your money in one investment. Where many accredited investors make a mistake is they may be worth $1M or make $300k a year but have $100k sitting around and put all of it in lone investment and it goes upside down.

I was with someone the other day who has 8 figure net worth and is in 30+ offerings and a balanced portfolio of lower risk debt funds getting 8-10 up to investing in VC and everything in between.