Crowdfunding and Syndication Vs. Turnkey (TK)

[Charles Worth]

With many crowdfunding and syndication deals promising IRRs of 15% - 18% I am curious how this will impact turnkey providers or if anyone has insight on going this route vs. doing turnkey. Many turnkey companies I think are in that expected return range or slightly lower.

At least to me, it would seem that a really good syndicated deal would be the better place to be if the returns were about equal. For instance, I am going to invest in a mobile home park syndication with one of the most experienced operators in the space for returns at about the range I put above. This would seem like a better investment for the same return considering that I can achieve diversification on day one and not have to deal with any other issues at all.

I also want to make a few things clear before people start commenting:

1) Yes I know that you have to be accredited to invest in these deals. However, that may be changing with new rules and even if its not a large number of people are accredited investors on here, especially considering that one of the benefits of turnkey is that you don’t have to put in as much time and that for people living in NYC or CA the salary to become accredited is not very high by any means.

2)Turnkey means different things to different people. I am not talking about hybrids of turnkey but houses that are sold fully rehabbed with property management in place.

3)I am not against good turnkey. I think many provide a good service to people that want to buy in a different area and they deserve to be compensated.

4)I know that you can leverage your home and that is a huge benefit. However, a syndication investment is using leverage also.

5)There are good and bad syndication. I get probably two a week at this point. I am not saying most are bad but most I just don’t know enough to evaluate. Like any investment its important to wait for the good ones. 

6) There are tax benefits to investing directly investing in RE though everyone's situation is different so hard to go based on this alone.

[Bryan Hancock]

I think it really boils down to whether or not you want to actively manage your investment.  Most new folks drastically overestimate their skill at adding value on an active management approach and grossly underestimate the value of their time.  They then brag about some eye-popping return without valuing the time they spent making said investment.  To me if you're investing in a turnkey opportunity you have to ask yourself why the person selling the investment is selling it to you.  Is it:

1.  They strip out most of the red meat and hope you're too gullible to notice

2.  They wish to move inventory quickly and scrape off a few dollars

or some other reason?  I am sure there are good operations out there just like there are good operators for syndications.  There are also a lot of sharks in both industries.  

To me most people would be far better off just investing their money passively and using their time to do something they're better at or trained for.  Being in control of one's investments is a big plus for many folks though.