Where to silently invest?

Question

Hello,

My dad has about 50k saved up and wants to invest somewhere but is nervous about the stock market. He said he may be interested I’m becoming a silent RE partner/investor.

What would be the best way for him to learn and contact a syndicator?

I want to help him figure out what are his best options because he is very busy with work and does not have the time to analyze rental properties.

Thank you for all responses!

Ian Ippolito · Answer

Crowdfunding is the same as old-school syndication, but just done online. There are probably 30 or 40 different offerings which do not require accreditation and accept all investors. I don't personally invest in any because I feel there are better options in the accredited realm (much lower fees, much or experience sponsors, higher skin in the game). But, if I were a nonaccredited investor I would personally start by looking at:

1) Blackstone real estate investment trust (BREIT): the largest fund in the industry by far. Commercial real estate, core plus, 60% leverage

2) Broadstone direct real estate access (BDREX): rock-bottom fees, three-tiered investment strategy (access to institutional funds that normally require $500,000-$5 million minimums to invest in, directly owned real estate, liquidity sleeve of public REITs)

After this there are others that I would add to in smaller amounts, since they have more risk such as one of the Realty Mogul debt funds.

James Wise · Answer

Many people invest in low cost long distance rentals. This is called turnkey. It's a really big industry. Tons of turnkey markets & companies are out there doing this stuff. Many are well represented by sellers & turnkey operators here on BiggerPockets. The most popular markets are

• Cleveland, Ohio
• Toledo, Ohio
• Memphis, Tennessee
• Birmingham, Alabama
• Kansas City, Missouri
• Indianapolis, Indiana
• Detroit, Michigan

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Jerel Ehlert · Answer

Kiyosaki wrote that it's not the investment that's risky, it's the investor.  I hate to randomly quote stuff like that because it comes off pretentious, but it really does apply here.  Real estate is great, but you have to learn to do it right to reduce risk.  Otherwise, a smooth talker will take your dad's hard earned wealth.

Crowd funding is your "safest" entry point.  Anything else requires some investment of TIME to learn the industry.  Even if he were an accredited investor, I wouldn't let him in a syndication.

Geordy Rostad · Answer

@Tikvah Schlissel

Most syndicates probably would not be interested in having him for only $50k. Most of them want accredited investors or at least sophisticated investors. Accredited usually means $1,000,000+ of assets not including your primary residence and/or $250k/yr+ income.

Putting that aside, he should do some rehab lending. He should easily be able to get 10-15% on his money and possibly a fee right up front. Alternatively, he could buy some long term paper.

Account Closed · Answer

I would be interested in talking @Tikvah Schlissel about your options. It really depends on your goal and exit.

Tom Ott · Answer

Equity funds or Turnkey properties would probably be the best way to be passive.

Theo Hicks · Answer

Have you father gift you all or a portion of that money or have him fund a deal that you do. Or he can invest with a turnkey SFR company.

Trevor Ewen · Answer

@Tikvah Schlissel

As has been mentioned here, there are more than a few syndicators who will do that on the low end. TBH, it's a great way to start, and I tend to recommend going as low as possible when working with a new operator.

Private lending is the other good route, and I would say that has a slightly higher safety factor. Also, there's usually more predictability on the timeline.

Luke Miller · Answer

Hey @Tikvah Schlissel To answer your question, you can find several syndicators here on BP, but the best way to learn is to read books, listen to podcasts, listen to people who have done this for years, etc...

Like others have said, $50k is usually the bare minimum syndicators will accept. However, one of my initial questions when talking with folks is "what will happen if you lose this $50k?". If your answer is something along the lines of being devastated or going bankrupt, I won't accept your investment. I need people in deals that understand real estate is not guaranteed and there is the possibility that you'll lose money.

Alina Trigub · Answer

@Tikvah Schlissel

I agree with @Geordy Rostad, consider other types of investing as $50k is not enough to take the syndications route. Your dad would want to invest in multiple offerings, and $50k will get him into one if he's qualified.

Consider buying a property or wholesaling.

Where to silently invest?

Most Popular Reply