Crowd Street or Self Owned RE

[Cameron Mehta]

Let's say that you were not purchasing properties needing lots of rehab or trying to actively flip. Rather wanting cash flow in good neighborhoods with appreciation and cape rate contraction. 

Why would one purchase commercial or residential real estate when they can invest in private funds provided by Crowd Street, MHP funds, Senior Living Funds, etc, or even a bond portfolio. Let's say these investments yield 9-12% cash flow with around 15-20% ytm/ irr and can be reinvested on average every 4 years. 

If this discussion has been had in length elsewhere, you can post that link here too.

Thanks!!

[Ian Ippolito]

@Cameron Mehta, I own both private/self owned rental properties, and also invest passively  and crowdfunding/syndications. Both have their strengths and weaknesses and I think a diversified portfolio should have both. The rental properties give me maximum control, but also require you to look after them (either keeping an eye on the manager, or perhaps doing more if you take on more of the responsibilities).

The passive investments have no control, but also require no effort. Also, passive investing allows me to diversify into hundreds of properties for the price of a single direct own property,  as well as diversifying across industry types, asset types and geography. It also allows me to invest in property types that I couldn't do on my own because the amount of capital required would be too much.

Also, you're not comparing apples to apples on the returns. 90% of crowdfunding investments are value-added strategies,  which is a riskier strategy (requires the price of the property to go up) than directly own rental properties (when they are based primarily on income). You should be comparing the returns of a core plus strategy passive investment, to the returns of an established rental property, to get a closer and more fair comparison: since both involve an income-based strategy, rather than value-added.