Newbie looking for Passive income advice

[Jesse Carmack]

Anyone have any experience, positive or negative with “Blackstone Real Estate Income Trust (BREIT)”. Looking for a passive income investment. Just wondering if anyone has experience with crowdfunding real estate (the good bad and ugly) and willing to share for a newbie. Or what avenue you would suggest for generating passive income with say 25k, that can be locked up up to 3-5 years.

[Ian Ippolito]

Quote from @Jesse Carmack:

Anyone have any experience, positive or negative with “Blackstone Real Estate Income Trust (BREIT)”. Looking for a passive income investment. Just wondering if anyone has experience with crowdfunding real estate (the good bad and ugly) and willing to share for a newbie. Or what avenue you would suggest for generating passive income with say 25k, that can be locked up up to 3-5 years.

Like any investment there are pros and cons. 

On one hand it's the largest and most successful real estate fund in existence. It comes from one of the most established companies (Blackstone) that has a very impressive and long track record (although the fund itself is relatively new and hasn't been through a downturn). The ability to liquidate after a year without penalty is a handy thing for investors that don't have an illiquid portion of their portfolio allocated (although like all liquidation policies on an illiquid investment, it is subject to being gated. So an investor probably shouldn't expect to be able to liquidate during a severe downturn). It's also very convenient with taxes for smaller investors (with a 1099 div instead of K-1).

On the other hand, it has a very different structure then the sponsor used to generate all those impressive track record results (and it's untested in a downturn). And those other deals were offered to institutional investors with better terms. This is a retail investor offering and the terms aren't as good. It's also not truly core plus because it also invests in non-investment grade bonds ( junk bonds) and junk grade equivalent securitizations. And in past recessions these are investments that have sometimes gone done first and fastest. So this is a dealbreaker for me (but not for others).

Also, they play a little game with the distributions to make them seem larger then competing sponsors who aren't playing that game. Most sponsors deduct their management fees before issuing distributions. BREIT doesn't ( so they effectively issue a distribution that is about 1.25% higher than they would otherwise). And then at the same time they dilute the NAV by the same amount. Most investors are probably not sophisticated enough to realize what's happening.

And finally, total returns have been low (in my opinion) for the risk that's being taken ( considering it's not really a core plus fund).

Having said all that, I do know of a source that will give access to the best (no extra fee) Class I shares at a much lower minimum than the usuual $1 million (only $100k). They are an RIA (which is required to access BREIT) and are lower than most there as well (only 0.5% and less for higher sizes). They work via referral only, so if you're interested then private message me and I can give you their information.