I had the third sale in my portfolio and if I characterize the first sale as a solid but uninspiring single and the second sale as a walk, then this one is an out-of-the-park home run!! Considering that I originally thought that my next sale would be the one with such low expectations that even breaking even would be a win at this point and getting this instead is a trip!
Following the format of my previous posts on the sales...
The syndication pitch was like so:
Projections
Hold: 5 years
Total ROI: 95%
Annual ROI: 19%
Multiple: 1.95x
Projected Profit on a $50k investment: $48k
The property didn't make it even close to the full 5 years but sold after only 14 months!! Matching the predictions to such a small time-frame is a curious task, but let's do it anyway:
Adjusted Predictions
Hold: 14 months
Total ROI: 22%
Annual ROI: 19%
Multiple: 1.22x
Projected Profit on a $50k investment: $11k
Here's how it actually performed:
Real Results
Hold: 14 months
Total ROI: 80%
Annual ROI: 69%
Multiple: 1.80x
Actual Profit on a $50k investment: $38k
It crushed the projections! The annual return doesn't look like a real number and even the total return is within spitting distance of the 5-year projected return but after only a little more than a year! Wow!
As before, let's compare this to a "what if" I had invested this into VTSAX instead.
VTSAX
Total ROI: 9.8%
Annual ROI: 8.4%
Multiple: 1.10x
Profit on $50k investment: $4.9k
The very short time frame plus the abysmal year stocks are having this year (which makes an outsized impact on the performance since the time frame is so small) and the stock market had no chance this time around. If it was fair to compare when the stock market was flying high, though, then it's far to compare when it's... not.
I will freely admit that my FOMO instincts kick in with returns like this and I think "I should have invested $400k into this instead of $50k and then my return would have been $320k instead of 'just' $38k!!" and better believe that a part of me is pushing to invest a notably higher amount with this sponsor in their next deal. But... no. This is just not my style. Even in infinite alternate universes, there are very few to none where I would have invested more than $50k with this particular sponsor and I'm even at least a little hesitant to 1031 this with them since that just continues the high risk train.
And that's the key. I am a moderately conservative investor who tries to focus on deals that have contingency plans in place if everything goes catastrophically south -- that is, maybe I won't make any money but I definitely don't ever want to lose money. This particular sponsor is shooting for the moon with every deal and they are phenomenally successful (this deal is par for the course for them) because the market they are in is currently completely insane -- it's not possible to not be successful in this market now. It's exhilarating riding this current wave and I do plan on continuing it for at least one more round, but I very much don't want to be on this same ride when it does inevitably start crashing down!
