All Forum Posts by: Nate R.

So, we decided to hire a PM. They helped with some of the make-ready that needed to get done, and it's been 30+ days on the market. We've had 2 showings as far as I know. We've dropped the rent twice, by a total of $75. The PM's excuse is that it's the "slow season." 

I'm considering driving down there and holding an open house, in which case we would just handle the leasing ourselves.

I've also thought about hiring a realtor to help. Would a realtor do an open house for a rental? Any way we can avoid having to spend our weekends driving down there and back would be great.

Personally I like investing in RE, but I decided I don't want to be a landlord, a flipper, or do anything RE-related that resembles a job.

I think about switching careers sometimes, but it would probably be something unrelated to real estate, unless it let me combine RE with things I enjoy (such as writing, programming).

Definitely don't want to lose that primary income stream, which enables RE investing in the first place, but if I could reach FI early and "retire" to become a full-time investor, that would be awesome.

The answer to the title question is obviously "No, you can be very successful by keeping your job and investing in RE."

I read a statistic once that a significant percentage of Americans are unhappy with their jobs. There are many reasons, but lack of autonomy, lack of career growth, commuting and office environments are all factors. Also, employers have phased out pensions and more jobs are "gigs," hourly contract or freelance work without health insurance or full benefits. Many people are just not happy with what they're doing for a career. At some point, it's normal to get burned out and want to do something else. For some of those people, real estate is the promised land of riches and passive income. Maybe some of them have a passion for real estate, but it sounds like many are just running away from their jobs.

When it comes to burnout, it's funny to see 20-something's who are already tired of working and just want to retire and sail around the world.

Target IRR on Realty Mogul Reit II is 14-16% and 5-6% COC (passive investor distributions), net of fees. The fees are similar to those of syndications I have seen recently (management fee, disposition fee).

I believe the underwriting standards are solid based on what I read in the prospectus.

Liquidity is slightly better. You can get your money out in stages and in year 3 can fully redeem your shares IIRC.

I am not saying I will go this route in the future, but it's something I've entertained.

I've seen a few solid, value-add syndication deals in my market recently. They're always oversubscribed and there's an internal tension between wanting to commit enough capital to get into the deal and wanting to invest in more opportunities and not be over-exposed to one deal / one sponsor / one city. 

This crowdfunding movement is really amazing and promises to make the commercial RE market more efficient. I'm thinking you will see more and more niche funds available to both unaccredited and accredited investors, and eventually the minimums on the syndication deals will be lower. Fees for all offerings should go down over time.

As I understand it, the REIT is the sole buyer of the assets, using debt financing and equity from investors. They pay asset managers 2%, similar to a deal sponsor. I don't see anything about an equity split but I assume that's part of the compensation. They also charge a 3% disposition fee - similar to many deals I have seen. I assume they hire a property management company that is part of the above-the-line operating expenses, same as in syndication deals.

Define "best". They probably have strict underwriting standards. Are they missing the best deals or deals that might be deemed too risky (deep value and repositioning plays, for example)? I'm guessing the latter. 

Really, the fees look quite reasonable by comparison. I would imagine with all the layers separating me from my money it is far from optimal, but if i was only trying to optimize my expenses then I would just buy RE outright. I need the buying power of a group to get exposure.

I haven't seen any deep value / complete repositioning plays recently. I heard someone (I believe it was Gene Trowbridge) say on a podcast the other day, those deals that take a year or more to establish and get cash flow, they don't exist anymore at this point in the market cycle.

Ok, I will stop trying to rationalize my thinking. I probably will take a little bit of $ and put it into a couple of these REIT's just to see how they work.

Will stay plugged in with syndications, too, because I like to read the PPM's and practice my underwriting skills.

Well, yeah... I was comparing two relatively passive options. Best analogy is stock-picking vs. fund investing (thanks Andrew). Don't know why I didn't think of that before.

I understand. My desire to be a solo RE investor has waned as I've learned that it's actually a lot of work and I don't really have the time to do it right due to my job. Despite the disadvantages that you point out, syndications fit my current situation.

Those unlisted REIT's I mentioned are smaller than publicly traded REIT's. They are bought and sold at asset value minus fees, unlike public REIT's which can trade at premium and fluctuate between discount and premium due to trading on the stock exchanges. Unlisted REIT's are relatively illiquid.

They execute very specific strategies unlike the large institutional REIT's that trade publicly. For example, Mogul REIT II does deals that look very similar to the value-add syndications I am interested in. Most of the deals are in TX and they are targeting 5-6% COC, 14-16% IRR. They only have 4 properties in the portfolio currently.

I've found people's motivations change over time. As they get bigger, they're less interested in making great investments and more interested in earning fees.

Also, minority shareholders in a syndication don't have much influence anyways.

Wow, interesting insight. It's ego! That makes sense.

Yes, you can get a higher return, but you could also do worse than average, and unless you are very wealthy you can't invest in a large enough number of deals for the law of large numbers to work.

I have been looking at some of these offerings from Fundrise and Realty Mogul such as Mogule Reit II and they look quite good.

If my goal is to be a passive investor, why wouldn't I buy a REIT vs. invest in syndication deals? The syndications have much higher minimums and are inherently concentrated / undiversified, whereas the REIT's are diversified geographically and have low minimums, so I can diversify across different funds, real estate sectors, etc.

I have invested in two syndication deals in the past, one of them was a home run, the other has been disappointing. At least with the REIT's, the manager has the ability to go where the best deals are, whereas with syndications I am limited to my network and deal sponsors who will take me in their deals. I am not yet accredited.

The only good reasons I can think of are:

1) If I can find a deal that is better than the market average. The odds are stacked against me here since I can't get into most deals.

2) Tax treatment. REIT's get no depreciation. Although, syndications rarely do 1031 exchanges so all those deferred taxes will come due when they get sold.

3) To get investing credibility with lenders and brokers, since I can say I was a partner in a MF deal, in case I want to purchase a MF property as an IRO in the future.

4) To develop contacts with sponsors and investors who might be able to help me in the future, by being advisors or key principals.