This would seem like a better investment for the same return considering that I can achieve diversification on day one and not have to deal with any other issues at all.I also want to make a few things clear before people start commenting:1) Yes I know that you have to be accredited to invest in these deals.

How to Vet a Private LenderIf I wanted to invest with a local hard money lender, I would first decide my desired involvement, risk tolerance, and diversification profile.

He just wants something as passive as sticking money into a mutual fund that offers diversification and hard asset ownership.  

In addition there are significant advantages to gaining experience investing nationally (ability to exploit market opportunities and national trends, investment diversification, invest in emerging markets, etc.).

There are also buyers looking for good long term investments in those cities (diversification reason).2) 2nd and 3rd tier cities such as Detroit, St Petersburg, Austin, Miami, Philadelphia A lot more interest from Chinese investors compared to two years ago.

No solution to offer though one of the principles of resiliency, diversification, is probably on your mind.

In other words, diversification on a small scale (actually, within a small market space), with a cash and effort focus on the strategies that are working today.

I believe diversification is huge at the start.

We're seeing many of these types of diversification exchanges from appreciation to cash flow markets.  

I would recommend you check those out and allocate your capital across projects to get some promoter and geographic diversification.