Welcome to the WCI Real Estate Opportunities List
Real estate is one of my favorite asset classes; 20% of my portfolio is invested in it. High returns, low correlation to the stock and bond markets, and some unique tax benefits. What's not to like? Unfortunately, investing in it is much more difficult than just buying a few stock and bond index funds.
On one end of the spectrum, you can simply buy a REIT index mutual fund, but that has moderate correlation with the overall stock market, offers little if any control over the investment, and is terribly tax-inefficient. On the other end is direct real estate investing. While it can provide great returns, it also has aspects of a second job, something most of us don't need. This email list is all about the middle of this spectrum-investments with low correlation to the stock market and minimal hassle (at least after initial vetting), but still with the high returns and the tax advantages real estate investors seek. The investments we will introduce you to are generally private real estate funds and syndicated deals. They stretch across the breadth of real estate asset classes such as residential, retail, industrial, storage, mobile homes, private short term loans and more.
What to Expect
From time to time we will use this email list to introduce you to new syndicators, new fund companies, new online courses, and new online real estate platforms. Some emails will be an invitation to a free webinar where the sponsor/manager (sometimes with me) will be discussing an upcoming investment. You can safely assume we have some sort of financial relationship with every firm mentioned in these emails. Some Katie and I will have invested with personally (and we will make that clear when that is the case.) Sometimes they have purchased advertising from us or perhaps we have some sort of affiliate deal where we get paid if you sign-up for more information. By their very nature, some of these deals will be time limited, and so reading about them may feel "salesy." Just remember that there are no called strikes in investing. If the deal or even just the timing doesn't work for you, let it go. There will be another one in a few weeks or months.
Types of Investments
There are several categories of investments this list will discuss.
#1 Private Syndications
If you prefer to pick your own real estate investments and really do a deep dive into the properties you purchase, you may be interested in real estate syndications. A typical syndication might be a $20 Million, 300 door apartment complex purchased by 99 different investors, each putting up $50-100,000. That money becomes the equity in the deal. The manager then borrows the rest of the purchase price, manages the property for 3-10 years, and then sells it. As an investor in this limited partnership or LLC, you receive depreciation-sheltered income over the years and then after the property is sold, your principal and your share of any profits from the sale. A typical fund might buy 15 different syndications, but you won't have any control over the properties in the fund. When buying individual syndications, if you don't like a property, you simply don't buy it. These investments are very illiquid and it is usually years before you get your money back.
#2 Private Real Estate Funds
One of my favorite ways to invest, a private fund provides a great deal of professional expertise in selecting and managing investments and ready diversification between deals. Think of a fund as 15 or so different syndications compiled into one investment. While equity funds are usually quite illiquid, some of the debt funds do provide significant liquidity after a year or even less. Minimum investments generally range from $50,000 to $1 Million per fund. Note that investing in equity funds is going to mean filing multiple state tax returns at some point in the future.
One subset of this category is what I call an access fund provider. In exchange for an additional level of fees, this type of platform helps you choose a fund, reduces the cost of entry to the fund (often to something like $25,000), and may even provide other special incentives for investors going through the platform such as a reduced fund fee.
#3 Real Estate Platforms
These companies are most commonly thought of as online crowdfunders that connect real estate syndicators/developers with investors. Although you still usually need to be an accredited investor, minimum investments are generally lower than going directly to the syndicators. There may be an additional fee or at least an additional layer of communication between you and the sponsor.
#4 Private Real Estate Investment Trusts
Many investors know about REITs from their publicly traded cousins available in an investment such as the Vanguard REIT Index Fund. REITS have a unique legal structure that requires them to pay out essentially all of their profits each year to investors. Although somewhat comparable to funds, REITs have different tax treatment (benefit from the 199A deduction but don't have depreciation passed through to investors) and generally have more liquidity and lower investment minimums. You may not even have to be an accredited investor to invest in these.
#5 Turnkey Real Estate Companies
When you go through a turnkey real estate company, you own the real estate directly and singly. You get all the benefits (depreciation, control, profits) and all of the downsides (risk, lack of diversification, illiquidity). However, the company builds (or fixes up) the property and puts a tenant in it before selling it to you. They then manage the property and often even sell it for you when you're ready to be done. While there are fees for this service, it is a great way to reduce the hassle of direct ownership, especially in locations away from your local area.
Caveat Emptor
This list is primarily for us to send you information about current real estate investment opportunities and courses. Nearly every email you get from us due to being on this list will involve someone that either has paid us to introduce you to them or will pay us if you purchase through the links in those emails. This is one way we make the money that we use to cover our business expenses, pay our employees, fund the WCI Scholarship, and support our favorite charities. Like the blog, podcast, videocast, and monthly newsletter, these emails cost you nothing and purchasing services through our affiliate links doesn't cost you any more than going directly to the syndicator, fund manager, or course producer. In fact, you usually get something extra by going through our links. While our intent is not for the emails to feel salesy and pushy, we certainly hope that a few of you will elect to click on the links to learn more about the opportunity from time to time. We are unashamedly a for-profit institution, sincerely feel we can do more good by being for-profit, and don't plan on changing that.
If you ever want to get off this list, no problem and no hard feelings. We have zero desire to send you emails that you don't want. Just go to the bottom of this email, look for the line that looks like this: "Find out about real estate opportunities (Unsubscribe)" and click on the unsubscribe link. You can still get all the blog posts and the monthly newsletter (just don't hit the nuclear unsubscribe button at the very bottom or you won't.)
You should view these emails as introductions, not recommendations. We cannot stress that enough; that's why we put it at the top of every email we send. We are not your financial advisor and like every other blog on the planet do not have any particular fiduciary duty to you. We cannot do complete due diligence on every single real estate deal out there and have no intention to do so. For example, we have not done criminal background checks on the principals, fully evaluated the assumptions in their pro-forma, walked their properties, spoken to their former and current investors, nor read the entire Private Placement Memorandum. Before you invest, you should definitely do as much due diligence as you need to feel comfortable with the investment. Reading the emails we send you about an opportunity should be the first step, not the last.
I am often asked if we are investing in a particular deal. I assure you that if we are personally investing in one of these deals it will be very obvious in the email. Otherwise, you can assume we are not investing. That is not necessarily an indication that you should not invest. For example, the most common reason we don't invest in a given real estate deal that goes out to this list is because we are already overweight in real estate in our asset allocation at that time. We only buy when we are underweight and need to get back to our desired asset allocation. Obviously saying "we're investing in this deal" is really valuable to the advertiser because more of you will invest if we are investing alongside you, so they love it when we do that. But we probably only make a real estate investment once or twice a year, and we send out a lot more emails than that. There are no called strikes in investing. If you don't like a particular deal, just let it go right by; there will be another one in a few weeks.
We have also had a few people on this list wonder why we did not include a particular piece of information about an investment in the email. Perhaps it is how much the sponsors are investing in the fund. Or what the particular fee structure is. Or some detail about the past track record. We appreciate that because it helps us know exactly what you want to see in the emails and we make adjustments as we go. But don't assume because you don't see some particular fact in the email that somebody is trying to hide something. The goal is to send you an email that is quite a bit shorter than the 100+ page Private Placement Memorandum (PPM)! So some things obviously have to be left out. Usually the information you are seeking is at the link in the email or in the PPM for the investment. Sometimes you may actually have to ask your questions directly to the sponsor. If you are ever having trouble finding particular information, shoot us an email and we'll either direct you to it or get the sponsor/fund manager to get you an answer.
Speaking of the sponsor/fund manager, that person does not work at or for WCI. They simply paid us a fee to introduce you to them. Eight months after you invest if you have a question about a distribution or whatever, we're probably not going to be able to help you much. We do not control their business, see them every week, or have any special insight into that particular investment. You should call or email the company itself. If you are getting poor service from them, we would like to hear about that so we can either get them to fix their issues or quit introducing them to our readers. But our remedies are limited to threatening them with bad publicity and refusing to help them find any more investors.
Thank you for subscribing and for feedback. We look forward to serving you over the years. We highly value the trust you place in us and feel maximum transparency is the best way to maintain that. Thanks for what you do and good luck investing.
Jim
James M. Dahle, MD, FACEP
Founder, The White Coat Investor
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