An Ignoble Experiment: WCI October Real Estate Newsletter

Welcome to the Monthly White Coat Investor Real Estate Newsletter!

Thank you for being a member of the WCI Real Estate Opportunities Group! We hope you find the enclosed information and introductions helpful. Remember that we have a financial relationship with each company listed in this email, you generally need to be an accredited investor to invest, and you are still responsible for any necessary due diligence. Consider these to be introductions, not recommendations. This newsletter should be the first step in your due diligence process, not the last one.

Today's Topic: Top Down and Bottom Up Analysis

No matter how you choose to invest in real estate, it's important to know how to analyze any deal to determine if it's a "good" deal. Top-down and bottom-up analysis can be used to look at a wide array of different types of investments, but today, we'll look at how they can be used to analyze a real estate syndication deal.

You may already be familiar with real estate syndications—at its simplest, it's a group of two or more investors or companies joining together to raise money for building or buying real estate. Unlike a Real Estate Investment Trust (REIT), the specific property to buy is identified upfront in a real estate syndication. While there are many different kinds of real estate syndications out there, it's common for real estate syndication deals to be for larger properties (i.e. ones where it would be difficult for a single investor to purchase outright). One of the most famous real estate syndication deals was the purchase of the Empire State Building in 1961 for $65 million by a syndication, where some of the investors paid as little as $10,000.

If you're considering investing in a real estate syndication, you need to know how to evaluate the deal to determine if it's worth investing in. Two ways to analyze deals are bottom-up analysis and top-down analysis, both of which are covered in WCI's No Hype Real Estate Investing course.

With top-down analysis, you start by looking at the overall macroeconomic conditions of the potential syndication deal. Every real estate deal is different, and they will be subject to different market conditions. A top-down analysis might look at the real estate market in different cities—do you think the market in Phoenix is overvalued and due for a correction? Or maybe the market in Cincinnati is undervalued and ripe for growth.

Another factor of top-down analysis could be the class of real estate asset in which you want to invest. Mobile homes, industrial, commercial real estate, multifamily units, vacation homes, or single-family rentals are all different classes of real estate investment, and each different class will likely perform differently. A top-down investor looks first at these larger factors and only THEN searches for specific deals that fit their criteria. The hope is that even if the overall deal is average, the prevailing winds and market conditions will still provide solid returns.

When you do a bottom-up analysis, you are starting with the property itself and only then considering overall macroeconomic conditions. After all, any real estate investor worth their salt knows that the three most important words in real estate are "location, location, location."

A bottom-up analysis for a real estate syndication deal will usually look at the income for a particular syndicated deal. You'll want to look at historical profit and loss reports, rent rolls, and property expenses. If you are considering a "value add" property that has significant vacancy, make sure that you are examining rents at properties that are comparable to the subject property. A bottom-up analysis is mostly concerned with the numbers of the property itself before looking at overall market conditions. The thinking is that if the deal is good enough, the larger macroeconomic conditions won't really matter.

Here's the bottom line.

There are pros and cons of both bottom-up analysis and top-down analysis, and deciding which one to use is in some ways a matter of personal preference. It could be smart to consider a hybrid approach where both schools of thought are taken into account. The important thing before considering a real estate syndication or any investment is to make sure that you have done your proper due diligence in a manner that makes YOU comfortable that you're making a good investment.

Recently Published Articles That Relate to Real Estate

Check out these recent articles and podcasts that relate to real estate from across the WCI Network:

Current Real Estate Opportunities

DLP Capital (Multiple Funds)

DLP has been around for a long time and treats investors better than any similar company we know. Their investments are straightforward, easy to understand, and profitable. They even pay preferred returns before they receive their management fee, which is unique in the industry. DLP has five funds: 2 equity funds, 2 debt funds, and a notes fund. DLP has agreed to lower that minimum to $100,000 if you go through the links in this email and/or tell them you're coming from The White Coat Investor. Jim is invested in the Debt and Equity funds with DLP.

To learn more, watch the DLP Capital Webinar.

Check Out DLP Today!

MLG Capital (Multiple Funds)

MLG Capital is a real estate investment firm, founded in 1987. Focused on serving accredited investors, investment advisors, family offices, and more. Each of the MLG Private Funds target to acquire a geographically diverse portfolio of 25-30+ commercial real estate assets across several key U.S. markets.

Since its inception, MLG Capital and its associated entities have had active, exited or pending investments of nearly 35 million square feet of total space across the United States, inclusive of more than 30,000 apartment units, with exited and estimated current value exceeding $±4.7 billion.

MLG Private Fund VI is now open for investment.

To learn more, watch the MLG Capital Webinar.

Check Out MLG Capital Today!

Southern Impression Homes (Turnkey Homes)

Southern Impression Homes is the parent company of one the most successful Build To Rent Ventures in the United States. They specialize in helping individual investors build successful rental portfolios in high growth, landlord friendly markets in Florida. Focused on new construction homes in desirable neighborhoods designed to maximize landlord profit with better inventory, less tenant turnover, lower maintenance and repairs and a better overall growth strategy for both rents and values. Their system provides full-service in acquisition, building, construction, property management and ongoing client support and education. Most clients come to SI Homes looking for an alternative to the stock market because SI's strategy creates ongoing cash flow, real estate appreciation and an excellent hedge against inflation. For the right investor, their system delivers amazing results to help overcome those issues quickly and completely.

To learn more, watch the Southern Impression Homes Webinar.

Check Out Southern Impression Homes Today!

Origin Investments (Fund and Syndications)

Origin Investments helps high-net-worth investors, family offices, and registered investment advisors grow and preserve wealth by providing best-in-class real estate solutions. They are a private real estate manager that builds, buys, and lends to multifamily real estate projects in fast-growing markets throughout the US.

Since their founding in 2007, they have executed more than $2.8 billion in real estate transactions and their Co-CEO's have invested more than $60 million alongside their investors. Their performance ranks them in the top decile of private real estate North America-focused fund managers by Preqin, an independent provider of data on alternative investments.

Origin is currently accepting new investors for their open QOZ Fund III and IncomePlus Fund, which seek to provide tax efficiency, enhance portfolio yield, maximize growth, and minimize portfolio volatility. Also their affiliate partner, Origin Credit Advisers, offers the Strategic Credit Fund ¹, a private credit Fund open to qualified purchasers. ² The Strategic Credit Fund's objective is to provide a consistent stream of risk-adjusted income with capital protection.

1) This Fund is offered by Origin Credit Advisers, LLC, an SEC-registered investment adviser. For information on Origin Credit Advisers privacy practices, please see their privacy policy.
2) A qualified purchaser is an individual or a family-owned business that owns $5 million or more in investments, not including a primary residence or any property used for business.

Check Out Origin Investments Today!

Wellings Capital (Fund)

Wellings Capital seeks to help accredited investors passively protect and grow their wealth through investing in self-storage, mobile home parks, RV parks, and more throughout the country. Over 700 accredited investors have invested in Wellings Capital funds, which aim to provide value to investors in four primary ways:

Instant diversification across private real estate asset types, operators/sponsors, geographies, properties, and strategies
Extensive, professional due diligence on operators and properties
Access to deals and operators
Better terms

Their sixth fund, the Wellings Real Estate Income Fund, is accepting new investors with a $50,000 minimum investment. The Fund only accepts new capital when properties are identified, so all capital is called up front.

Check Out Wellings Capital Today!

37th Parallel Fund II (Fund and Syndications)

37th Parallel has been doing multi-family syndications for years. Since their inception in 2008, they've completed over $1 billion in multifamily transactions while maintaining a 100% profitable investor track record. Their Income and Total Return Fund II is now open for investment. This $40M-$80M fund has a $100,000 minimum. Fund II is focused on acquiring and improving 200-plus unit Class A & B apartment complexes in 13 markets across Texas, North Carolina, South Carolina, Florida, and Georgia. Capital will be called as needed to acquire properties with a goal to have all investors' capital called within 12 months. Their goal is to begin liquidating or recapitalizing fund assets in seven to eight years from inception. Fund II has two share classes - Class A (Current Income) and Class B (Total Return). Class A shares have a 9% annual preferred return and first access to cash flows from operations but capped upside. Class B Shares have a 7% annual preferred return and second access to cash flows from operations along with an initial 80/20 split. Jim is personally invested in Fund I, and we have negotiated a $500 fee discount for you if you go through our links. If you prefer individually choosing which properties you invest in, 37th Parallel still does individual syndications too at a $50,000 to $100,000 minimum investment.

Check Out 37th Parallel Fund II Today!

Mortar Group (Syndications)

Mortar's approach to investments is simple. We are a vertically integrated firm with an experienced team that delivers consistent returns. Specializing in multi-family real estate, Mortar has been the driving force behind over 30 distinctive and successful developments in prime and niche New York neighborhoods since 2001. We leverage over two decades of experience in architecture, development, and asset management to build value and minimize risk for both investors and the residents who live in them. Our winning combination of high-returns and risk-adjusted strategies has led to an excellent track record of investment success.

Check Out Mortar Group Today!

EquityMultiple (Real Estate Platform)

Offers equity and debt investments to accredited investors. Equity Multiple is very transparent and invests alongside its investors in every deal, which is unique for a real estate platform. Since it has skin in the game, I expect EquityMultiple to be a little more conservative with its due diligence. Its volume is not as high as some companies, but perhaps that is a reflection of the higher quality of the deals that do show up. Jim owns a syndication purchased through Equity Multiple. Minimum investments are typically $5K-$20K.

Check Out EquityMultiple Today! (Management fee waived on your first investment when using this link)

AcreTrader (Real Estate Platform)

AcreTrader is an investing platform that makes it easy to buy shares of farmland and earn passive income. US farmland has historically outperformed most asset classes, with almost no correlation with the stock market. Further, it has experienced positive returns during economic downturns. Unfortunately, buying and maintaining farmland directly is extremely difficult, which has prevented most investors from participating. AcreTrader makes it easy to place direct investments in farmland and handles all aspects of administration and property management. AcreTrader carefully reviews each farm, selecting less than 1% of the total parcels considered, then places each farm offering in a unique legal entity and offers shares to investors through its online platform. See AcreTrader's current offerings to view what is available today! Minimum investment is $10K.

Check Out AcreTrader Today!

Fundrise (Private REIT Provider)

Fundrise offers REITs and funds to non-accredited investors. It now has 7 REITs/Funds with various focuses, including income, growth, and various geographic areas. Minimums are the lowest we've seen, just $500. Jim has invested with Fundrise in the past, although that was before they started this REIT.

Check Out Fundrise Today!

CrowdStreet (Real Estate Platform and REIT)

CrowdStreet is the premium provider of online commercial real estate investment marketplace, technology and professional services. Investors can directly access institutional-quality commercial real estate offerings with CrowdStreet's online investing platform. CrowdStreet's REIT provides investors with easy access to a diversified portfolio of growth-oriented private commercial real estate projects from multiple sponsors through a single fund managed by CrowdStreet Advisors. This is a portfolio of 20-25 private commercial real estate projects selected by CrowdStreet. You can invest with lower minimums ($25K) and expenses than traditional private funds. The REIT election allows for simple 1099 tax reporting instead of multiple K1's.

Check Out CrowdStreet Today!

We hope you find these monthly newsletters helpful. We appreciate your feedback, both positive and negative, about the real estate opportunities you learn about here and elsewhere.

Jim and Brett

Jim Dahle, MD, FACEP
Founder, The White Coat Investor

Brett Stevens, MBA
COO, The White Coat Investor