An Ignoble Experiment: Look for These 4 Criteria When Investing in Commercial Real Estate

Dear Investor,

The real estate market is finally softening.

Today's increasingly challenging economic environment means that investors must be far more discerning and disciplined if they want their investments to grow.

By way of disclosure, we have an advertising relationship with Wellings Capital, meaning we get paid for making this introduction and sharing this content. As always with these types of deals, consider this an introduction and not a recommendation. Every deal is unique and the responsibility to vet any and every deal you invest in still lies with you. This opportunity is available to accredited investors only.

Lets take a moment to break down four specific criteria every investor should look for to improve their chance of making safe and profitable investments. Wellings Capital believes these criteria are what differentiates them from hundreds of other private real estate investment companies.

Diversification
Due diligence
Access
Better terms

Here's what this means:

1. Diversification. Wellings Capital seeks to offer investors reduced risk through diversification across real estate asset types, properties, operators/sponsors, geographies, and strategies.

Unexpected factors with operators, states, cities, and properties can negatively impact an investment from time to time. If that is the only operator, state, city, or property you invested in, you could get into trouble.

Wellings Capital offers instant access (with a $50k minimum investment) to 12 carefully vetted operators, seven different asset types, and hundreds of properties across over 20 states.

For illustration, here is Wellings Real Estate Income Fund's allocations by equity invested.

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2. Due Diligence. The Wellings operator due diligence process includes 27 steps and the list is growing. They're constantly tweaking the process.

For example, they recently paid to attend a two-day training course taught by former CIA agents, which taught them how to detect dishonesty when interviewing potential operators.

Wellings Capital's investors trust them to see through the haze and perform the due diligence they would conduct themselves if they had the time, knowledge, desire, and resources.

Many of these due diligence steps could never be done from home sitting at your computer or on a Zoom call with the operator.

Wellings is on a constant quest to find the most trustworthy operators with the team, track record, and technology to meet the Fund's goals. And they're picky! Here is an overview of the deals they reviewed in 2023:

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Would you be able to analyze 515 investment opportunities in a year so that you could find 11 worth investing in? We know we wouldn't!

3. Access. Even if you had enough capital to invest the minimum in each of the Fund's investments, you could not replicate the Fund's portfolio on your own.

About 40% of current Wellings Real Estate Income Fund investments are preferred equity investments structured by their attorney specifically for their Fund. Other investors cannot invest in those opportunities, no matter how much money they have.

But there's one more factor for the opportunities you could not access on your own...

4. Better Terms. Many deals you could access directly offer significantly better terms for Wellings Capital. The better terms flow through directly to investors.

For example, one of their operating partners offers investors a 7% preferred return and then a 60/40 split. As a large (over $10 million) investor, Wellings contractually receives a 9% preferred return and an 80/20 split. Plus, Wellings negotiated upfront fees to cover due diligence, which are passed as profit to investors.

Some prospective investors are concerned about the extra fees incurred by being part of a fund like this. However, their preferred equity investments do not have an extra layer of fees. Some other deals pay Wellings more upfront, which can offset their fees.

These are just some of the reasons why Wellings investors could never individually replicate what the fund offers.

A Fund Created by Investors for Investors…

When Paul Moore and Ben Kahle started the first two Wellings funds in 2019, they wanted to build something they would be excited about investing their own money in, year after year. They are on their sixth fund now, and they're excited about the results so far.

Today, Wellings serves over 800 investors across its six funds. In 2023, a year when many investors were upset at their struggling syndicators, about half of its capital raised came from current investors. I (Jim) was among their re-investors.

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If you'd like to learn more about the Wellings Real Estate Income Fund, you can do that here:

Check out the Wellings Real Estate Income Fund today!

Thanks for your time. As always, your feedback is welcome and appreciated.

Jim and Brett

James M. Dahle, MD, FACEP
Founder, The White Coat Investor

Brett Stevens, MBA
COO, The White Coat Investor

*All investments are subject to risks, including the loss of all principal invested. Past performance is no guarantee of future returns and the investment objectives of the Wellings Real Estate Income Fund may not be achieved. Please read the offering memorandum before investing so that you fully understand the risks and consult your tax or advisor before investing. Wellings Real Estate Income Fund is the only Wellings fund currently open to investors. All investors must meet the criteria required of accredited investors. Wellings Capital and The White Coat Investor are not affiliated.