Private Investing: The Upside and Risk
Episode 24
Hello everyone - greetings from Austin!
Here's what I got for you this week:
More investors jump into Real Estate
Is Zoom the next Microsoft of the workplace?
More businesses are being built than ever before
🏡 Real Estate News of the Week
This article from the NY Times this week mentioned how more individuals are investing in specific properties, rather than investing in funds such as REITs. Investing in Real estate syndications will provide investors with much better rewards than REITs primarily due to tax benefits as well as the more private nature of syndications. This is exactly what we do successfully at JT Capital.
However, due to the private nature of these investments you also must understand that there is inherently more risk. REITs are publicly traded, which theoretically should involve decreased risk due to the increased regulatory requirements of public companies. Syndications are private. And although these syndications are overseen by the SEC, you must still do your own proper and thorough diligence when considering investing in a syndication.
Here's a few questions I ask when vetting a deal as an LP:
Trust and intelligence: Do you trust the GP? It takes time to determine this and you must look for tells & clues on their integrity. Do they have an ability to think through problems intelligently with frameworks and processes? Do they have good judgment
Incentives: How much equity are the GP sponsors putting into the deal? What are their fees and when do they get paid vs. LPs get paid? Do they own any other businesses that will be performing work on the property (i.e. construction company, landscaping company, etc.) I want my sponsors to make $$, but I also want full transparency and aligned incentives
Success: What’s their track record / experience? What were expected returns vs actual returns?
Assumptions: What are the few key assumptions that need to be right for this deal to work?
Private investments are a great alternative to public markets. Particularly Real Estate. However, you must take your time to do proper diligence.
📱 Tweet of the Week
If Microsoft Office was the Work OS of the past 3 decades, I would bet heavily that Zoom is the new Work OS.
📈 Chart of the Week
Business formation is up almost 100% from Q2 of this year.
Have a great Sunday,
Rohun