Finding a good deal on a single family house has gotten more difficult. The latest house was more of a hobby project to show my daughter where it all started. This year is the first time I've bought an investment house since 2008. Over the last decade I've been investing in self storage, NNN and multi-family. Single family is a common starting point, but multi-family, RV parks, mobile home parks, self storage and industrial are all options. I've never done hotel/motel or office real estate. They are the most common assets I see on the auction lists lately, so I'll probably stay away from them.

 

I'm not sure how the market works on this, but do you think 'small footprint' commercial would be a good investment/project right now? My thought is that, with COVID hitting the small businesses so hard, there may be opportunities to pick up small 'strip mall' type properties that are partially/mostly vacant. Once the economy turns, entrepreneurs will be looking for storefronts again.

The risk is how long that return takes. Thoughts?

 

I got out of residential about 10years ago, strictly commercial now . I have 6 properties on long term leases and I am building 10,000 sq.ft. more. The world will turn . Be bold.

 

IMO Self Storage is a great investment right now because it provides the most return for the least amount of risk. Easiest way to get in is thru partnerships available on multiple platforms like Real Crowd, Crowdstreet, Equity Multiple etc etc. A Delta Pilot is also helps runs Spartan Investment Group which has been successful in Self Storage and RV Parks.

In terms of how long that return takes generally 5 years. These are illiquid investments so it's highly recommended to only invest money you won't need for a while. Moreover, generally with these partnerships you have to be an acredited investor which majority of Delta pilots qualify for.

2nd Full disclosure I'm invested in a Self Storage Partnership thru Equity Multiple

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Also currently evaluating the switch from residential investments (which are hot right now) to commercial investments (which are less hit right now).

 

2nd this...I’m with spartan

 

Do you have to be an accredited investor as defined by SEC with Equity Multiple?

Whats typical ROI? Are you able to give example? Like invested 50k and monthly you receive 10% of that?

 

Yes, you have to be an accredited investor. Typical ROI are in the 15% IRR range

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That would be one hell of a ROI.

 

Each syndication will have a different payout structure. You will hear terms like, preferred returns (pref), split, hurdle and waterfall. Here is a good explaination.

I've invested with several syndicators who all use a very similar payout structure. There is a quarterly payout of around 2% once the project is stabilized. If we invested in a stabilized cash flowing property that may occur after the first full quarter. For a value add property it may be a year or more for a payout. In the case of a value add property, once the property is stabilized it is usually refinance with significant cash out. In some cases you may get 50-100% of the investment back in 3 years, but still receive quarterly payouts from 1-3% of the initial investment. After the sale of the property in 5-10 years, you get your remaining distribution. The syndicator who puts the deal together typically gets 20% of the profits. For example if a 50k investment was returning 10% ($5,000) annual distributions, the deal sponsor gets 1K and you get 4K. At the sale if that 50k investment is worth 100k, you get back your initial 50k and split the other 50k profit 80/20 (you get 40k and the sponsor gets 10k). IRR on these deals is typically in the mid teens or better. It can also be 0, just like the stock market.

There are far more complicated payout structures and many include asset acquisition fees, management fees, construction fees, disposition fees. The waterfalls may offer an 8% preferred return, then 70/30 until the investor receives 10%, then 50/50 on returns above 10%. There are many different ways to structure a syndication.

I've only been an investor in syndications and have never acted as a deal sponsor. Any property where I've acted as the principle has been mine all mine, no sharing.