Decision Tracker: Investing passively in a multifamily deal

Every big decision I made I tend to reflect back to see how I made it to better understand myself and make better decisions in the future. This time is to invest in a multifamily deal on the passive side

The Decision to be made: To buy 2 unit of shares in Laredo and Muse or not

Greed Motivation: Nothing wrong with true mail box money. double it in 5 years is not to bad per the expectation

Oh and the Tax advantage is going to be great as well. This is huge since i made quite a bit of income on my commission this year. this will all be offset via K-1

Fear Factor: No control over money, the economy will tank, the job market will tank

Logical Sense:10% for a truly passive investment in real estate is a great deal.

Why Do you want to make this decision: We have some extra funding that we currently pay 3.5% interest on. We need to invest in something to offset it. I do want to stay active as an investor so I feel like this investment is necessary. I do want the exposure of my portfolio to multifamily as well because as of right now I don’t have any

Describe the Surrounding: lot of successful investors around me. I know the sponsor as well and did a deal that went well with them in the pass

Anyone pushing you to make the decision? not really, just myself.

What will you do if everything works out: enjoy the cashflow

What will you do if shit hit the fan: suck it up – you have no control as a passive investor

Have you done your due diligence: yes, I understand the sponsor payout model, I did a deal with them in the past. I really like the location and the way the Sponor approach the deal as well. it is value-added.

How do you feel: not that excited – normal actually. I know I can generate better returns than this by flipping, Airbnb, but that’s active/semi active income. Also, I want to push this money to work to a place that I don’t see it so I am more motivated to generate new money. Having money in the bank kinda makes me lazy. I am not in the state where I want to retire yet, although I have the option to do that

What is some reason to say NO to this deal: Cap rate is quite low going in, not terribly bad though, things are uncertain with the election, even more, uncertain with Covid. The economy feels like a big bubble that will pop anytime. The sponsor cut is 30/70 it is usually 20/80 in the past

Describe some way to mitigate this risk: Split the fund into two apartments in two different locations instead of on, asking for a reference. ..him perhaps i should think more about this

Could this be a life-changing decision: No, worst case I lost a 100k best case I made 200k after 5 years. hm…now looking at this. not too sure if it is a good deal anymore since my gain is capped at 200k and I have to risk 100k?

looking back: Thinking..

In The pictures:

Trying new Korean Fired Chicken Spot in town.

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