Why are smart and experienced investors upgrading to hybrid real estate and debt funds?
There are many ways to invest. Even among real estate and mortgage debt sectors. There is flipping, wholesaling, rentals, first lien and second lien mortgage notes, performing and non-performing notes and tax liens. Then there are also funds that incorporate many of these strategies simultaneously. Sophisticated investors are increasingly choosing this strategy for their capital. Here are just some of the reasons that they are making the change now.
As a small to mid-sized operator or individual investor, these individual strategies often under deliver on expected returns. Direct investors often grossly miscalculated the numbers, costs and exit. By the time they’ve done their taxes, they may be netting less than if they would have just put the money into a fund like this, and had it all done from them with the efficiencies of scale.
Return On Time
Following on from the above, the DIY route means a lot of time. Whether you are swinging hammers and paint brushes to rehabbing properties on the weekend, taking late night tenant calls, or just spending endless hours on screens trying to vet note investments and manage them, it can be very time consuming. It sure beats flipping burgers, running coffee for a boss, or even having to clock into a well paid job for someone else. Yet, when you break down the return on your time and what you are really getting paid per hour, is that the best you can do? A fund means you spend a few minutes allocating more money and checking your deposit and balance every quarter, and you just get all of the same rewards, with plenty of extra time to spend on what you care about the most.
Unfortunately, the tough truth is that direct investment of any kind is extremely risky today. The US has become so insanely litigious, with so many professional con artists and criminals taking advantage of hard working people, that if you are on the front line, you are just a target. Investing through a fund gives you an impenetrable shield against legal liability. That makes all the difference in net results, and your risk-reward balance.
Ability To Diversify Well, With Less Capital
Even with a quarter of a million dollars to invest, you aren’t going to make much of a dent in any of these strategies alone. You won’t get the volume of experience fast enough to avoid the pitfalls. You won’t be diversified enough. You won’t have the capital to benefit from the efficiencies of scale and expertise in any single vertical. A hybrid fund changes all of that. It allows you to effectively diversify and benefit from having it all done right for you.
Consistency In Investment Performance
Consistency allows you to plan ahead and sleep at night. Whether it is staying on track with overall compounding returns, your net worth, or the cash flow and passive income, the hybrid route provides concrete downside protection, with balanced results no matter what phase of the cycle we are going through.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund