Assessing Investment Opportunities

For Accredited Investors

Identifying conservative deals is challenging, but a structured process can improve the chances of finding suitable investments. The following process can be employed:

Step 1: Portfolio Matching (a few seconds per deal)- The first step is to assess whether a potential deal aligns with the existing portfolio needs, considering factors such as the real estate cycle and portfolio balance. Deals that do not fit are immediately discarded, which filters out approximately 75% of deals. This ensures that the portfolio remains balanced, timing is considered, and risk and reward align with the overall strategy.

Step 2: Sponsor Quality Check (15-45 minutes per deal)- The next step is to evaluate the quality of the sponsor managing the deal. This involves examining the sponsor’s experience, track record, and commitment to the project. Approximately 90% of the deals are eliminated at this stage.

Step 3: Property-Level Due Diligence (minutes to months per deal)- Once the sponsor is vetted, an in-depth examination of the property-level details and legal documents is conducted. This step further filters out 99% of the remaining deals, leaving only the most promising investment opportunities.

Pros of Becoming an Accredited Investor

• Access to Exclusive Opportunities: Accredited investors can invest in exclusive opportunities not available to the general public in real estate deals.

• Diversification: These investments often offer greater diversification for your portfolio compared to traditional investments.

• Easier Qualification: If you have substantial net worth or income, meeting the requirements to become an accredited investor can be relatively straightforward.

Cons of Becoming an Accredited Investor

• High-Risk Investments: Accredited investments often involve higher risk, including investing in emerging markets or unproven ventures that might not have stable returns.

• Higher Minimum Investment and Fees: These investments usually require significant capital and come with higher performance fees, which can impact your overall returns.

• Capital Lock-Up and Experience Needed: You might face longer periods where your capital is locked up and may qualify as an accredited investor without sufficient experience or expertise in high-risk asset classes.

For Non-Accredited Investors

Choosing the right real estate crowdfunding fund as a non-accredited investor can be a bit overwhelming, but here's a simplified step-by-step guide to help you navigate the options:

Step 1: Build an Emergency Fund- Before investing in real estate crowdfunding, make sure you have at least three months' worth of salary saved as a cash reserve for emergencies.

Step 2: Decide How Much to Invest- Traditionally, it's recommended to allocate 10-25% of your investment portfolio to real estate. However, recent studies suggest you might consider a higher allocation depending on your risk tolerance. Speak with a financial advisor to determine the right amount for you.

Step 3: Pick a Core Fund- If you are looking for a single fund to invest in, consider one that has an experienced manager and a conservative strategy

Step 4: Diversify with Debt Funds- Once you've established a core fund, consider diversifying into a real estate debt fund for better balance and stability in your portfolio.

Step 5: Diversification- If you have more money to invest, consider diversifying into funds with different strategies.

Step 6: Explore Higher-Risk Options- If you're looking for potentially higher returns and are comfortable with higher risk, consider opportunistic strategy funds.

Pros of Becoming a Non-Accredited Investor

• Access to Public Investments: Non-accredited investors can access a wide range of public investment options that are available to everyone.

• Lower Minimum Investment: The minimum investment amounts are generally lower, making it easier to start investing with less capital.

• Less Risk Exposure: Public investments often come with lower risk compared to high-risk private investments, offering more stability and transparency.

Cons of Becoming a Non-Accredited Investor

• Limited Investment Options: Non-accredited investors have limited access to high-risk, high-reward investment opportunities available only to accredited investors.

• Lower Potential Returns: The returns on public investments may be lower compared to those available through exclusive, high-risk investments.

• Less Diversification: Without access to a broader range of investment options, it can be harder to diversify your portfolio and hedge against risks.

Returns for Accredited & Non-Accredited Investors

Returns are never guaranteed, regardless of the investment. Accredited investments often carry higher risks, increasing the chance of losing your capital. As an accredited investor, your experience and knowledge help you evaluate these risks and make informed decisions. Ultimately, you are responsible for your own investment choices. As a non-accredited investor, you have limited investment options which can have an adverse impact on the potential returns you might earn.