I have an opportunity to invest in "quasi-fund" comprised of a trio of projects with an innovative Portland developer. They create cool creative offices and hip live/work housing, and I like their business culture and the esthetic of their work. In this case they are looking to purchase three existing small buildings, renovating (hipsterizing) them, then renting them out.
I'm "all in" on Portland. This city has taken off and I think it has all the right ingredients to keep going.
They are looking to raise around $2M in $50k increments, and offering 12% simple interest annual return for, say, a 5-year term, then return of capital. The investors would all be limited partners, but there is no additional potential upside for investors beyond the interest.
They are running the numbers assuming a small recession, to insure it pencils out in that scenario.
Still, I have reservations:
+ The development company does not appear to have skin in the game. They are not investing their own capital beyond substantial sweat equity. With investors assuming all of the risk, they have nothing to loose (except time/effort) and all the upside to gain.
+ The properties are of course not diversified geographically. If the big earthquake hits, I could loose my house and this investment in a matter of two shaky minutes.
You're going to tell me that at good REIT would provide more diversification and less risk, however I think much of the real estate in the US is suburban sprawl garbage, which I want to avoid.
What should I do?