Has anyone had success investing in private real estate development?

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Don’t invest in something you don’t understand


Lol. If someone had to advertise to get your money investment….. Run. If your friend doesn’t have enough money for his great business real estate venture……. Run.


The success of a private’s real estate development deal HIGHLY rests on the developer behind the project, do your due diligence and check their track record. It can be a great investment if you choose the right developer, right development project with the right terms. If you choose the wrong developer, you can be faced with delays, a finished product different than the marketing materials, a project that will not age well and represents low quality workmanship. There will be a HOA that oversees the property, which is either the developers related company or an outsourced property management company that must MAINTAIN the development for the foreseeable future. The risk/reward has many factors dependant on the location, market, other development and amenities in the area, the timeline of the project, background/success of the chosen developer, local laws etc. There are too many factors to consider and it is very important you do a due diligence and crunch your numbers while having the correct objective in mind. By nature, investing in a developers project is an illiquid asset, while you can liquidate a REIT/index/mutual fund (never touch bank mutual funds!) quite easily. The profits can be quite rewarding for someone who does ample research in the beginning. The fact the company is advertising their projects do not change anything, every developer essentially uses OPM.


There are a lot of shady developers out there. The sitting president was one! Only pursue something like that if you’re willing to research the entire history of the developer in question.


Yes, I have invested with someone who pools money together for commercial real estate, they’re called “syndicators” or “sponsors” in the business. Never lost capital and only one of a handful of investments isn’t quite hitting projected cash flow returns at this point. I also work at a small firm that syndicates investments (I invest into our own deals as well) into commercial real estate, namely industrial properties with single tenants on NNN leases. Most of these are stabilized investments, with a few small developments here and there. Just to illustrate how common these transactions are: In 8 years, we’ve never lost investor capital, or had to call investors for more cash in the event an investment wasn’t going well. We have $180M under management (24 properties) and have gone full cycle on 12 deals averaging 21% annualized returns. That being said, developments are on the risky end of syndicated investments, followed by value-add projects (improve a dilapidated property to raise net operating cost), and “core” or stabilized properties are on the less risky end of the spectrum. I don’t think advertising is a red flag. These can be $50M-$100M+ projects that need equity raised to move forward so they need to attract investors. Doesn’t mean a thing about the fundamentals of the investment and the sponsor, other than they don’t have people able to write that many checks in their private network. At the end of the day, your job is to do your own homework on the sponsor and the deal. For the sponsor, it’s all about their track record: Have they done deals like this before and how have they gone? If someone continuously exceeds their projections in one type of project, that’s a great sign. Ask tough questions. Ask for references. Attend a webinar they host about the deal and DM the other investors on the call to see what they know about the sponsor. Good Luck!