What is Investing?
Investing, in any form, is placing capital at risk in anticipation of a reward.
You only know whether that investment worked out as project AFTER you’ve received your return of capital. This is when you can tally your result.
Ahh, The Return of Capital
Let’s review the timeline of each of the deal categories I mentioned above
1. Fix & Flip Houses & Multi Family (Less than 1 Year) – This is my favorite investment.
Buy a house or small apartment building, renovate it, and sell it to someone who will make it their home.
I love that sense of purpose in the work – as well as the artistry of design that goes into a well executed rehab.
Return of Capital – The return of capital is most often within 6-9 months, and normally no longer than a year. However, the work load is very active to run the project. It is almost more of a job than an investment.
2. Short Term, High Interest Loans (Less than 1 Year) – Private Mortgage Investment Opportunities are my favorite place to park cash short term. I think of them like a 1 year CD because the money is locked up for a period of 6-12 months. However, at 10% and 2 points, the return blows away the CD.
Private Mortgage Investment Opportunities fund our Diamond Equity fix & flip deals. Many readers fund these, and my team & I fund them regularly to keep our cash working.
Return of Capital – I LOVE these deals for their somewhat quick Return of Capital. An investor can try one out and be repaid in less than a year, sometimes even 3-4 months.
The quick Return of Capital allows a first time investor to “test drive” us, the operator, to make sure we perform before doing more. These are truly passive investments.
3. Value Add Commercial Real Estate (2-10 Years) – Here I’m focusing on Value Add syndication deals, where a team is operating the investment and we are discussing the Limited Partner capital stack. In other words, capital being  placed in the deal in anticipation of return.
Value Add Commercial deals often project higher returns than short term Private Mortgage Investment deals and would be taxed at Long Term Capital Gains.
Both of these features are great, however take the entire deal cycle to discover the results.
Return of Capital – Return of Capital in Value Add Commercial Deals is often 5-10 years, especially in the current cycle of higher interest rates we are currently living through.
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