Three real estate investment ideas

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Read up on our past Real Estate issues to get the most from this post.

HIGHLIGHTS:

  • A multifamily rental feeder fund featuring 17% IRR
  • A diversified fund targeting 15% IRR recommended by a subscriber
  • A single-family home in Cleveland with 9% CoC

Let’s go!

Real estate investment ideas

This time, we’ve decided to focus on investment ideas rather than giving you more market commentary.

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  • Ideas + less commentary?
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  • Something different?

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Croatan Access Fund

Offering at a Glance

  • Name: Croatan Access Fund​
  • Available: Until December 29th, 2022
  • Terms: 12% pref (80/20)
  • Term: 7 years
  • Target net IRR: 17%
  • Min. investment: $25,000

This is the first feeder fund we’ve highlighted, and it’s a good one.

It gives access to Croatan’s All-Weather Fund II, which focuses solely on rental properties in fast-growing parts of the US. It’s an institutional-grade private equity fund featuring top decile returns.

It invests in parts of the country that feature high:

  • Population growth
  • Domestic migration
  • Labor workforce growth

This means its properties span across most of the American southwest and southeast.

Notably, the fund partners have a solid track record of not investing when it doesn’t make sense. They invested in zero properties from 2006 to 2008, before loading up during the 2009 distressed market. That strategy produced a 42% gross IRR.

And it looks like they’re following the same playbook now. Since the first quarter of 2022, they’ve only acquired one property (down from an average of three per year since 2009).

They also had the good sense to liquidate $450m worth of properties near the peak in mid-2021.

A few other things we like:

  • 32% realized IRR
  • The GPs invested $7m of their own money
  • It’s been audited by KPMG

But direct investment in the fund carries a $100k minimum investment.

That’s where CityVest comes in.

Investing via their feeder fund not only reduces the minimum investment to $25k, they’ve also been able to secure preferential rates.

Because Croatan Access Fund is aggregating several million dollars of capital, CityVest negotiated much better terms (12% pref with 80% of profits above coming back to LPs).

JKAM Diversified RE Fund II

Offering at a Glance

  • Name: JKAM Diversified RE Fund II
  • Available: Now
  • Terms: 6-8% preferred return + (70/30)
  • Term: 5-6 years
  • Target net IRR: 15%+
  • Min. investment: $50,000

This is a slightly different opportunity that came to us from a subscriber. (Do you have an opportunity you think we should look at? Let us know.)

This investment is smaller but more diversified, and it’s reflective of the manager’s personality (Jack Krupey). Jack is a significant investor in the fund, with over $1m committed.

Geographically, this fund focuses (like the one above) on Arizona, Florida, and Texas, but in addition to multi-family homes, it’s also acquiring assets in the industrial, mobile homes, self-storage, senior living, and sale leaseback spaces.

Here’s how your returns might look given a $100k investment:

The fund plays on several demographic and economic trends that are popping up, including an aging population, increased reliance on self-storage, and the growing mobile homes trend.

Lofty.AI

Offering at a glance

  • Name: 1339 E 115th St, Cleveland, OH 44106
  • Platform: Lofty.AI
  • Buy in: $148,450
  • Minimum investment: $50
  • CoC: 8.8%

Lofty has found its niche in Cleveland, with their current offering about 50 feet from the last one we covered.

The home is offered at $148k, inclusive of a $126k purchase price, maintenance reserve, vacancy reserve, and the Lofty listing fee.

Here’s what people think it’s worth:

And the rental estimates:

  • HouseCanary: $1,400 (though the listing on Lofty says $1,654, so I may be missing something)
  • RentoMeter: Avg $2,129; Median $1,600

Lofty is forecasting a rent of $1,550 per month, which is probably fair.

This means $1,090 monthly cash flow returns, or 8.8% CoC.

Lofty is also forecasting 0.0% appreciation on the home, which is going to be wrong somehow. There’s a decent chance Cleveland dips another few percent in 2023 before returning to a slow and steady 4-6% per year.

The nice thing about Cleveland is that it’s so cheap, and expectations are so low (sorry, Cleveland) that any sort of catalyst to the upside could deliver big returns. A tech hub, hipsters gentrifying the city, anything like that could be a big win for property prices.

That’s all for this week.

Have you seen a real estate deal, fund, or opportunity you’d like to share with the community?

Cheers,

Wyatt

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Author

Wyatt Cavalier

Wyatt Cavalier

With a background in finance & intelligence analysis, Wyatt has an unhealthy obsession with finding the best blue chip investment opportunities. His previous newsletter, Fractional, resonated deeply with subscribers, bringing actionable insights and unconventional trading strategies. His rare book collection specializes in banned editions. He currently lives in Spain with his beautiful wife, three young boys, and dog Monty.

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