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A Tale of $20,000

In October of 2013, shortly after I helped open a real estate investment fund, one of my clients invested $20,000 of his family’s savings into it. Since then he has left the money untouched, neither adding nor withdrawing from the account. What has happened with his investment makes an effective case study of the fund’s performance over the past 5 years:

By the end of 2013, their capital had grown to $20,521.54, setting a baseline to measure the investment’s growth on an annual basis at the end of each successive year. Our fund saw 10.01% of growth in 2014, bringing the investor’s balance up to $22,575.77. The next year brought a record annual return of 24.85%, bumping the value of their shares to $28,186. And in 2016, their investment grew another 11.52% to $31,434.29, followed by a gain of 18.28% in 2017 which brought their balance to $37,180.14.

As of this month, their original investment of $20,000 has grown during the past year by an additional 7.58% to an estimated value of $39,998.54—on course to double in just over 5 years under our care. Our average annualized return has been 14.45% over that period, compounding to 18.98% for our investors who have rolled these returns back into their shares.

It should be noted that these returns are based in part on the estimated accrual values of our real estate portfolio and that historic returns should not be relied upon as an indicator of future performance, but it is satisfying all the same to be able to look back on these first 5 years with a sense of real achievement when you compare it to the performance of the passive investment returns of many mutual funds.

Our fund provides a relatively reliable alternative for investment that is diversified between real estate holdings in multiple markets as well as equity-secured notes that generally pay between 12% and 18% returns—which helps provide the fund a steady monthly cash flow during down cycles. And in times when real estate slows, the demand for private money often increases.

At present our focus is on continuing to build our portfolio of notes and medium-scale developments with ample carrier rental income in place where we can keep costs down while giving us access to higher projected gains than single-property flip projects offer. And with the proceeds of past profitable sales going into these types of investments, we have managed to convert fully-appreciated assets into new investments that continue to accrue value, while also deferring our capital gains from the sale of properties being purchased from us at as much as twice what we paid for them.

Using these types of strategies, we should be well poised for a return to double digit growth moving into the new year, and we look forward to tracking the continuing tale of that self-same $20,000 as it continues along our shared path of growth.

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