A 2023 Update on My Passive Real Estate Investment Returns - Physician on FIRE (2024)

In my investing career, I have made many real estate investments of varying sizes, types, and with a wide range of returns.

This post brings my seven completed passive real estate investments and seven ongoing investments together in one place, and I’ve updated my investment my returns and time invested for 2023, which, in some cases, is now up to five years.

Note that I won’t be talking about the properties we’ve purchased to live in (covered here, here, and here) or land we once purchased to possibly build on (covered here). Some of those became rental properties and flips, but were not necessarily intended to be investments.

In this post, I’m detailing my various passive real estate investments — ones that don’t require any effort from me other than a bit of due diligence on the front end and a bit of extra paperwork to pass along to my CPA.

Returns have been updated most recently on 1/16/2023.

My first investment in passive real estate was made in July of 2013 when I bought shares of Vanguard’s Real Estate Index Fund (VGSLX), a collection of publicly traded REITs (Real Estate Investment Trusts).

The volatile nature of REITs combined with the availability of numerous additional ways to invest passively in real estate as a result of the JOBS Act passing and me becoming an accredited investor led me to seek out other real estate investments.

I started small with a few investments five years ago in January of 2018. Wanting to diversify across deal types (debt, equity, eREIT), and across different investment platforms, I made about a half-dozen investments in the first part of 2018.

As I continued to become more familiar with my investment options and the platforms offering them, I broadened my scope to include larger investments in crowdfunded syndications and real estate funds. As of early 2022, these various passive real estate investments represent about 10% of our investment portfolio.

Valuation of some of these investments can be challenging, as we don’t necessarily know the true market value of some of these real estate investments until the deals have been completed (i.e. properties sold or loans paid back), but 10% of our portfolio is a fair rough estimate.

Why So Many Real Estate Investments?

I’ve asked myself the same question at times.

First, I wanted to dip my toes in the water with small sums of money. There’s no better way to learn how these investments work than by becoming an investor yourself with a tiny sliver of your portfolio.

Also, with some of these platforms, I’ve had advertising or referral relationships in place, and I figure if I’m researching them and presenting them as potentially viable options for your investment dollars, I should be comfortable investing with them myself, which I’ve done in most cases.

With any asset class, diversification is a good idea, and in the case of crowdfunded real estate in particular, there is no Vanguard with 40+ years of experience. The JOBS Act that allowed for these platforms has only been around since 2012, and I think it’s a good idea to diversify across different platforms.

I’m now at the point where I’ve been comfortable making a six-figure investment in a real estate fund with a single operator, but I don’t know that I would have gotten there without slowly wading into these waters. I don’t think jumping into the deep end of the real estate pool to either sink or swim is a good approach for most people, and it was certainly not for me.

DISCLAIMER

Most of the platforms and operators have offered dozens, if not hundreds, of real estate investments to potential investors. Some deals overperform their projections, some underperform, and my one or two investments on a platform should NOT be taken as a representative sample.

For example, Crowdstreet’s deal flow is very steady, with several offerings weekly. AcreTrader presents new farms or timber tracts weekly while declining to offer 99% of the farms they consider to investors. I’ve written a review of Crowdstreet and a similar review of AcreTrader if you’re interested in learning more about them. Other platforms may have numerous opportunities at any one time.

One individual’s investment’s returns are not necessarily representative of a platform. My single deal with Alpha Investing gave an outstanding return; my returns on my single investment with EquityMultiple were only slightly positive. That doesn’t mean one company is better than the other.

These are individual deals among dozens offered by both platforms. I may have simply been lucky with one and not so much with the other when it came to the individual project, both of which were value-add multifamily equity deals.

Some companies offer only a few funds or eREITs, each of which is invested in a variety of underlying deals.

Some of them regularly update the Net Asset Value (NAV) of the deals they’re invested in. Others do not, and you won’t know the value of your investment until it goes full circle. This is technically true even of those that do estimate the NAV on an ongoing basis — it’s their best estimate, but you don’t know the true fair market value of a thing until it sells on the open market.

All of this to say that it’s tough to compare apples to apples when investing in different deal types with various companies that might report asset values differently. The same can be said of fees. They are higher for real estate investments than for ETFs and mutual funds but they’re often used to cover operating expenses of the real estate companies. What matters are your returns after all fees are paid, which is what I report below.

I calculate my IRR with an Excel sheet, but when you don’t know the current estimated value of the investment, you’ve got incomplete information. I’ll report what I can for each investment I’ve made. I’ll start with the deals I’m currently invested in, and you’ll see those that have gone full circle afterward.

Ongoing Deals

Since these investments have not yet gone full circle, reporting my total return to date can be challenging. Where an up-to-date NAV (net asset value) is provided by the platform / operator / sponsor, I will use it, but keep in mind this is only an estimate of the current value.

Some of these will be completed in the coming months or years. Others are meant to be “evergreen” where I can choose to leave my money invested indefinitely or request a return of funds. The liquidity options vary by investment, and penalties can exist for early exits.

I’ll start with the smaller deals that I started with to get comfortable investing in this asset class. Next, I’ll discuss the four-figure investments I’ve made and finally, the six-figure investments that I’ve made in recent years.

Small Deals (Investments Under $10,000)

Fundrise

Fundrise also offers eREITs, a collection of various real estate investments, and I’ve been invested with them since January of 2018. As mentioned earlier, I currently or previously have had advertising or referral relationships with a number of the platforms I’ve invested with such as Fundrise. If you choose to register with any of them to see more details of their offerings, you may be supporting this blog and its charitable mission.

I’ve opted to take my distributions in cash, and they pay quarterly. Fundrise does update the Net Asset Value of their holdings, so you can see the growth of your investment over time and estimate your total returns. They also offer a liquidity option, but you may owe a penalty, decreasing over time, of 3% to 1% if you make a withdrawal in the first five years of your investment. There are no early withdrawal penalties in the Flagship Fund or the Income Fund.

An IRR of nearly 11% over five years is at the top end of what was projected in this diversified multifamily portfolio. I’ve been pleased with the performance and communication.

My Results with Fundrise

IRR: 10.86%

Days Invested: 1810

Total Return on Investment: 58.43%

Visit Fundrise

Explanation of Terms

IRR: Internal Rate of Return (IRR) is the compound annual growth rate, accounting for inflows (investments made) and outflows (distributions from the investment). It is annualized and probably the best way to measure performance of investments like these.

Total Return on Investment: The total cash returned / total cash invested. Not annualized. Change this from a percentage to a decimal and put a 1 in front of it, and you’ve got the equity multiple.

Days Invested: How many days it took to earn that total return.

RealtyMogul

RealtyMogul has a variety of real estate investments on their platform, including two eREITs, numerous individual syndicated deals, and triple net leases.

Since April of 2018, I’ve been invested in their MogulREIT II, the goal of which is to realize capital appreciation while providing regular income.

I’ve received quarterly distributions since July, 2018. The NAV, which is regularly updated, took a hit during COVID, but has bounced back. It was $10 a share when I invested, and now sits at $10.65. I’m hopeful that it’s a conservative estimate, as that is not a lot of capital appreciation over a 3-year period.

The portfolio consists of 9 multi-family equity deals in 4 states, although 6 of the 9 apartment complexes are in Texas.

In terms of liquidity, there’s none in the first year, and after that, you can opt to have RealtyMogul buy back 25% of your shares quarterly. There are decreasing penalties of 2% or 1% that disappear once you’ve been invested for 3 years, which I now have.

To calculate returns most accurately, I’ve included a prorated distribution based on what I expect to receive with the next quarterly payment. I’ve done the same for other ongoing investments below that have reliably paid distributions where we’re between payments.

I’m not unhappy with 8.7% annual returns, especially given the fact that publicly traded REITS plummeted in 2022, but I’ve seen somewhat higher returns in similar investments that I’ve made. I’ve decided to withdraw my money in 2023, a process that will take most of the year, as RealtyMogul limits withdrawals to 25% of your balance each quarter.

My Results with RealtyMogul

IRR: 8.67%

Days Invested: 1,738

Total Return on Investment: 43.40%

Visit RealtyMogul

AcreTrader

Agriculture is something I was surrounded by growing up, and I’m happy to say that I own a little piece of a farm myself now — roughly 2 acres of a row crop farm on fertile Arkansas soil to be precise.

I’ve been invested since July of 2019 and have received annual distributions in the range of 2% to 3% of my initial investment for three consecutive years in December of 2019, 2020, 2021, and 2022 based on rental income.

AcreTrader works with the farmers that rent the land to help increase crop yields, soil health, etc… Their plan is to hold the property for 5 to 10 years, selling at an advantageous time, and they have data that shows farmland to be an asset class with both outsized returns and low volatility.

Acretrader has had a handful of investments go full-circle, and they’ve generally performed significantly better than projected

Since they do not update the asset value between the time of purchase and when the farmland is sold, I cannot estimate my total return. Time will tell, but based on the regular updates on the productivity of the acreage, all seems to be going according to plan.

Visit AcreTrader

DiversyFund

DiversyFund has one investment offering, the Diversyfund Growth REIT, with a minimum investment of only $500. I invested in it in July of 2019.

I am currently one of about 28,000 investors in the fund with $73 Million deployed across 13 multifamily and student housing projects in 5 states, and the fund remains open to new investors.

The goal is for the fund to match their historic performance of an IRR in the 16% to 18% range with a hold period of five years, and there is no liquidity (withdrawal) option during the five-year hold period.

Without an updated NAV, I cannot guesstimate my total return, but I did receive my first cash distribution of more than 18% of my initial investment and previous dividends have been reinvested.

Visit DiversyFund

Medium-Sized Deals ($25,000 to $50,000 investments)

Crowdstreet

I’ve invested twice with Crowdstreet in projects with projected IRRs greater than 20%. They are one of the most active platforms in terms of deal flow, as you will see after a free registration.

They offer real estate funds, individual syndicated equity deals, and I’ve even seen marijuana investment opportunities. I passed (and did not puff) on those.

As of early 2023, CrowdStreet investors have funded 580 deals, about 150 of which have gone full circle for an average IRR of 19% with a wide range of returns.

I’ve chosen to invest in two separate ground-up builds in Texas, both of which have projected IRRs north of 20%. One will be student housing, the other residential townhomes.

With new builds, there is no income to disperse, so my returns will be realized when the projects are complete and sold.

I made these investments in December 2019 and January 2021. Both are anticipated to be fully realized in 2023 to 2024. Until then, I won’t have much to say about returns, but I can say that the communication has been excellent with quarterly updates, pictures of the progress, and more.

Visit Crowdstreet

Big Deals (Six Figure Investments)

Origin Investments

Origin Investments was founded in 2007, and the co-founders invest a good amount of their own money alongside their investors. People I know and trust have invested with them, and after learning more about the current and past funds, I felt comfortable investing a six-figure sum with them.

They have had three funds go full circle, with an average IRR of 27.3% over 25 realized deals. They currently offer four funds.

I’ve been invested in the IncomePlus Fund since September 2020. The fund aims to provide a tax-neutral distribution of about 5.5% to 6% annually in 0.5% monthly increments, along with additional capital appreciation of 3% to 5%, investing in a mix of preferred equity, equity, and ground-up builds.

It’s an evergreen fund, and I can choose to remain invested indefinitely or sell my shares at a later date.

Origin updates the NAV per share monthly, so I have a good idea of my total return to date.

My Results with Origin Investments

IRR: 13.37%

Days Invested: 512

Total Return on Investment: 22.99%

Visit Origin Investments

SFR3 via Republic Real Estate

SFR3 is a fund that purchases and renovates distressed homes to provide rental workforce housing throughout the southeastern U.S.

I was impressed by the resumes of the leadership team and their algorithmic approach to identifying neighborhoods and properties for potential acquisition. They’ve also got an impressive, albeit short performance record, and residential real estate has continued to perform quite well since I invested in the fund.

I saw this fund as a way to profit from single family home purchases and subsequent rental in a very passive way without getting my hands dirty. Most of the other investments I’ve made have been either equity in large multifamily complexes or lending to various projects.

I committed my funds in December, 2020, and the money was deployed in March, 2021. Returns thus far are reported to be in the upper teens, and the reported return does not include an increase in market value of thousands of homes in the portfolio; these are only updated when a cash-out refinance takes place.

I made this investment via an access fund put together by Republic Real Estate.

Completed Deals

Alpha Investing

In July of 2019, I made my first investment on the Alpha Investing platform, a low five-figure investment. It was an apartment complex in Arizona to be purchased, improved, and resold.

I received small quarterly distributions from September 2019 to September 2020. In December 2020, the property was sold for a handsome profit, and I was paid out with payments in December 2020 and January 2021.

My Results with Alpha Investing

IRR: 50.45%

Days Invested: 512

Total Return on Investment: 76.5%

Visit Alpha Investing

Republic Real Estate Deal #1

I’ve made two small investments and one big one via Republic Real Estate, the first of which was made when it was known as Compound.

They offer a wide variety of real estate investments from short-term loans to unlevered luxury condominiums to private REITS to real estate funds with six-figure minimums.

The first investment I made was in an equity deal for a luxury Miami condominium that was purchased at a relative discount while the market was down somewhat pre-COVID. There was a small income component to the investment, with an annual dividend of about 2% from rental income, but the main source of return came from the proceeds when the condo was sold in the summer of 2022.

The model here is actually quite similar to the AcreTrader deal in that no leverage is used — the property was purchased with cash from investors — and most of the return is dependent upon the property increasing in value.

The 1-bedroom, 1.5 bath condo was purchased early in 2020 and held for two years and change, at which point it was sold at a profit. I was happy with a nearly 9% return on my money in a non-leveraged, relatively low-risk deal.

My Results with Republic Real Estate Deal #1

IRR: 8.86%

Days invested: 897

Total Return: 22.90%

Visit Republic Real Estate

Republic Real Estate Deal #2

My second investment with Republic was the first to go full-circle after just 7 months. It was a loan as part of a fix and flip project in Los Angeles.

They raised $1.5 Million for the project ($108,000 via Republic Real Estate) and, after renovations, sold it for $2.18 Million, giving me a return of 27.5% in 7 months for an IRR of 52.2% annualized.

This remodel of a 4 bed / 4 bath place on Boeing Avenue in Los Angeles marked the launch of Republic’s American Dreamhouse series, and a series of mini-episodes werereleased on Instagramto show the progress of the home as it was remodeled. A bit like something from HGTV where you can invest in the project before the show begins.

Below is an artist’s rendering of the proposed finished product and an actual picture from its Zillow listing. The garage door is less fancy, but otherwise, they pretty much nailed it.

My Results with Republic Real Estate Deal #2

IRR: 52.2%

Days Invested: 210

Total Return on Investment: 27.5%

Visit Republic Real Estate

EquityMultiple

This was one of my first investments in passive real estate, made in January of 2018, and it was a low five-figure investment via EquityMultiple. It was also a value-add apartment complex project in Connecticut in an area suitable for commuting to New York City.

The investment was all set to be completed in the spring of 2020, but COVID threw a wrench in those plans. I received distributions from rental income from May, 2018 to November, 2019, and then the distribution stopped while lawyers sorted out the details of the stalled closing.

Eventually, a new buyer was identified, and after the sale closed, I was paid out in April of 2021. I made money, but not much.

My Results with EquityMultiple

IRR: 2.49%

Days Invested: 1,204

Total Return on Investment: 8.21%

VisitEquityMultiple

PeerStreet

I also invested with PeerStreet in January of 2018, a mid-four figure debt deal for a project in Palm City, Florida. Their business model is making short-term loans to individuals who like to fix-and-flip homes.

These short-term loans, typically in the 4-month to 24-month range, with 12 months being quite common, tend to pay interest in the high single digits.

From March, 2018 to December, 2019, I received monthly interest payments, and my money was returned with one final interest payment in January of 2020.

My Results with PeerStreet

IRR: 8.54%

Days Invested: 705

Total Return on Investment: 15.90%

Visit PeerStreet

DLP Capital Partners via CityVest

DLP Capital Partners now offers five funds in 2023. When I first learned about them, the minimum investment in the three funds they had was $500,000.

In 2021, that figure was lowered to $200,000 for audiences of Physician on FIRE and the White Coat Investor, a concession that we really appreciate, as that’s a more achievable figure for our readership.

In 2019, however, the only way to invest with DLP with less than a half-million dollars or more was via an “access fund,” also sometimes referred to as a “feeder fund” in which assets from multiple investors are pooled together (for a fee) to meet the minimum to make otherwise inaccessible investments.

I invested in the DLP Lending Fund via a CityVest access fund in April 2019, and received quarterly dividends until the investment was liquidated and the cash hit my bank account on November 1, 2022

When my investment is liquidated by CityVest as planned in the fall of 2022, I will likely invest this money directly with DLP to save on fees now that the minimum investment is more approachable.

My Returns with DLP via CityVest

IRR: 8.68%

Days Invested: 1301

Total Return on Investment: 29.51%

Visit DLP

RealtyShares

This was another investment that I made in January of 2018, a low four-figure short-term debt deal for a quadplex in Albuquerque, New Mexico.

The RealtyShares platform no longer exists, having shut down gradually beginning late in 2018. Fortunately, your investment with a crowdfunding platform like them is not held by the company; RealtyShares was the technology platform that connected investors with operators seeking investors, performing some due diligence and record-keeping and reporting duties.

Still, their closing undoubtedly created some headaches for investors. My investment had gone full circle by July of 2018 and I received my 1099 for the interest income in early 2019 as expected.

My Results with RealtyShares

IRR: 6.98%

Total Days Invested: 152

Total Return on Investment: 2.94%

VGSLX

We’ll wrap this up where we started, with a look at my first passive real estate investment, the Vanguard REIT index fund, which I owned from 7/26/2013 until 8/20/2021.

Having been an investor for over 8 years, calculating my own IRR with a spreadsheet as I have done for the others would be quite cumbersome with so many inflows and outflows as I made my annual backdoor Roth contributions.

Morningstar reports a 107.62% total return over the entire timeframe. The Rule of 72 would suggest that a 9% return would result in an 8-year doubling time, and an 8% return would double in 9 years. I can confidently say that my returns were in the high single digits, at least with the money I invested in my Roth IRA early on.

It was a wild ride, but not nearly as scary as the fund’s performance in 2009, when the fund was down 78% from it’s all-time high.

Why am I no longer invested? I decided to open a self-directed Roth IRA in 2021 via RocketDollar (save $50 with code PHYSICIAN) to invest in a handful of pre-IPO startups. Since I already have about 10% of my portfolio invested in the passive real estate investments mentioned on this page, I felt no need to keep the REIT, so I liquidated it.

I feel that the investments I’ve made are likely to perform as well or better and with lower volatility.

My Take on Passive Real Estate Investments

I got comfortable with the asset class by making small investments in diversified eREITs. I think that’s a great place to start.

Read everything you can on the website of any platform you consider investing with. Many of them have investor education blog posts and modules. Become educated and familiar with the terms used.

As you gain knowledge and confidence, and eventually attain accredited investor status by virtue of at least two years of multiple six-figure income ($200,000 as an individual or $300,000 as a couple) or by having a million dollar net worth (not counting your primary home), you may be ready to choose individual syndications. These are deals found either on the popular crowdfunded platforms or by connections made with other investors in your network. Passive Income MD and his Facebook groups are great resources for learning more.

If you are not an accredited investor, your options are limited to smaller investments like the REITS offered by Diversyfund, Fundrise, and RealtyMogul, and various offerings at Republic Real Estate. These are a great way to learn about the space and “get your feet wet” without putting up a whole lot of capital.

There’s also the option of publicly traded and private REITS, and REIT index funds like Vanguard’s, which tend to be more volatile as they are priced by the whims of the market minute by minute, but may offer similar long-term returns.

At this point, I’m most likely to direct future passive real estate investments to evergreen funds like those offered by DLP, Origin, and others. As my smaller investments come full circle or reach the point where there’s no penalty to liquidate, I’ll plan to consolidate for the sake of simplicity.

I would be very happy with a tax-neutral distribution in the 6% range with total returns in the low teens, which is the somewhat conservative target of the funds I’m considering or have invested in.

Passive real estate investments are certainly not without risk — nothing offering double-digit returns ever will be — and a total loss of capital on a single deal is not unheard of. It’s an optional asset class, as there are no called strikes in investing, but it’s an asset class that has generated a great deal of wealth for many individuals and families.

I plan to continue to grow my investments in the space to roughly 20% of our investment portfolio.

As mentioned earlier, I currently or previously have had advertising or referral relationships with a number of the platforms I’ve invested with. If you choose to register with any of them to see more details of their offerings, you may be supporting this blog and its charitable mission.