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Burt Polson's Real Estate in the Napa Valley: Consider alternative real estate investments - part two
Real Estate in the Napa Valley

Burt Polson's Real Estate in the Napa Valley: Consider alternative real estate investments - part two

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Burt Polson

The savvy real estate investor makes their profit on the front end of their real estate investment purchase; purchase at a discount.

It could be challenging to find those deals today as many potential sellers seem to be holding out to see what is next for our economy.

Others may not have a choice and are getting pushed in a corner with unpaid rent and mortgage payments due. You need to know where to look.

There are three methods of investing in real estate: indirectly by owning shares of an entity created to hold the property, direct ownership, and holding “paper.”

In Part 1, we discussed two forms of indirect ownership of real estate, investing in REITs (Real Estate Investment Trusts), and through crowdfunding.

In Part 2, we will discuss the third type of indirect ownership, private equity, as well as the remaining two methods of investing in real estate: direct ownership and not owning the real estate at all, but rather promissory notes, deeds, or liens (paper).

Private equity The third method of indirect ownership is through private equity funds. There are two types of private equity fund investing.

A syndication is for the purchase or development of a single property. The property is secured first, followed by the investors.

A blind pool fund secures the investors first and “pools” their funds in a trust account, followed by purchasing multiple investment properties.

In either case, the investor owns shares of the entity created rather than the property.

Keep in mind with either type of private equity fund; there are no guarantees of returns. If you are interested in learning more about a blind pool fund, check out one I am starting at StoneMarkerInvestments.com.

Direct ownership With direct ownership, an investor owns the real estate in their name, with a partner, or in an entity such as an LLC (limited liability company).

In using an entity, the investor owns shares and is a form of direct ownership because the investor is the managing member controlling the property.

If you are looking to take your alternative real estate investing one step further, consider a non-traditional type of real estate.

Self-storage facilities, student housing, and mobile home parks are all excellent performers. You will find alternative investments accessible not only as a direct investment but through several private equity funds, REITs and crowdfunding.

Not owning real estate at all Tax liens, tax deeds, notes and deeds of trust are ways of holding “paper” on a property rather than the property itself. Tax liens and tax deeds are usually purchased through the county or state for unpaid taxes by the owner.

You may acquire a lien on a property that must be satisfied before an owner can sell, or you may purchase a deed where you own the property.

Owning a note or deed of trust is the investor acting as a lender. This investing could be a great way to earn stable returns without ever stepping foot in a property. You lend money for a return on your investment with the property as collateral.

Watch now: the Napa Chamber of Commerce launches a community assist campaign

Burt M. Polson is the CEO of ACRESinfo.com, a commercial real estate brokerage company and CEO of StoneMarkerInvestments.com, a private equity real estate fund. Call him at (707) 254-8000 or email burt@acresinfo.com and burt@stonemarker investments.com.

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