No solicited deals.
I don't pursue any "deal" that is marketed to me or broadly available, especially on a website if I haven't solicited it myself. Deal flow can be solved by building a network or joining an investment club.
No offerings from any crowd sourced "platform".
I mean, yeah this is similar to my first rule, but although good deals have passed through those platforms, there are better ways to source better deals, with better terms, with better operators, baked in vetting, along side smarter more sophisticated and powerful investors. The general feel amongst some investment communities I have joined is that these platforms are where operators go when they don't have demand for their product or after they have exhausted all other sources of equity. Imagine the deals developed for the family office of the Walton family on one end of the investment sophistication continuum and deals with a $5,000 minimum offered with a 20 page deck on a crowd site on the other end.
Only deals that have been fully vetted by a broad team of professional investors attached to a coordinated investment group.
Its impossible to have the skill of a cpa, the contract understanding of an attorney, the market knowledge of a broker etc. But it is very possible to partner with all of these folks through investment circles.
Operator first, then deal
There are so many deals and they all look amazing, the partner however is far more important and harder to find. They need to have survived at least one downturn and have a proven track record driving the thesis that is backing the particular deal in question. I'd much rather have what is presented as a mediocre deal with an amazing operator than the converse.
Do your research, invest in what you understand, and meets your investment goals.
There are so many funds out there: Secondaries, Co-GP, NNN lease back, Qoz, Evergreen, Private equity prime lending, Housing Bonds and on and on. I spent a lot of time interviewing the investment relations folks for different funds and was looking for good concepts, and business plans. I started leaning towards some deals and away from others. Apartment funds for example in 2022 just seemed way too far gone. Cap rates were extremely compressed, building costs were high, interest rates rising etc etc. If you are feeling confused, that is the exact wrong time to invest. Study your way to clarity and make decisions you can be happy with even if they go South.
The corollary to "Study your way to clarity, make good decisions" is, 'Be decisive.' Deals don't get better because you study them more" Accept that some things will always be unknown, you worked hard for the opportunity to invest and have your money work for you and it can't do that sitting on the side lines.
No single asset partnerships
I don't buy into one property partnerships. Is this shortsighted? Possibly. There are different phases of investing though- I am not playing the "Wealth Preservation" game, maybe someday but for me, growing my investments is key. They other side to this though is that I cannot afford for any of my investments to go to zero. Diversity is a way to mitigate that.
Have a correlation strategy. Diversification is key but if you decide to go into passive indirect real estate investing how are you going to diversify and reduce correlation of your portfolio of investments? First consider a few facets:
Fund and Asset type: Apartment, Self Storage, Mobile Home, Student Housing, NNN, Qoz, Industrial etc., Secondaries, Prime Lending, Bonds etc.
Geography
Capital Stack- The point with this facet is that investing in a mobile home park as the senior debt partner on a low leveraged syndication that cash flows day 1 is very different than engaging in the exact same deal as a LP on the common equity side of the equation. If you don't understand this sentence you MUST watch these videos below, but the concept is pretty simple. If you don't pay your home loan what happens to it? The bank forecloses right? They have the senior debt position. For senior debt positions you want to make sure that you are low leveraged in the sense that IF the property forecloses, you don't want a situation where you loaned more money on a property than the propery is worth. Let's say that you only loaned 60% or less on the value of a property. In that event, default on the loan payment, even if it does result in foreclosure, represents very little risk as you would take over the property at a 40% discount. In many cases, well managed senior debt funds do better if there are foreclosures.
Dan Handfords whack at it: https://www.youtube.com/watch?v=NCcMY401KAg