The Returns Bell Curve: How I Spread Risk and Returns

2 weeks ago 17

In real estate, high minimum investments aren’t just a barrier to entry—they’re also a barrier to diversification. Whether you buy investment properties directly or invest passively in syndications, funds, or JV partnerships, you likely need to cough up $50,000 to $100,000 or more. That includes the down payment, closing costs, and initial repairs, or the required minimum set by the operator. Those kinds of minimums make it really hard to diversify. This is why I invest $2,500 to $5,000 at a time instead, as a member of a co-investing club. By doing so, my returns form a healthy bell curve, reducing my risk and letting me approach real estate investing more like stock investing. The Returns Bell Curve All investments come with risk. Some inevitably underperform, others overperform, and most land somewhere in the middle of the returns bell curve. As real estate investors, we do our best to analyze and understand the risk of any given investment. But we can’t eliminate it entirely. Of the 54 passive real estate investments I’ve made, four have underperformed badly. Others have surpassed expectations. That’s investing. But when I invest $5,000 at a time, I don’t lie awake at night che...

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