Case study: Land fund pays 16% distributions
(I don’t know how that owl got three legs, but just go with it)
Tomorrow the Co-investment club meets to review this month’s investment: a land fund that pays 16% in quarterly distributions.
The fund has made on-time payments every quarter since inception. The operator consistently achieves 30-35% net profit from the company’s land investments.
We know firsthand, because we also invested with them last year.
“Yes, but past performance doesn’t guarantee future results, right?”
Naturally. Every investment involves risks. But this operator is a seasoned land investor with a lot of experience who has performed consistently.
Let me propose an alternative question: If this investment truly offers an asymmetric return (high return with moderate risk), what are the trade-offs on the other dimensions?
The other dimensions of this investment
Here’s how this country fund compares to the other dimensions:
Liquidity: None
Time investment: 4 years
Tax benefits: None
Minimum investment: $50,000 (if you invest yourself; Co-Investing Club members can invest $5,000)
Access for non-accredited investors: Yes
Percentage of people who understand the investment: Very low
The operator’s ability to attract investors: This company excels in land investment, not marketing
Personal values: non-controversial
As you can see, there are tradeoffs for high returns with moderate risk. You have to tie up your money for four years. The fund has no tax benefits, unlike some other passive real estate investments.
You also benefit from the fact that most people know nothing about investing in land, and that this operator does not have a slick marketing department. There is no herd of investors all tripping over each other to throw money at them (unlike AI companies, for example).
Are you beginning to see how some investments can offer high returns with moderate risk?
#risk #return #hidden #dimensions #investing