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> she invested $200,000 with a company that was making 30% returns by buying the hottest ticket in global real estate: US apartments. > Now, she says, most of t

by mrkeen 2y ago

> she invested $200,000 with a company that was making 30% returns by buying the hottest ticket in global real estate: US apartments. > Now, she says, most of that money is gone. Maybe it's there in the article but it's not jumping out at me: did the investment assets decrease in worth (as most of the article seems to imply), or did someone steal investors' money and run? Because if an investment in apartments is "mostly gone", I'd expect those apartments to be considerably more affordable now. Is the housing crisis "mostly gone"?

jarsin 2y ago
They used money from individual investors to obtain a loan to buy the property. The loan takes priority over the investors and they had to sell at a loss. So the little guys got wiped out.
- floundy 2y ago
  To add to this, it was a leveraged investment scheme. Think if you buy a house with 20% down and sell for a loss between 1-20%, it's your money that disappears first and the lender is not impacted. This was the same concept except the investor's funds were the down payment. There's a bar chart graphic in the article demonstrating this. Average reader of Bloomberg will not feel pity for the subject of the article as they are "supposed" to from the way the journalist wrote it. She played with leverage and got burned, lured in by the unreasonable promise of 30% annual returns. Not much different or "scammy" than people who lose their money in leveraged stock funds, Forex, crypto, or many other investment products. Too bad, if she took her $200k and used it as a down payment on a residential property investment in 2021 the value would probably be up 20-30% in most markets. S&P 500 would be up 15-20%.
silverquiet 2y ago
30% returns sets off every skeptical alarm in my head. That might be doable for a year or two, but if anyone can get that consistently (and I doubt really doubt it), they're not just going to offer it to you/the public.
floundy 2y ago
Commercial real estate prices are heavily interest rate dependent. Prices go down as the cost to finance debt rises. Apartment rents can stay the same or go up while the value of the building itself falls.

by mrkeen 2y ago

jarsin 2y ago

They used money from individual investors to obtain a loan to buy the property. The loan takes priority over the investors and they had to sell at a loss. So the little guys got wiped out.

floundy 2y ago
To add to this, it was a leveraged investment scheme. Think if you buy a house with 20% down and sell for a loss between 1-20%, it's your money that disappears first and the lender is not impacted. This was the same concept except the investor's funds were the down payment. There's a bar chart graphic in the article demonstrating this. Average reader of Bloomberg will not feel pity for the subject of the article as they are "supposed" to from the way the journalist wrote it. She played with leverage and got burned, lured in by the unreasonable promise of 30% annual returns. Not much different or "scammy" than people who lose their money in leveraged stock funds, Forex, crypto, or many other investment products. Too bad, if she took her $200k and used it as a down payment on a residential property investment in 2021 the value would probably be up 20-30% in most markets. S&P 500 would be up 15-20%.

silverquiet 2y ago

30% returns sets off every skeptical alarm in my head. That might be doable for a year or two, but if anyone can get that consistently (and I doubt really doubt it), they're not just going to offer it to you/the public.

floundy 2y ago

Commercial real estate prices are heavily interest rate dependent. Prices go down as the cost to finance debt rises. Apartment rents can stay the same or go up while the value of the building itself falls.