Study Confirms Ray Lucia is Selling Snake Oil

Investment News reports on a study that finds that the non-tradeable REITs that Ray Lucia is so fond of have consistently underperformed the broad market of real estate investing for the past two decades.

Interestingly, the study notes that the industry is seeing more and more independent broker-dealers like the Lucias out there, raising money for these stinkers.

The reason why these non-tradeable REITs are such dogs will be familiar to readers of this blog: the high fees.

The fees on nontraded REITs, which can be as high as 12% to 15%, are particularly egregious, one industry executive said. “An investor gives $100,000 to a program, and he’s immediately at $85,000,” said Wes Tellie, director of operational risk due diligence and independent broker-dealer due diligence with Duff & Phelps Corp. “That’s a hell of a hurdle rate.”

The nontraded REIT industry had some $84 billion in assets under management at the end of 2011.

Remember, that just because everyone else is doing it doesn’t make it a reasonable investment. Valuations of non-tradeable REITs, the article concludes, are “at a point of comedy.”

I’m going to make some popcorn, sit back and enjoy watching the silver-tongued “guru” explain his way out of this one.

 

3 comments

  1. Tony

    Hi Seth, You say that “the industry is seeing more and more independent broker-dealers like the Lucias out there, raising money for these stinkers.” Would you include Ric Edelman in this same group? Thanks!

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  2. Troy

    I’m not super familiar, but from what I understand Mr. Edelman’s process and philosophy aren’t bad. The trouble is that his fees are quite high. If you’re simply looking for someone to manage your portfolio, I recommend Rick Ferri, owner of Portfolio Solutions. His process is solid, and he charges only 0.25%. If you want a comprehensive advisor that will act as your partner in all things financial, I recommend you search NAPFA.org.

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