Hey Reader,

You may have seen the Brandon Turner news last week.

He is a big name in real estate. His team bought an apartment building in Texas a few years ago for $72 million. The deal worked. Rents went up 33%. The building stayed full. By every measure, the operator did what he said he would do.

Then the market shifted, and they had to sell for $62 million.

Here is what happened to everyone's money:

Same building. Same operator. Same deal. Three completely different outcomes.

The difference was where each investor was sitting.

When you invest in something backed by real estate, you are either an owner or a lender. Owners hope the value goes up and they get paid last when things sell. Lenders make a loan against the property and get paid first.

That is not bad luck. That is just how the line works.

This is not a Brandon Turner problem. He has been transparent about what happened, and the deal performed operationally. He is not the lesson.

This is also not an argument against equity deals. Plenty of investors take that position knowingly and do well with it.

The lesson is just this. Before you put money into anything backed by real estate, the most important question is not "what is the projected return?" It is "where am I sitting in this deal?"

If you cannot answer that in one sentence, the rest of the math does not matter.

I think about this a lot because of the position I hold in my own deals. When I buy a mortgage note, the borrower pays me, and the property secures the loan. It is not the only way to invest in real estate, but it is the way that fits how I think about risk.

I wrote a longer letter walking through exactly how I think about this. It covers the six questions I work through before committing capital to any real estate-backed deal, plus the page most people end up screenshotting — how I evaluate the operator.

If you find your answer and are not sure what to do with it, hit reply. I read every response.

Sierra

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Educational content only. Personal investment examples are shared for illustration and do not constitute investment, tax, legal, or financial advice, or an offer to sell securities.