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Listener Question: DLP Capital Advisors

Last week, Jay called and asked about a company called DLP Investments. Jay asked what our thoughts were on them, but we weren’t familiar with the company. It sounded like a private REIT offering, but I wanted to do some more research before giving an opinion. 

According to their website, dlpcapitaldvisors.com, they offer funds that deliver high yields with low risk. That is one of my least favorite phrases in the world of finance. That is how things like variable annuities are sold, and we all know my thoughts on those. Those funds, it turns out, are a variety of Real Estate related investments, but not just in the private REIT space. For instance, they have a fund called the DLP Fixed Fund II. This fund is open only to accredited investors with $100,000 or more to invest, and offers fixed returns between 6.5% and 10%. They do this by loaning the money in this fund to their other funds in the form of a note. They claim this is the least risky fund of all of their funds as the investors in this fund are first to get paid out of all the investors in their various funds. It pays monthly, and the return depends on the amount you invest, as well as the term that you agree to lock up your money with them. For instance, investing $100,000 for one year pays 6.5%, while investing $1,000,000 for 5 years pays 10%.

They also offer a fund that invests directly in multi-family housing units. This one promises a 7-8% return during the investment period, and then twice the initial investment paid back in the wind down period. They claim the targeted annual return to investors is 17%. This fund locks up your money for 10%, but redemptions are available with 180 days’ notice.

There are several other funds available, with many of the same restrictions as the first two that I mentioned. DLP was formed in 2013 when Don Wenner decided to form the company out of a private lending business. They claim to have $200 million in assets under management while having $100 million in revenue and over 200 investors.

I don’t know enough about the company to say they are good or bad, but it isn’t somewhere I would put my money, just due to transparency, liquidity, and the sales tactic of calling this high return for low risk.