I’ve had two conversations recently that perfectly capture one of the most common debates in passive investing.
One investor told me he’d never invest in a fund. He wants to see exact properties, review the specific business plan for that property, and make his own call on every deal.
The other investor said the opposite. He’d never invest in a single deal. Too much concentration. Too much riding on one asset.
Both were thoughtful and had clear reasoning. And at the very least, I admired them for their clarity.
They each made their decision based on the structure of a deal. But they were missing something much more important.
What Never Changes
No matter how you invest passively (individual deal, fund, etc.), there’s always one constant: you’re ultimately betting on the sponsor.
They source the deals, execute the business plan, and make the tough calls when things don’t go according to plan. (And things never go entirely according to plan.)
A great property with a bad GP can still fail. Not because anything was wrong with the asset, but because the execution fell apart.
Sponsor evaluation is table stakes in every deal structure. You want to understand their track record, how they make decisions under pressure, and whether their interests are genuinely aligned with yours.
That foundation doesn’t change. But different deal structures influence what else you can verify.
The Single-Deal Advantage
When you invest in a single-asset syndication, you evaluate the sponsor and the deal.
You can look at the market. The property. The business plan. Rent assumptions, debt terms, exit strategy. The whole lot.
If you disagree with their projections or don’t like the market, you can pass on that specific deal and still invest with that same sponsor on the next one.
In a single-asset syndication, you can evaluate just about everything – the asset, the market, and the sponsor’s ability to execute that specific plan. You have the full picture in front of you.
What a Fund Actually Asks of You
A fund or blind pool is a different animal. You’re investing in a strategy and a team, not a specific property (or even a specific market).
You might know their target “buy box,” their high-level thesis, and their projected returns. But you’re not going to be able to underwrite individual acquisitions. That’s the whole point of a fund – you’re handing them discretion over asset selection.
So your due diligence has to go deeper on the sponsor. Not just their track record on one or two deals, but across multiple market cycles – including how they’ve navigated projects that didn’t go as planned. You need to understand their fee structure, their incentive alignment, and how they make decisions when the original plan stops working.
But here’s what fund-only investors often miss:
You believe you’re getting diversification. And at the asset level, you are. Multiple properties, potentially multiple markets, spread across independent business plans.
But every one of those assets was chosen by the same team, managed under the same strategy, subject to the same judgment calls. If a fund underperforms, it’s rarely because every property was a bust. It’s usually because something went wrong at the operator level.
Investors who chose funds specifically to avoid concentration risk should understand: that concentration didn’t go away – it just shifted from an asset to the person managing the asset.
You diversified the real estate, but not the decision-maker.
How to Decide What Fits You
Neither structure is right or wrong. Both can be right for different investors at different points. A few questions worth asking yourself:
How much time do you want to put into evaluating each opportunity? Single deals require more hands-on diligence. Funds trade that work for trust in the operator.
How well do you know this sponsor? A fund asks for a deeper level of trust. If you’re earlier in a relationship with a GP, single deals let you test the waters.
Where are you in your investing journey? Newer passive investors often learn the most from evaluating individual deals. More experienced investors might value the efficiency of a fund.
What does the rest of your portfolio look like? If you're already concentrated in one asset type or market, a fund might offer some instant diversification.
Both of those investors I talked to had good instincts. They’d each thought carefully about what mattered to them.
And while the deal structure matters, it doesn’t matter nearly as much as the team behind it – and how much of their work you’re able to verify before you invest.
Know what level of visibility you need to be comfortable, and the rest falls into place.