I keep talking myself out of the hotel fund and back into land

Wrong question, arbor. You're asking how much hotel exposure is sane in the abstract. The number that matters is what happens to you if the $40k goes to zero and the capital calls still show up in year two. If that's survivable, size it however. If it isn't, the fund's segment strategy doesn't matter.

Also your land isn't the safe comparison you think it is. It pays nothing and it's illiquid too. It just doesn't send you statements that make you feel bad.

Question from someone who doesn't know: if the capital is called over two years, does that mean you have to keep $40k liquid the whole time waiting for them to ask? Because that seems like it costs something too, and I never see it counted.

@plumb, yes. Committed capital that hasn't been called still has to be available, and the return you'd earn on it elsewhere is a real cost that fund-level IRR calculations typically ignore. Ask for the expected call schedule in writing and ask what the penalty is for missing a call. Most partnership agreements dilute a defaulting partner, sometimes severely.

Arbor, hotels make money three ways. The properties generate net income from rooms and ancillary services after operating costs. Renovation and better operations lift that income, which lifts value. And the sponsor sells or refinances the stabilized asset. A value-add select service fund is leaning hard on the middle one, so the question is what specifically they're changing and what they think it does to revenue per available room.

What to interrogate in the documents:

Segment and market concentration. Performance varies sharply between extended-stay, leisure-destination and business-driven properties, and between markets. A fund with ten assets in one segment and one region is a single bet.

The operating partnership. Hotels are operating businesses that reprice nightly, so institutional capital almost always contracts with a hotel management company. Skilled operators drive rate and occupancy. Weak ones erode returns fast. Find out who runs the assets, how they're paid, and what performance standards let the fund terminate them.

Hold period against the cycle. Five to seven years from today's mixed economic backdrop means the exit lands somewhere unknowable. Ask what exit cap rate they're assuming and what happens to equity if it's a point higher.

On sizing, no one here can tell you a number. The input is what fraction of your total holdings you're willing to have exposed to discretionary travel demand and how long you can be without that money.