Growth Equity Group - How 170+ investors were scammed

Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes

In 2014-2015, more than 170 investors purchased 2 and 3 bedroom condo units from Growth Equity Group. This company specializes in investment properties in a self-directed IRA. More than 85% of their sales are bought in this fashion.

Business was solicited mainly at investment conferences (Las Vegas a popular site), and some here at BP. I was one of those people who fell for their marketing.

I was sold a condo in a neighborhood in Virginia (specific details to be disclosed later). They sold me the condo for almost $90K. The property value was however, at best, $65K. They came with sweet talk, a personable friendly nature, like a predator (although I didn't know it at the time.) They only allowed an appraisal to be performed through them. One can see why, a legitimate appraiser operating legally would not appraise these condos for what they were selling for.

Growth Equity Group sold units to more than 170+ investors. 3BRs went for $96K, 2BR for $86K. Of course, they also used an "in house" lender specializing in non-recourse loans. They wouldn't allow you to use your own lender. It sounds fishy looking back at it, but not when they present it in a such a welcoming and favorable way. The rate would be 5%, which would balloon to 9% in 4 years!

I see three main issues with what transpired:

1. Sales. Growth Equity Group knowingly sold condos which were valued at $60-65K, for $85K-100K. They did this with open eyes and a smile. They even rushed me to sign on the dotted line.

2. The Appraisal process. Appraisers in the past have been fined and jailed for falsifying numbers, for elevating the appraisal amount. If the appraiser is on the payroll of the company who is selling you a property, or they are getting business or money from the company who is selling you the property, this is a major conflict of interest.

3. Financing. Industry standard for a non-resource loan is - during the balloon period, the interest rate cannot go up more than 0.5% per year or more than 2% total, no matter the interest rate environment. Growth Equity Group again used a lender that they were "working with" and did not let you use your own lender. Their loans carried an interest rate of 5%, which immediately jumps to 9% at the 4 year mark.

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Lauren B.

Asheville, NC · Member since 2017 · 170 posts · 242 votes

@Andrey Y.

I’m so sorry this happened to you.

I would comment further but I got stuck at the part where you refer to people in their 50’s as elderly.

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Jon Segura
Rental Property Investor · Philadelphia, PA · Member since 2018 · 42 posts · 9 votes
7y
so sad!!! We have to do more due diligence in order to not get scammed not saying that i would never get scammed but trying my best not to.
Regards
Chio
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Andrey Y.:

Originally posted by @Jonathan R.:
Why not use the heloc to purchase an undervalued property you put sweat equity into that returns an insane amount of cashflow. Keep the sdira property till it appreciates where you want it to at the 9% interest rate, use your new great cashflowing property using the many lessons learned on BP to help cover any potentially negative cashflow from the sdira property. Certainly try and get your turnover costs lower on the sdira property. That way you can have your cake and eat it too.
Basically, evaluate your financial picture and decide where you can get the best return for your resources. You need to factor your time also.
I have learned many lessons.
One thing I won't do, is buy another property that does not (minimum) appreciate with inflation. Even if I payed market value for this ($65K) I don't think it would have been that great of an investment. Sure, $6K of "cash flow" on paper in 4 years, 60% of that is wiped with repairs/capex. Okay. But the property doesn't go up in value. Where is the profit?
Besides dealing with shady salesman and being conned into something, this is also something I'm been pondering after talking with "Bob Bowling" on a phone a few minutes ago. He was known as the 'cap rate man' and was heavily against buying for cash flow. I am starting to see why.
I have a $100K HELOC open which I can expand to $200K by the end of this month. 2.4% interest only for 10 years, at the 10 year mark it can be re-upped. I am just wondering if I could do the "sell it to myself". Because if I use $43K to pay down the loan, at 2.4% this property will make some decent profit I'm thinking.
Keep in mind Bob was very fortunate to buy in the SF bay area prior to the values exploding.. I did not have rentals in the bay area but i owned a lot of real estate that did not cash flow and i made millions in appreciation.. I always wonder what the allure it to or the mind set of all these BP buy and holders that say cash flow is everything and appreciation is luck.. LOL or gambling.. I get it if you keep them for a lifetime but what happens in a non appreciating asset is when you go to sell .. your going to lose a good portion of what you made in sales costs fix up costs etc.. so your IRR is going to go way down.. keep them forever I get that.
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Tom V.
San Francisco, CA · Member since 2014 · 345 posts · 281 votes
7y
Let me get these details straight:
A medical resident attends an investment conference in Las Vegas, and buys a condo he has never seen.
He uses his paltry Self-Directed IRA money (subject to all of the restrictions on co-mingling funds, withdrawal penalties) and borrows in a loan structure that is non-recourse (necessary for his IRA funding use) with a 5% interest rate for 5 years.
The property cash flows for years, but after a while his reliable tenant moves out, and (lo and behold!) it is expensive to turn over the apartment and he has little control working from the other side of the world! The funky little non-recourse loan is going to re-set from 5% to 9% (Heaven forbid!) and he feels awfully hurt by the whole process!
First, I will hazard a guess that you were too young to have lost any money in the 2008 crash. You were probably in school, and everything you have ever known about investing is that you buy stuff and it goes up in value. You are in the medical profession, so you are smart. You think you're a bit more savvy than the average doctor even, in financial terms, because you found out about the magic(!) of self-driected IRA's and you have a leg up on everyone else.
Here are some lessons:
1. If you buy a product and you don't understand it, your risk is your own.
2. Not all investments make money. Sometimes you win and sometimes you lose. Concentrating your IRA in one goofy condo across the country is a very specific bet. Why didn't you simply buy mutual funds? Because you're smarter than the sheep who buy mutual funds?
3. Taking on debt in an IRA account is silly. If you don't have the reserve funds (in the IRA itself) to back up the investment, don't do it.
4. Plenty of people on Bigger Pockets are trying to sell the self-directed IRA/401K dream. It is a recipe for this kind of concentrated loss situation. DON'T MAKE INVESTMENTS IN PHYSICAL ASSETS WITH YOUR RETIREMENT FUNDS UNLESS IT IS MONEY YOU CAN AFFORD TO LOSE!!!!!!!!
5. This too will pass. Sell your asset if you have to. Take your loss and move on. No one sensible is going to have a tremendous amount of sympathy for a doctor in Hawaii who bought a condo on a lark. "HOW CAN THEY LIVE WITH THEMSELVES?" People brag here in the forums all the time about big spreads on wholesale deals and other shady practices. "I just found a willing buyer and a willing seller" You were the willing buyer here.
6. I welcome your indignant, "Why are you rubbing salt in the wound?"
Because you deserve the straight talk.
Because people who buy tricky real estate with tricky tax angles and are uninformed will have their money taken again and again. I am so glad this this example made with a young doctor in the prime of his career. How about taking some ownership for your part in this dubious transaction?
You didn't get "scammed" because your loan rate is going from 5% to 9%. You didn't have a plan for when that would happen.
I have lost money in deals. Anyone who had assets in 2008 lost money (and 2000 for that matter). People are getting freaked because the stock market is down a little bit. Big Flipping Deal. Risk is a real thing. You lost. Move on.
FANTASTIC PROFITS are never guaranteed, especially when you are putting your training-wheel IRA capital at risk in concentrated deals.
People have forgotten how to lose money. Accept it, Own it. Move on.
16 Reply
George Blower
Retirement Accounts Attorney · Southfield, MI · Member since 2017 · 3k+ posts · 1k+ votes
7y
The following post should be read by all retirement account investors before investing with third-party companies.
https://www.biggerpockets.com/blogs/3441/81099-201...
2 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Tyler Erickson:

@Andrey Y.
I am an appraiser and i Just consulted with my mother, a Certified General Appraiser, about this. Plus, I decided to become an appraiser instead of becoming a lawyer, so I know a bit about both fields. Ironically, so does my mother as she currently has a law degree. Albeit, I didn’t study a lot of real estate law outside of what may affect me, but I have a knack for it. But we both believe that this could honestly be moved into class action lawsuit territory.
They can use their own appraiser, that is no problem. But they cannot utilize their own appraiser to give you a value, if that makes sense. It’s called a restricted appraisal report and although they’re pretty rare these days, they still exist in a couple forms.
It’s a bit different if this was a commercial appraisal report (as if they appraised the whole condo unit). But it sounds like each condo was valued individually.
If this is the case, their in-house "lender" and the appraiser both probably broke the law and USPAP. USPAP is the rule of god in appraising, and a fair, free market value is the ultimate rule. "Fair" includes being free of any conflicts of interest or undue influence. Technically, an appraiser can get past the conflict of interest part by stating in the report their relationship with the client... But perhaps the most egregious mistake was on the lender's part.
They likely did two things wrong. I bet they used a restricted appraisal report, but those are only allowed to be seen by the clients listed on the report and are generally never allowed as a "real" appraisal. The appraiser must follow this guideline and clearly state that it is a restricted use appraisal report. However, USPAP is clear in that the only people that can see or utilize the report are the clients listed. NOT you. So the lender using this form to convince you of the value would likely be fraud.
They also made a major mistake, most likely, by not offering you the chance to get an appraisal done and see the report. You have a right to, as a buyer. They might think they’re circumventing this by letting you see the restricted one, but that loops us back to fraud. It’s the fruit of the poisonous tree doctrine, at this point.
It’s also worth it to point out that after the Dodd Frank Act, lenders cannot typically have “in-house” appraisers. There are some loopholes, but it sounds like you can make an easy case that the appraiser and the “lender” were working together on values, which is one of the biggest no-no’s a lender or appraiser can do.
If hundreds of units are all valued at 60% and buyers were all misled, this could very easily and very literally lead to jail time.
I wish you the best of luck. Feel free to reach out and I’ll help in any way I can. I’m sorry that this happened to you.
while i will defer to your expertise on the appraisal issues.. on the lending side these are non regulated loans.. you dont need a license in that state to do these loans ... So really the only thing that comes to play is usury ( which these clearly are not).. and being commercial purpose loans they are not predatory by any means.. and unless the note is flawed IE there is no provision to bump interest at a certain date.. but if its in the note and they were signed.. then thats the deal that was made..
I said in an earlier post i wrestled with this appraisal issue as a HML back in 2001 when i started lending on turnkey in detroit.. I even flew my banker out to go over things with title company and appraisers.. cant remember the appraisers name but the one we used had some very good language that allowed him to set a value after rehab.. but I can assure you this is an issue in every single market were out of area folks are buying rentals that are basically 100k to 120k and under.. And were there is no OWNER occ comps to pull. as the only people buying these are investors.. although if the property had gone up in value or the tenant was paying on time etc.. probably would not have been the issue it is today.. and of course Andrey was unaware of the very small niche NOn recourse lending occupies i mean you see post after post on this thread of people saying refi.. well its not that easy .. and rates for non recourse are 8 to 9% bottom line But many people still borrow at those rates becasue they are getting good enough front end deal that it still works for them. This is not a new concept of how these were sold.. I have seen this same model in many markets.. its just this company when I called them was very coy on how they could write 5% paper.. they were using part of the proceeds from the sale no doubt to buy down the rate.. no one lends at 5% in the private world. Or they self financed these were the 50% down pretty much paid for the asset.. and the other 50% is their profit. I have seen that a bunch..
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1 Reply
Tyler Erickson
Appraiser · Denver, CO · Member since 2018 · 40 posts · 58 votes
7y
Originally posted by @Jay Hinrichs:

Originally posted by @Tyler Erickson:
@Andrey Y.
I am an appraiser and i Just consulted with my mother, a Certified General Appraiser, about this. Plus, I decided to become an appraiser instead of becoming a lawyer, so I know a bit about both fields. Ironically, so does my mother as she currently has a law degree. Albeit, I didn’t study a lot of real estate law outside of what may affect me, but I have a knack for it. But we both believe that this could honestly be moved into class action lawsuit territory.
They can use their own appraiser, that is no problem. But they cannot utilize their own appraiser to give you a value, if that makes sense. It’s called a restricted appraisal report and although they’re pretty rare these days, they still exist in a couple forms.
It’s a bit different if this was a commercial appraisal report (as if they appraised the whole condo unit). But it sounds like each condo was valued individually.
If this is the case, their in-house "lender" and the appraiser both probably broke the law and USPAP. USPAP is the rule of god in appraising, and a fair, free market value is the ultimate rule. "Fair" includes being free of any conflicts of interest or undue influence. Technically, an appraiser can get past the conflict of interest part by stating in the report their relationship with the client... But perhaps the most egregious mistake was on the lender's part.
They likely did two things wrong. I bet they used a restricted appraisal report, but those are only allowed to be seen by the clients listed on the report and are generally never allowed as a "real" appraisal. The appraiser must follow this guideline and clearly state that it is a restricted use appraisal report. However, USPAP is clear in that the only people that can see or utilize the report are the clients listed. NOT you. So the lender using this form to convince you of the value would likely be fraud.
They also made a major mistake, most likely, by not offering you the chance to get an appraisal done and see the report. You have a right to, as a buyer. They might think they’re circumventing this by letting you see the restricted one, but that loops us back to fraud. It’s the fruit of the poisonous tree doctrine, at this point.
It’s also worth it to point out that after the Dodd Frank Act, lenders cannot typically have “in-house” appraisers. There are some loopholes, but it sounds like you can make an easy case that the appraiser and the “lender” were working together on values, which is one of the biggest no-no’s a lender or appraiser can do.
If hundreds of units are all valued at 60% and buyers were all misled, this could very easily and very literally lead to jail time.
I wish you the best of luck. Feel free to reach out and I’ll help in any way I can. I’m sorry that this happened to you.
while i will defer to your expertise on the appraisal issues.. on the lending side these are non regulated loans.. you dont need a license in that state to do these loans ... So really the only thing that comes to play is usury ( which these clearly are not).. and being commercial purpose loans they are not predatory by any means.. and unless the note is flawed IE there is no provision to bump interest at a certain date.. but if its in the note and they were signed.. then thats the deal that was made..
I said in an earlier post i wrestled with this appraisal issue as a HML back in 2001 when i started lending on turnkey in detroit.. I even flew my banker out to go over things with title company and appraisers.. cant remember the appraisers name but the one we used had some very good language that allowed him to set a value after rehab.. but I can assure you this is an issue in every single market were out of area folks are buying rentals that are basically 100k to 120k and under.. And were there is no OWNER occ comps to pull. as the only people buying these are investors.. although if the property had gone up in value or the tenant was paying on time etc.. probably would not have been the issue it is today.. and of course Andrey was unaware of the very small niche NOn recourse lending occupies i mean you see post after post on this thread of people saying refi.. well its not that easy .. and rates for non recourse are 8 to 9% bottom line But many people still borrow at those rates becasue they are getting good enough front end deal that it still works for them. This is not a new concept of how these were sold.. I have seen this same model in many markets.. its just this company when I called them was very coy on how they could write 5% paper.. they were using part of the proceeds from the sale no doubt to buy down the rate.. no one lends at 5% in the private world. Or they self financed these were the 50% down pretty much paid for the asset.. and the other 50% is their profit. I have seen that a bunch..

Very interesting. The lending side of the process is a little foggy to me... I deal with lenders and their needs constantly, obviously, but I am not too savvy with the laws regarding the lender's culpability in issues like these. I know that it is a very big deal, however, after these new regulations after the global recession. They targeted lenders, as I'm sure you're aware, because they were at least partly to blame for the chaos that ensued from 2006-2009 or so (liar loans are an example). Part of that package made the greatest reforms to USPAP and the lender's role in the appraisal process since the inception of USPAP. As I mentioned earlier, I know there are some loopholes, however. I'm not sure if it's ethical or against the forum rules to call out individual companies, but the specifics don't matter. One of the largest banks in the nation created a company, owned by this bank, that works as an AMC (appraisal management company) and divvies appraisal orders out to this bank (and as far as I know, they ONLY work with the bank that owns this AMC). AMC's are, essentially, middlemen between the lender and the appraiser. This is most likely due to Freddie Mac's requirement stated as "Lenders may use a pre-approved list or panel to select an appraiser, provided that (1) any employees of the lender tasked with selecting appraisers for the list are independent of the loan production staff; and (2) the loan production staff is not involved in selecting appraisers from the list for particular appraisal assignments." Again, I'm not sure about this particular individual's situation, nor am I privy to the right information on the lender's side to understand their own culpability, but it's a fairly egregious mistake to let that slip. To me, it sounds like the lender worked with the appraiser to drive the appraised values down significantly. Which is a severe violation of USPAP on the appraiser's side (only the appraiser is subject to USPAP), but also what I imagine would be a severe violation of banking/lending laws. I just can't imagine how that could be legal.

In regards to your first paragraph... I agree. If this was all done in a legally satisfactory way, then although it's obviously predatory, it was perfectly legal and therefore, that's the deal that is made. Unfortunately for the original poster, this is just the way it is. After reading your response, I'd presume that it must be exactly that. Thanks for your insight. I just have a really salty taste in my mouth for this company that, essentially, scammed these investors. But it happens constantly... I'm seeing an increase in seller financing/CD "scams", as well. "Scam" may be the wrong word because it's perfectly legal, but they're sharks preying on the emotions and financial positions of people around them. Not good.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Tom V.:

Let me get these details straight:
A medical resident attends an investment conference in Las Vegas, and buys a condo he has never seen.
He uses his paltry Self-Directed IRA money (subject to all of the restrictions on co-mingling funds, withdrawal penalties) and borrows in a loan structure that is non-recourse (necessary for his IRA funding use) with a 5% interest rate for 5 years.
The property cash flows for years, but after a while his reliable tenant moves out, and (lo and behold!) it is expensive to turn over the apartment and he has little control working from the other side of the world! The funky little non-recourse loan is going to re-set from 5% to 9% (Heaven forbid!) and he feels awfully hurt by the whole process!
First, I will hazard a guess that you were too young to have lost any money in the 2008 crash. You were probably in school, and everything you have ever known about investing is that you buy stuff and it goes up in value. You are in the medical profession, so you are smart. You think you're a bit more savvy than the average doctor even, in financial terms, because you found out about the magic(!) of self-driected IRA's and you have a leg up on everyone else.
Here are some lessons:
1. If you buy a product and you don't understand it, your risk is your own.
2. Not all investments make money. Sometimes you win and sometimes you lose. Concentrating your IRA in one goofy condo across the country is a very specific bet. Why didn't you simply buy mutual funds? Because you're smarter than the sheep who buy mutual funds?
3. Taking on debt in an IRA account is silly. If you don't have the reserve funds (in the IRA itself) to back up the investment, don't do it.
4. Plenty of people on Bigger Pockets are trying to sell the self-directed IRA/401K dream. It is a recipe for this kind of concentrated loss situation. DON'T MAKE INVESTMENTS IN PHYSICAL ASSETS WITH YOUR RETIREMENT FUNDS UNLESS IT IS MONEY YOU CAN AFFORD TO LOSE!!!!!!!!
5. This too will pass. Sell your asset if you have to. Take your loss and move on. No one sensible is going to have a tremendous amount of sympathy for a doctor in Hawaii who bought a condo on a lark. "HOW CAN THEY LIVE WITH THEMSELVES?" People brag here in the forums all the time about big spreads on wholesale deals and other shady practices. "I just found a willing buyer and a willing seller" You were the willing buyer here.
6. I welcome your indignant, "Why are you rubbing salt in the wound?"
Because you deserve the straight talk.
Because people who buy tricky real estate with tricky tax angles and are uninformed will have their money taken again and again. I am so glad this this example made with a young doctor in the prime of his career. How about taking some ownership for your part in this dubious transaction?
You didn't get "scammed" because your loan rate is going from 5% to 9%. You didn't have a plan for when that would happen.
I have lost money in deals. Anyone who had assets in 2008 lost money (and 2000 for that matter). People are getting freaked because the stock market is down a little bit. Big Flipping Deal. Risk is a real thing. You lost. Move on.
FANTASTIC PROFITS are never guaranteed, especially when you are putting your training-wheel IRA capital at risk in concentrated deals.
People have forgotten how to lose money. Accept it, Own it. Move on.
I agree fixed rental assets in an IRA need to be carefully looked at.. and you need larger than normal reserves in case you have a bad tenant or day.. and if they dont appreciate why do it.. i mean rentals are risk in the low value arena we know that. being the bank is more appropriate for IRA money but even that you need reserves in case a note goes bad and you have to foreclose it happens.. just like in this instance i bet a lot of those notes go bad.. investor either wont have the reserves are are out of luck.. or they just walk.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Tyler Erickson:

Originally posted by @Jay Hinrichs:
Originally posted by @Tyler Erickson:

@Andrey Y.
I am an appraiser and i Just consulted with my mother, a Certified General Appraiser, about this. Plus, I decided to become an appraiser instead of becoming a lawyer, so I know a bit about both fields. Ironically, so does my mother as she currently has a law degree. Albeit, I didn’t study a lot of real estate law outside of what may affect me, but I have a knack for it. But we both believe that this could honestly be moved into class action lawsuit territory.
They can use their own appraiser, that is no problem. But they cannot utilize their own appraiser to give you a value, if that makes sense. It’s called a restricted appraisal report and although they’re pretty rare these days, they still exist in a couple forms.
It’s a bit different if this was a commercial appraisal report (as if they appraised the whole condo unit). But it sounds like each condo was valued individually.
If this is the case, their in-house "lender" and the appraiser both probably broke the law and USPAP. USPAP is the rule of god in appraising, and a fair, free market value is the ultimate rule. "Fair" includes being free of any conflicts of interest or undue influence. Technically, an appraiser can get past the conflict of interest part by stating in the report their relationship with the client... But perhaps the most egregious mistake was on the lender's part.
They likely did two things wrong. I bet they used a restricted appraisal report, but those are only allowed to be seen by the clients listed on the report and are generally never allowed as a "real" appraisal. The appraiser must follow this guideline and clearly state that it is a restricted use appraisal report. However, USPAP is clear in that the only people that can see or utilize the report are the clients listed. NOT you. So the lender using this form to convince you of the value would likely be fraud.
They also made a major mistake, most likely, by not offering you the chance to get an appraisal done and see the report. You have a right to, as a buyer. They might think they’re circumventing this by letting you see the restricted one, but that loops us back to fraud. It’s the fruit of the poisonous tree doctrine, at this point.
It’s also worth it to point out that after the Dodd Frank Act, lenders cannot typically have “in-house” appraisers. There are some loopholes, but it sounds like you can make an easy case that the appraiser and the “lender” were working together on values, which is one of the biggest no-no’s a lender or appraiser can do.
If hundreds of units are all valued at 60% and buyers were all misled, this could very easily and very literally lead to jail time.
I wish you the best of luck. Feel free to reach out and I’ll help in any way I can. I’m sorry that this happened to you.
while i will defer to your expertise on the appraisal issues.. on the lending side these are non regulated loans.. you dont need a license in that state to do these loans ... So really the only thing that comes to play is usury ( which these clearly are not).. and being commercial purpose loans they are not predatory by any means.. and unless the note is flawed IE there is no provision to bump interest at a certain date.. but if its in the note and they were signed.. then thats the deal that was made..
I said in an earlier post i wrestled with this appraisal issue as a HML back in 2001 when i started lending on turnkey in detroit.. I even flew my banker out to go over things with title company and appraisers.. cant remember the appraisers name but the one we used had some very good language that allowed him to set a value after rehab.. but I can assure you this is an issue in every single market were out of area folks are buying rentals that are basically 100k to 120k and under.. And were there is no OWNER occ comps to pull. as the only people buying these are investors.. although if the property had gone up in value or the tenant was paying on time etc.. probably would not have been the issue it is today.. and of course Andrey was unaware of the very small niche NOn recourse lending occupies i mean you see post after post on this thread of people saying refi.. well its not that easy .. and rates for non recourse are 8 to 9% bottom line But many people still borrow at those rates becasue they are getting good enough front end deal that it still works for them. This is not a new concept of how these were sold.. I have seen this same model in many markets.. its just this company when I called them was very coy on how they could write 5% paper.. they were using part of the proceeds from the sale no doubt to buy down the rate.. no one lends at 5% in the private world. Or they self financed these were the 50% down pretty much paid for the asset.. and the other 50% is their profit. I have seen that a bunch..

Very interesting. The lending side of the process is a little foggy to me... I deal with lenders and their needs constantly, obviously, but I am not too savvy with the laws regarding the lender's culpability in issues like these. I know that it is a very big deal, however, after these new regulations after the global recession. They targeted lenders, as I'm sure you're aware, because they were at least partly to blame for the chaos that ensued from 2006-2009 or so (liar loans are an example). Part of that package made the greatest reforms to USPAP and the lender's role in the appraisal process since the inception of USPAP. As I mentioned earlier, I know there are some loopholes, however. I'm not sure if it's ethical or against the forum rules to call out individual companies, but the specifics don't matter. One of the largest banks in the nation created a company, owned by this bank, that works as an AMC (appraisal management company) and divvies appraisal orders out to this bank (and as far as I know, they ONLY work with the bank that owns this AMC). AMC's are, essentially, middlemen between the lender and the appraiser. This is most likely due to Freddie Mac's requirement stated as "Lenders may use a pre-approved list or panel to select an appraiser, provided that (1) any employees of the lender tasked with selecting appraisers for the list are independent of the loan production staff; and (2) the loan production staff is not involved in selecting appraisers from the list for particular appraisal assignments." Again, I'm not sure about this particular individual's situation, nor am I privy to the right information on the lender's side to understand their own culpability, but it's a fairly egregious mistake to let that slip. To me, it sounds like the lender worked with the appraiser to drive the appraised values down significantly. Which is a severe violation of USPAP on the appraiser's side (only the appraiser is subject to USPAP), but also what I imagine would be a severe violation of banking/lending laws. I just can't imagine how that could be legal.

In regards to your first paragraph... I agree. If this was all done in a legally satisfactory way, then although it's obviously predatory, it was perfectly legal and therefore, that's the deal that is made. Unfortunately for the original poster, this is just the way it is. After reading your response, I'd presume that it must be exactly that. Thanks for your insight. I just have a really salty taste in my mouth for this company that, essentially, scammed these investors. But it happens constantly... I'm seeing an increase in seller financing/CD "scams", as well. "Scam" may be the wrong word because it's perfectly legal, but they're sharks preying on the emotions and financial positions of people around them. Not good.
Dodd Frank does not apply to these loans.. bottom line.. again not sure on the appraisal issue.. but like Russell stated once they had a few arms length comps IE willing buy willing seller that established values.. I have had this bite me in Texas were we rehabbed properties and we had willing OWNER OCC buyers and the appraisals came in low.. but like I said in another post.. I also was on the winning side of this I build 23 of the exact same floor plan in 2016/17 that sold for 350 to 370 and in 2018 not half a mile away same floor plan same finish's same lot size I was getting 430 to 460k per home.. and we had NO appraisal issues we had some cash sales.. a few VA ( am pro military so I always will sell my properties to vets) probably half conventional and the rest fha.. and we even had a few go through Rocket ( they suck for new construction loans..)… And maybe the appraisers client was the seller.. not the buyer I have seen that.. .. or we see refi appraisals higher than sale appraisals all the time. At the end of the day in all the continuing ed I take for my brokers licesnes and my mortgage bankers license.. these are just one persons opinion on the date the appraisal was made.. you can have two apprasiser come up with two different values on the same asset.. we see this all the time right.. or surveyors do the same survey and are off by 1 inch.. :)
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Brad S.
Investor · Pasadena, CA · Member since 2017 · 613 posts · 523 votes
7y
@Andrey Y.
Appraisal -
1. At that transaction amount ($90k), the "Appraiser" does not even need a license (transaction value below $250k), and therefore, would not be bound by the same standards as a licensed Appraiser. This is even more true for a non-federally regulated Lender.
2. Although it is unclear, I am assuming the condos they sold were all within the same project or neighboring projects. Contrary to some other comments, just because there are 2+ closed sales in the same complex/neighborhood, does not mean they are comparable transactions. The "Appraiser" should be able to discern those transactions involved the same Seller/Developer and therefore, may not represent typical market transactions. The Developer or investment group would not have the same motivation as a typical Seller, and therefore, those transactions may not represent "Market Value." This is why many Lender appraisal guidelines require a recent sale outside of the Subject's project and/or neighborhood (in new projects).
Anyway, unfortunately, since the Appraiser may not even be licensed, they also probably don't have any Errors & Omissions insurance to go after.
Also, the Appraisal report is for the Lender, NOT the Buyer. It is for the Lender to assess their risk in the transaction, which is why they are listed as the client in the report, and the Buyer is listed as the Buyer/Borrower only. This is true UNLESS a Buyer specifically gets their own appraisal separate from the Lending process. Practically speaking you (Buyer) get a copy of the report and should be able to generally rely on it, since it should be an "objective" assessment of the property's value, but again, in this case, the Appraiser may not even be licensed.
But, I'd imagine all the parties still have a responsibility of disclosure, including whether they knowingly sold you the condo for more than it's worth. But, proving that is the challenging part, since they will defer to the Appraisal and not be willing to divulge that they knew it was overpriced, etc.
With all that said, I am not an attorney and you should never take any advice from a social media and/or message board website, without fully vetting it and discussing options with an attorney. But, it does sound like it may be worth finding an attorney local to the Subject, and consulting with them to see if there is any recourse. If there was a licensed someone involved (Broker/Agent, Appraiser, etc), maybe there is a better chance for some relatively quick and easy resolution.
******************************************
On another note:
I'm sorry this happened to you and you don't deserve this. No one deserves to be scammed and taken advantage in this way. There have been many people that have been scammed and deceived, even after doing all the proper due-diligence.
Now that said, you are responsible for your actions, decisions and the situation you are now in. I would take an in-depth look at that local market, either doing your own statistical research, or contact a few top agents and independent property managers in the area. Find out what the short and long-term prognosis is, regarding, ease of re-renting, market rents (including historical and future guesstimate), typical "rent ready" costs, potential future appreciation, etc. Look at the data, your cashflow, etc, and decide your next move based on this information. My basic point is you already made a decision based on little or no info, now is not the time to make another uninformed decision.
Most of us that have been in the RE investing world have made decisions, that in retrospect, we might've done differently. These are what helps us to grow ...hopefully. ;)
Good Luck...
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
@Brad S. exactly if I was betting i would bet dollars to donuts the appraisal that was done was for the lenders protection and just for the buyers information.. I know in the turnkey world appraisers will doc values if the property is being sold through a highly orginized and targeted marketing system.
your a CA broker we dealt with this when i was just starting out selling recreational subdivision land. we had to get a public report.. you may have seen one.
in that report one item comes to mind.. it says and i quote.. Buyer should be aware that your buying a property that is being market professionally and that is may be very hard or difficult or impossible to sell the land for what your paying for it.. some thing along those lines.. and that was in the 60s and 70s..
most of the reason for these is the property would not perc or water system was not adequate at the time for a full build out of the subdivision.. but these things have come before .. now people dont really buy bare land that much like they used to .. these mid west low value rentals have taken over for the specualted land plays. think Glenn Garry Glenn Ross
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
@Russell Brazil one last thought on this for Andrey would be.. are sellers disclosures required in VA.. i see in the turnkey space they are rarely if ever used..
also was the developer the seller or were they marketing them for another entity or owner.. and basically selling real estate without a license.. just like Clayton Morris does.. he is out there selling houses with no license. I still cant believe the states let him get away with what he is doing.
all of the bigger turn key resellers over the years have gotten licensed.. they need to be.
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Micah Watson
Rental Property Investor · Greenville, MI · Member since 2018 · 36 posts · 9 votes
7y
@Joel Owens @Russell Brazil
It’s glaringly obvious now, how right you are. Ironically, I talk about opportunity cost on a regular basis, but I was thinking very narrowly within the context of his “how to refi a non-recourse loan” problem.
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
Originally posted by @Jay Hinrichs:

@Russell Brazil one last thought on this for Andrey would be.. are sellers disclosures required in VA.. i see in the turnkey space they are rarely if ever used..
also was the developer the seller or were they marketing them for another entity or owner.. and basically selling real estate without a license.. just like Clayton Morris does.. he is out there selling houses with no license. I still cant believe the states let him get away with what he is doing.
all of the bigger turn key resellers over the years have gotten licensed.. they need to be.
Virginia has 1 required disclosure that is basically a caveat emptor statement.
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
Originally posted by @Jay Hinrichs:

@Russell Brazil one last thought on this for Andrey would be.. are sellers disclosures required in VA.. i see in the turnkey space they are rarely if ever used..
also was the developer the seller or were they marketing them for another entity or owner.. and basically selling real estate without a license.. just like Clayton Morris does.. he is out there selling houses with no license. I still cant believe the states let him get away with what he is doing.
all of the bigger turn key resellers over the years have gotten licensed.. they need to be.
We always use this analogy in the area. Virginia the laws favor the Seller, DC they favor the Buyer, and Maryland is middle of the road. DC has a mandatory property disclosure statement, Virginia does not, and Maryland has a state issued form that you can either choose to Disclose, or choose to Disclaim, saying we wont tell you anything except Hidden defects.
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
7y
Were all 170 of these condos in the same area or was this spread out over this company's entire business in multiple markets?
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
7y
Originally posted by @Andrey Y.:

In 2014-2015, more than 170 investors purchased 2 and 3 bedroom condo units from Growth Equity Group. This company specializes in investment properties in a self-directed IRA. More than 85% of their sales are bought in this fashion.
Business was solicited mainly at investment conferences (Las Vegas a popular site), and some here at BP. I was one of those people who fell for their marketing.
I was sold a condo in a neighborhood in Virginia (specific details to be disclosed later). They sold me the condo for almost $90K. The property value was however, at best, $65K. They came with sweet talk, a personable friendly nature, like a predator (although I didn't know it at the time.) They only allowed an appraisal to be performed through them. One can see why, a legitimate appraiser operating legally would not appraise these condos for what they were selling for.
Growth Equity Group sold units to more than 170+ investors. 3BRs went for $96K, 2BR for $86K. Of course, they also used an "in house" lender specializing in non-recourse loans. They wouldn't allow you to use your own lender. It sounds fishy looking back at it, but not when they present it in a such a welcoming and favorable way. The rate would be 5%, which would balloon to 9% in 4 years!
I see three main issues with what transpired:
1. Sales. Growth Equity Group knowingly sold condos which were valued at $60-65K, for $85K-100K. They did this with open eyes and a smile. They even rushed me to sign on the dotted line.
2. The Appraisal process. Appraisers in the past have been fined and jailed for falsifying numbers, for elevating the appraisal amount. If the appraiser is on the payroll of the company who is selling you a property, or they are getting business or money from the company who is selling you the property, this is a major conflict of interest.
3. Financing. Industry standard for a non-resource loan is - during the balloon period, the interest rate cannot go up more than 0.5% per year or more than 2% total, no matter the interest rate environment. Growth Equity Group again used a lender that they were "working with" and did not let you use your own lender. Their loans carried an interest rate of 5%, which immediately jumps to 9% at the 4 year mark.
Tagging Andrey. See above queation
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Diana Duncan
Real Estate Investor · Miami / Fort Lauderdale, FL · Member since 2013 · 63 posts · 12 votes
7y
Originally posted by @Lauren B.:

@Andrey Y.
I’m so sorry this happened to you.
I would comment further but I got stuck at the part where you refer to people in their 50’s as elderly.
Made me smile and chuckle
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Kevin M.:
@Andrey Y. Have you seen The Wolf of Wall Street or Boiler Room with Giovanni Ribisi? Where do you think these movie ideas come from? Real Life. I have had two friends scammed. Same bait and switch, One friend took $150k each from 6 of his family members and invested in a fertilizer company supposedly out of Alabama. During the Due Diligence period he went out to Alabama to the the fertilizer plant, and these guys had rented a whole fertilizer plant and showed and BSed him through the whole facility. Ran a pyramid scheme until they couldn't cash flow and jumped ship. Everyone lost everything. The second I had a buddy wanted to start a food truck in LA. Bought two food trucks and found someone who said he owned a shop that could renovate his two trucks. He already had one that was broken down he started with. He went to the guys garage to check out the facilities to make sure everything looked legit and he had rented out the entire garage. He went one day to bring his two new trucks to get wrapped and renovated and gave the guy $60k. While he waited 30 days and even got updates on the phone, he did marketing all over social media. The day he went to go pick up the trucks, the garage was empty and the guy was gone. Just two empty trucks in the garage. He is still going to court over this 5 years later. He'll never see that money again. At least you have a deed in your name. So maybe you go move into that condo and start a blog? Start pumping out on social media about how the economy is booming over there and people should start investing in that neighborhood. LMAO SORRY that's all I could think of. I have no idea what to do all I could offer was some personal experience and humor. I am really sorry that happened to you. Point is some people really don't give a sh what happens to anyone. It just facts. Where is Bernie Madoff?
That is really sad. It seems like a lot of people who start businesses which take investors care about adding value to each other, forging a long term relationship, and even provide value to the community.
Its amazing that so many investors fell for this. I can't wait to dig deeper into this. If I know I can help others by showing them what Growth Equity Group does, I would consider the money I lost well spent.
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Tyler Erickson:

@Andrey Y.
I am an appraiser and i Just consulted with my mother, a Certified General Appraiser, about this. Plus, I decided to become an appraiser instead of becoming a lawyer, so I know a bit about both fields. Ironically, so does my mother as she currently has a law degree. Albeit, I didn’t study a lot of real estate law outside of what may affect me, but I have a knack for it. But we both believe that this could honestly be moved into class action lawsuit territory.
They can use their own appraiser, that is no problem. But they cannot utilize their own appraiser to give you a value, if that makes sense. It’s called a restricted appraisal report and although they’re pretty rare these days, they still exist in a couple forms.
It’s a bit different if this was a commercial appraisal report (as if they appraised the whole condo unit). But it sounds like each condo was valued individually.
If this is the case, their in-house "lender" and the appraiser both probably broke the law and USPAP. USPAP is the rule of god in appraising, and a fair, free market value is the ultimate rule. "Fair" includes being free of any conflicts of interest or undue influence. Technically, an appraiser can get past the conflict of interest part by stating in the report their relationship with the client... But perhaps the most egregious mistake was on the lender's part.
They likely did two things wrong. I bet they used a restricted appraisal report, but those are only allowed to be seen by the clients listed on the report and are generally never allowed as a "real" appraisal. The appraiser must follow this guideline and clearly state that it is a restricted use appraisal report. However, USPAP is clear in that the only people that can see or utilize the report are the clients listed. NOT you. So the lender using this form to convince you of the value would likely be fraud.
They also made a major mistake, most likely, by not offering you the chance to get an appraisal done and see the report. You have a right to, as a buyer. They might think they’re circumventing this by letting you see the restricted one, but that loops us back to fraud. It’s the fruit of the poisonous tree doctrine, at this point.
It’s also worth it to point out that after the Dodd Frank Act, lenders cannot typically have “in-house” appraisers. There are some loopholes, but it sounds like you can make an easy case that the appraiser and the “lender” were working together on values, which is one of the biggest no-no’s a lender or appraiser can do.
If hundreds of units are all valued at 60% and buyers were all misled, this could very easily and very literally lead to jail time.
I wish you the best of luck. Feel free to reach out and I’ll help in any way I can. I’m sorry that this happened to you.
It is almost guaranteed that both of the things that you mentioned, both were done. I don't even recall seeing an appraisal report. If I forgot, then they probably uses a "restricted appraisal report". I will be reaching out to you. Hopefully we can get a conversation going and see where it leads.
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Son D.:

Hey Audrey I'm sorry this happened to you. As you may remember ( you replied in my post) I was involved in a situation like this just over a year ago. Jay actually mentioned about it briefly in this thread as well. I fully understand knowing older people who have sunk their life and retirement savings into the scammer. If you and other members in your group pursue litigation, just be prepared for a long drawn out process. Meanwhile, the scammer will continue trucking along finding new victims for investments elsewhere.
Despite all this do not be disheartened. In my case, I still have the property and managed to achieve minimal COC return this past year. I see you have plenty of people trying to help you on this thread. You'll do the same and turn your situation around. It will take some time, but time is still on your side.
I am glad you were able to make it work at least a little. Good luck with it and reach out to me if you need anything.
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Kyler Cook:

@Andrey Y.
I’m sorry this happened to you and to others. Deception, and theft drive me absolutely crazy. I’m too cautious when it comes to trusting others and don’t like to trust anyone with any part of the process. In the long run you’ll be successful if you find the right partners to put your trust in.
Don’t mind the old farts on here telling you that you got what you had coming. Just be more cautious when talking to smiling people! Look up deceivers delight, the psychological term. It’s real, man.
In truth, you’re ahead of most people. You took a risk and went for it. It hasn’t paid out, but at least you were courageous enough to try.
Yes. Totally. I believe in mutually beneficial deals and fostering a decent business relationship. Intentional deception, not following standard legal procedures, lies to your face, etc. that is what I cannot stand.
I am sure I would not be the first to confront this company. There are dozens of investors in a similar predicament. I doubt all have been silent.
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Micah Watson:

Originally posted by @Russell Brazil:
@Andrey Y. Im doing the math....is the difference between the 9% and 5% rate just about $115 a month? Thats probably not worth doing a refinance due to closing costs. That seems like a perfectly manageable increase in your payment.
Just wondering. If the home value is too low for selling to make sense in the foreseeable future, why would you choose to loose $115/mo indefinitely? He has said he’s currently cash-flowing. Would he not recover closing costs in 2-4 years?
Not sure. Can someone further verify this?
Let me give you guys some additional numbers. Starting loan balance was around $45,000. Right now, its more like $42,700. So a little principal paydown. $6000 in cash flow, about $2000-3000 of this I will have to use next week to make it rent ready again. So basically, unless I have a tenant who stays 3+ years, the property slowly loses money, and definitely to inflation.
Of course, the property is nearly underwater. Selling it now would result in a $20K or so loss, but it would remove all future potential headaches and wasted time on it.
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Russell Brazil:

Originally posted by @Micah Watson:
Originally posted by @Russell Brazil:

@Andrey Y. Im doing the math....is the difference between the 9% and 5% rate just about $115 a month? Thats probably not worth doing a refinance due to closing costs. That seems like a perfectly manageable increase in your payment.
Just wondering. If the home value is too low for selling to make sense in the foreseeable future, why would you choose to loose $115/mo indefinitely? He has said he’s currently cash-flowing. Would he not recover closing costs in 2-4 years?
Your payment rising $115 doesnt mean you will be losing $115 a month. Lets say it costs $5k to refinance....in order to save say 3%...well thats like $80. Thats 5 years to break even. People do that all the time, but that doesnt seem like its worth it to me.
And lets say he was just break even right now, (which hes not, hes cash flow positive), if you cant absorb $100 a month, then yeah you should sell, and you shouldnt invest in real estate at all. Because theres going to be lots of problems investing in real estate that cause much more costly problems.
It sounds dramatic an interest rate jumping from 5% to 9%. My point was well in dollar amounts....this is no big deal at all. Its a perfectly manageable situation in fact.
Russell, and I've not sure that the 9% rate will stay indefinitely either. I am pretty sure they set it up in such a way that you HAVE to refinance at some point, or owe $42,000 to pay off the loan. They knew ahead of time what they were doing. They inflate the price, then make these financing terms. They know you cannot use a legitimate non-recourse lender since those don't seem to want to lend on an asset worth less than $85K. Then, you have no choice but to come back to their scummy lenders they "work with".
Let me check the closing docs and see if I can get a definite answer on what the balloon payment actually means/is.
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Joel Owens:

Micah Watson - Opportunity cost
If a property takes say 5 years to get to a decent position where you recover the whole funds (theoretically) and value goes back up then the analysis is what could that money have done in the same time with other investments.
Example a buyer puts 100k into a property. Few years in realizes the investment is not what they thought. They can wait 5 years to try and recover the 20k back in value now that property is worth 80k or take the 80k and put into another investment or investments over the 5 year span.
So one scenario has an investor getting back to break even. Another over 5 years even though initial 20k loss the 80k might now be worth 400k in other investments. If the 20k loss would break the investor to lose it and sell that is one thing. If the investor makes more money for a fast regeneration of monthly investible capital then sometimes it makes sense to take the loss with a write off and go after other investments.
An investor could pursue someone in court for years to maybe eventually win but think of all the time lost that could be spent to finding better properties. An attorney told me one time you can have a strong case but spend 1 year of your life you won't get back winning against someone with a judgement you may not ever see a dime from.
Good points. However, since this property is in a Roth IRA, there are no "write-offs" to be had. Its a straight loss of five figures, plus the time/opportunity lost. I am still leaning about 60% to just sell the property. We will see if any options to refi come into fruition and when I find out about these turnover costs.
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Andrey Y.
OP
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Tom V.:

Let me get these details straight:
A medical resident attends an investment conference in Las Vegas, and buys a condo he has never seen.
He uses his paltry Self-Directed IRA money (subject to all of the restrictions on co-mingling funds, withdrawal penalties) and borrows in a loan structure that is non-recourse (necessary for his IRA funding use) with a 5% interest rate for 5 years.
The property cash flows for years, but after a while his reliable tenant moves out, and (lo and behold!) it is expensive to turn over the apartment and he has little control working from the other side of the world! The funky little non-recourse loan is going to re-set from 5% to 9% (Heaven forbid!) and he feels awfully hurt by the whole process!
First, I will hazard a guess that you were too young to have lost any money in the 2008 crash. You were probably in school, and everything you have ever known about investing is that you buy stuff and it goes up in value. You are in the medical profession, so you are smart. You think you're a bit more savvy than the average doctor even, in financial terms, because you found out about the magic(!) of self-driected IRA's and you have a leg up on everyone else.
Here are some lessons:
1. If you buy a product and you don't understand it, your risk is your own.
2. Not all investments make money. Sometimes you win and sometimes you lose. Concentrating your IRA in one goofy condo across the country is a very specific bet. Why didn't you simply buy mutual funds? Because you're smarter than the sheep who buy mutual funds?
3. Taking on debt in an IRA account is silly. If you don't have the reserve funds (in the IRA itself) to back up the investment, don't do it.
4. Plenty of people on Bigger Pockets are trying to sell the self-directed IRA/401K dream. It is a recipe for this kind of concentrated loss situation. DON'T MAKE INVESTMENTS IN PHYSICAL ASSETS WITH YOUR RETIREMENT FUNDS UNLESS IT IS MONEY YOU CAN AFFORD TO LOSE!!!!!!!!
5. This too will pass. Sell your asset if you have to. Take your loss and move on. No one sensible is going to have a tremendous amount of sympathy for a doctor in Hawaii who bought a condo on a lark. "HOW CAN THEY LIVE WITH THEMSELVES?" People brag here in the forums all the time about big spreads on wholesale deals and other shady practices. "I just found a willing buyer and a willing seller" You were the willing buyer here.
6. I welcome your indignant, "Why are you rubbing salt in the wound?"
Because you deserve the straight talk.
Because people who buy tricky real estate with tricky tax angles and are uninformed will have their money taken again and again. I am so glad this this example made with a young doctor in the prime of his career. How about taking some ownership for your part in this dubious transaction?
You didn't get "scammed" because your loan rate is going from 5% to 9%. You didn't have a plan for when that would happen.
I have lost money in deals. Anyone who had assets in 2008 lost money (and 2000 for that matter). People are getting freaked because the stock market is down a little bit. Big Flipping Deal. Risk is a real thing. You lost. Move on.
FANTASTIC PROFITS are never guaranteed, especially when you are putting your training-wheel IRA capital at risk in concentrated deals.
People have forgotten how to lose money. Accept it, Own it. Move on.
Why the anger, condescension, and self-righteousness?
I don't think you read most of my comments. I mentioned several times that I take responsibility for taking this deal. My main goal it to prevent others who may come into the same situation. Smiles, great salesman, and tactics to make you sign on the dotted line.
Half of your comment are assumptions. I didn't attend an investment conference in Las Vegas. I said that that is one of Growth Equity Group's major ways to advertise this money-making scheme (for them apparently).
So when I get a bunch of assumptions and inaccurate information from a guy without a profile picture, its not very helpful.
P.S. 1 - I'm not a "doctor living in Hawaii". I did my training there and no longer reside there.
P.P.S - $50K is not a "paltry" sum. That disappointing that you would say that. That was like 7 years of max Roth IRA contributions to reach that. That was most of my savings.
By the way, knowing more than the average doctor about investing is not saying much. Doctors are well known to be terrible with finances. Unlike most doctors, I don't identify as a physician when I think of myself. My occupation is probably 4th or 5th on the list.
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