Pine Financial Group Fund V

[Joseph Romano]

BiggerPockets Money podcast has mentioned a few times about Pine Financial Group Fund V as a "truly passive real estate" investment. After looking into their website it sounds like a great option for true passive real estate investing.

Here are some key take away from their brochure...

- No lockup period

- Monthly distributions with no fees

- 14 years in the business

- Over 2,000 loans originated

- Stringent lending process with solid approval guidelines

- Promises an 8% hands free return

- Combines private cash and IRA investors into a pool for loans

- Funds are used by real estate investors to buy and rehab distressed properties which are insured and liens have appropriate title insurance

They have 300+ inventors, closed 2,000+ loans, $550m+, and 0 loser since 2008 when they opened. Their loans are rehabs, commercial bridge, portfolio, and 90% acquisition. Their minimum investment is $25k. This seems like a GREAT deal and good way to get into real estate especially with the limited inventory in my area and this being my first "investment". They want to protect their investment as much as I want to protect mine so it makes sense why they can almost guarantee an 8% return, it makes sense right? Check out their website here.

Questions:

What are your thoughts? Almost anything that has a guaranteed rate of return makes me want to scream and run the other direction, but this seems different. Has anyone invested with them? If so what are your thoughts with them? Are they truly a hands-free investment option?

[David C.]

Don't know much about fund 5 but I've been in fund 4 for years.  Distributions happen like clock work.  I took some money out a couple years ago to rebalance my portfolio with no hassle.  Pleasant and responsive people to work with. 

[Joseph Romano]

Quote from @David C.:

Don't know much about fund 5 but I've been in fund 4 for years.  Distributions happen like clock work.  I took some money out a couple years ago to rebalance my portfolio with no hassle.  Pleasant and responsive people to work with. 

 Have you gotten an 8% return since working with them?

[David C.]

Quote from @Joseph Romano:

Quote from @David C.:

Don't know much about fund 5 but I've been in fund 4 for years.  Distributions happen like clock work.  I took some money out a couple years ago to rebalance my portfolio with no hassle.  Pleasant and responsive people to work with. 

 Have you gotten an 8% return since working with them?

 I just dumped my monthly distributions from quickbooks to excel and calculated irr and average roi for years 2022 through 2023:

IRR = 8.55%

Average ROI = 8.17%

[Chris Seveney]

@Joseph Romano

As someone who manages a fund, first five rules are never promise or guarantee a return unless you want the SEC at your door

if they used the words guarantee or promise I would not even consider them. Don’t care if they did 10,000 loans and had 5,000 investors

- if they misrepresent that what else are they misrepresenting

Again know nothing of this company and only going off your post.

[Carlos Ptriawan]

Quote from @Joseph Romano:

BiggerPockets Money podcast has mentioned a few times about Pine Financial Group Fund V as a "truly passive real estate" investment. After looking into their website it sounds like a great option for true passive real estate investing.

Here are some key take away from their brochure...

- No lockup period

- Monthly distributions with no fees

- 14 years in the business

- Over 2,000 loans originated

- Stringent lending process with solid approval guidelines

- Promises an 8% hands free return

- Combines private cash and IRA investors into a pool for loans

- Funds are used by real estate investors to buy and rehab distressed properties which are insured and liens have appropriate title insurance

They have 300+ inventors, closed 2,000+ loans, $550m+, and 0 loser since 2008 when they opened. Their loans are rehabs, commercial bridge, portfolio, and 90% acquisition. Their minimum investment is $25k. This seems like a GREAT deal and good way to get into real estate especially with the limited inventory in my area and this being my first "investment". They want to protect their investment as much as I want to protect mine so it makes sense why they can almost guarantee an 8% return, it makes sense right? Check out their website here.

Questions:

What are your thoughts? Almost anything that has a guaranteed rate of return makes me want to scream and run the other direction, but this seems different. Has anyone invested with them? If so what are your thoughts with them? Are they truly a hands-free investment option?

unless you dig dive to their current book, how many NPL, how many non-residential, how many in CRE, how many redemptions, you would never know

[Jay Hinrichs]

my thought is that there is not one company myself included that has a perfect record since 08 making loans.. At any volume.. So that I dont believe .. does not mean they are not great but every lender will have defaults and work outs.. people die mid project I have had one a year last three years and I have to do work outs with the estate.. U have other issues with fix up loans that no one can control.. Again does not mean they are not great to work with .. But perfection Nope I dont believe that one.

[Jeremy H.]

Ehh - the stock market is passive to me too. I can get monthly dividends if I want to, it averages 8% over the long term with a 100+ year history 

I think a fund like this may be good for diversification. May be good for retirement or those that want monthly cashflow. 

The beauty of real estate to me (over going with a fund like that) is gaining equity at the buy (buying at a discount), appreciation, tax advantages, ownership (I own the asset). I can achieve an 8% easy buying, rehabbing, and renting a SFH.

There's several ways to get a 5.5% or so return right now with zero risk too

[Peter Walther]

If I'm reading their website correctly, and I may not be, investing in Pine Financial is not passive real estate investing.  Investors are lending money to Pine in return for an unsecured Note which has an 8% rate.  I believe all mortgages are in the name of Pine, not investors.

I also noticed that a FAQ states they have never experienced a default rate in excess of 3%.  Not that high, but not 0.

[Carlos Ptriawan]

Quote from @Jeremy H.:

Ehh - the stock market is passive to me too. I can get monthly dividends if I want to, it averages 8% over the long term with a 100+ year history 

I think a fund like this may be good for diversification. May be good for retirement or those that want monthly cashflow. 

The beauty of real estate to me (over going with a fund like that) is gaining equity at the buy (buying at a discount), appreciation, tax advantages, ownership (I own the asset). I can achieve an 8% easy buying, rehabbing, and renting a SFH.

There's several ways to get a 5.5% or so return right now with zero risk too

 Yea good for diversification especially if we split it into multiple HmL syndication 

[David C.]

@Peter Walther I'm in pfg fund IV LLC, the subscription agreement says I purchased a membership interest in the LLC. It doesn't say anything about an unsecured note. Can you point me to where the website discusses an unsecured note?

@Joseph Romano Can you point me to where it says they guarantee 8%, or where they are guaranteeing anything? ... that is definitely a red flag.

[Joseph Romano]

Quote from @David C.:

@Peter Walther I'm in pfg fund IV LLC, the subscription agreement says I purchased a membership interest in the LLC. It doesn't say anything about an unsecured note. Can you point me to where the website discusses an unsecured note?

@Joseph Romano Can you point me to where it says they guarantee 8%, or where they are guaranteeing anything? ... that is definitely a red flag.

 Now after re-reading the brochure, I do not see a guarantee. What I do see is on the back of the brochure it says "Call or email us today to start earing 8%"  

[Chris Seveney]

@Jay Hinrichs

I was at a conference and another offering who has claimed to do $2B in loans has noted they had a loan go delinquent and never lost money on a loan in 20 years. When I see stuff like that, sorry just don’t believe it.

[Chris Seveney]

@Joseph Romano

I looked them up as it took

Some digging because as a regulation a+ offering you are supposed to have a link to your offering circular on your website which they don’t have

BUT you are holding an 8% unsecured note where they could go get secured leverage and wipe you out.

At 8% - yikes. We offer more than that and are equity….

https://www.sec.gov/Archives/edgar/data/1837189/000173112223002289/e5292_1a.htm

[Peter Walther]

Quote from @David C.:

@Peter Walther I'm in pfg fund IV LLC, the subscription agreement says I purchased a membership interest in the LLC. It doesn't say anything about an unsecured note. Can you point me to where the website discusses an unsecured note?

@Joseph Romano Can you point me to where it says they guarantee 8%, or where they are guaranteeing anything? ... that is definitely a red flag.

 From their FAQs:

We are currently accepting investors in PFG Fund III, LLC, which is our fourth private money mortgage fund. When you invest in PFG Fund III, LLC, you will be investing in a promissory note with a promised return on your money. This structure was selected so we can pay you a flat and predictable return each and every month. It also gives you the flexibility to receive a direct deposit each month or reinvest your interest for faster exponential growth.

[Peter Walther]

Quote from @David C.:

@Peter Walther I'm in pfg fund IV LLC, the subscription agreement says I purchased a membership interest in the LLC. It doesn't say anything about an unsecured note. Can you point me to where the website discusses an unsecured note?

@Joseph Romano Can you point me to where it says they guarantee 8%, or where they are guaranteeing anything? ... that is definitely a red flag.

I believe a promissory note is unsecured by definition.  A mortgage acts as a lien on real property to secure a note while a financing statement (UCC1) is a lien on personal property to secure a note.

[David C.]

@Peter Walther

Thanks for taking the time to reply.

Seems Funds III and V are unsecured notes. The one I'm in, the one I was focused on, Fund IV, is an ownership interest in the LLC that owns the secured notes. I don't know why their funds have different structures.

[Peter Walther]

Quote from @David C.:

@Peter Walther

Thanks for taking the time to reply.

Seems Funds III and V are unsecured notes. The one I'm in, the one I was focused on, Fund IV, is an ownership interest in the LLC that owns the secured notes. I don't know why their funds have different structures.

My point remains the same though, having a Limited Partnership interest in an LLC is not passively investing in real estate. It's investing in the management skills of the Managing Partner(s).