Real Estate Syndications: Spark Rental

[Simone Montague-Jackson]

Hey everyone, 

I'm interested in RE syndications, but I'm quite cautious because I don't want to incur any scams. And I don't know how to start any on my own at the moment. However, I attended an RE meetup and learned about this company called Spark Rental (https://sparkrental.com/coinvesting/?utm_source=SparkRental+...). If anyone is currently investing with this company or know more about it, please comment below or PM me because I don't want to jump into anything that would cause me to lose money. 

Thanx in advance :) 

[Nicholas L.]

@Simone Montague-Jackson

just curious - what are your goals?  I don't know anything about Spark.

syndications are a diversification strategy, not a beginner strategy.  if that's you - great.

[Simone Montague-Jackson]

I'd like to diversify my real estate portfolio and get involved in syndications so I can put less money down in some real estate projects. 

[Chris Seveney]

@Simone Montague-Jackson

Brian Davis is on BP (not letting me tag him) as he runs the group.

In the past I have heard they have done a good job underwriting deals they invest in.

[G. Brian Davis]

Quote from @Chris Seveney:

@Simone Montague-Jackson Montague-Jackson

Brian Davis is on BP (not letting me tag him) as he runs the group.

In the past I have heard they have done a good job underwriting deals they invest in.

 Thanks Chris!

Hi Simone, no real estate investment comes without risk. But risk is what we prioritize as an investment club, as we vet deals together. It helps that there are a lot of people all vetting these deals together, so we all gain the benefit of each others' expertise. 

We have a no-questions-asked refund policy for membership dues, so we'd love to have you come and attend a club meeting or two, see how we're vetting deals together, and if you decide it's not for you, you can leave the club with no hard feelings and a full refund. 

Reach out any time with questions!

[Simone Montague-Jackson]

Thanx for responding, and I'm glad you're in the group to answer my questions. Also, with the investment, is there a monthly ROI or is the money simply held in the syndication?

[Melanie P.]

@Simone Montague-Jackson Spark's main claim to fame is that they have created what they believe is a loophole to allow non-accredited investors to invest in Reg. D offerings together as an "investing club LLC." There are additional fees incurred investing this way: membership fees, fees to maintain the entity that carries every deal you get involved with and possibly other non-disclosed fees.

Syndications are EXTREMELY risky investments suitable only for highly-experienced accredited investors who can appreciate the risk both to their principal in the case of bad planning or a scam AND to having their capital locked up for 5 years+. If everything goes according to plan you might make some dollars along the way and a payout when the asset sells. All deals have their own unique structure and you should understand the advantage and disadvantage to taking distributions along the way vs. a higher payout of profits at the end. And you must not forget that WHEN (not if) there are bumps in the road the monthly distributions will be put on hold, you may be told to have to invest more (a "capital call"), or you may lose some or all of the principal originally invested.

Spark's self-reported record is "two dozen or so" investments, 2 of those have had their distributions paused and one of the two had a capital call. The record is not terrible, but I'm not a fan of their model because it targets investors for whom these are wholly inappropriate investments. Here's why: Let's say you put $5,000 into one of their deals and everything goes well. This means sometime five years from now you'll pull out $10,000. Some of that $5,000 profit you may get along the way in distributions. You'll also pay Spark's $59 membership fee 60 times, the LLC maintenance fee 5 times - $3.915 in expenses to use Spark as your "platform. " Net $1,085. The same $5,000 put in TBills and rolled over would net you $1,622.36 with zero risk, liquidity should you need it and no state income tax.

Furthermore, I find Spark's claims dubious at best. Only the person running the club chooses potential investments. In my opinion this characteristic results in Spark not meeting the definition of an investment club under SEC rules. If this ever becomes an issue while you're in a deal everyone invested will have to pay out a share of the compliance costs to get their investment entity legal with the SEC. I also believe, but cannot yet prove that Spark has earned remuneration for putting together the group of investors in that if they are buying a $50,000 share from a promoter they remit some amount less than that and receive the full share giving them a "share" of the LLC they created to hold everyone's funds. This is my opinion only and Spark denies it but the details will come out eventually. A savvy investor will impute a negative inference to the fact that Spark is unlicensed, cannot legally make investment recommendations and owe you no sort of duty (fiduciary or otherwise) to put your financial interest ahead of their own.

Proceed with extreme caution. Or just buy a TBill on Treasury Direct and call it a day. 

[Ian Ippolito]

Quote from @Simone Montague-Jackson:

Hey everyone, 

I'm interested in RE syndications, but I'm quite cautious because I don't want to incur any scams. And I don't know how to start any on my own at the moment. However, I attended an RE meetup and learned about this company called Spark Rental (https://sparkrental.com/coinvesting/?utm_source=SparkRental+...). If anyone is currently investing with this company or know more about it, please comment below or PM me because I don't want to jump into anything that would cause me to lose money. 

Thanx in advance :) 

Every investor comes from a different risk tolerance, financial situation and has different financial goals. So what looks great to one investor will look terrible to another vice versa.

I'm a conservative investor and for me this sponsor is an easy "no":

1) I generally want to see at least one full real estate cycle experience in the exact strategy (and with little to no money lost).  This sponsor appears to be way too green for me. Other things that are red flags for me: Their bios don't even mention how long they've been managing other people's money.  I want to see their experience managing other people's money (and which is much harder than just buying properties for personal investing purposes).

2) No details on key things that indicate risk like co-investment, structure of debt etc. Often the lack of these things are associated with sponsors and deals that target unsophisticated investors. If that happens to be the case here then these types of sponsors and deals usually have multiple things that I can't stomach.

3) I'm not a fan of the gimmick of charging investors a recurring fee just for the potential chance to get access to an investment. There are many other ways to get access that don't do this.

[G. Brian Davis]

Quote from @Simone Montague-Jackson:

Thanx for responding, and I'm glad you're in the group to answer my questions. Also, with the investment, is there a monthly ROI or is the money simply held in the syndication?

Hi Simone, each syndication deal is different. Some pay distributions, others don't, at least for the first year or two. Sometimes we invest in notes that only pay interest income. You pick and choose the syndications that fit your investing goals.

[G. Brian Davis]

Quote from @Melanie P.:

@Simone Montague-Jackson Spark's main claim to fame is that they have created what they believe is a loophole to allow non-accredited investors to invest in Reg. D offerings together as an "investing club LLC." There are additional fees incurred investing this way: membership fees, fees to maintain the entity that carries every deal you get involved with and possibly other non-disclosed fees.

Syndications are EXTREMELY risky investments suitable only for highly-experienced accredited investors who can appreciate the risk both to their principal in the case of bad planning or a scam AND to having their capital locked up for 5 years+. If everything goes according to plan you might make some dollars along the way and a payout when the asset sells. All deals have their own unique structure and you should understand the advantage and disadvantage to taking distributions along the way vs. a higher payout of profits at the end. And you must not forget that WHEN (not if) there are bumps in the road the monthly distributions will be put on hold, you may be told to have to invest more (a "capital call"), or you may lose some or all of the principal originally invested.

Spark's self-reported record is "two dozen or so" investments, 2 of those have had their distributions paused and one of the two had a capital call. The record is not terrible, but I'm not a fan of their model because it targets investors for whom these are wholly inappropriate investments. Here's why: Let's say you put $5,000 into one of their deals and everything goes well. This means sometime five years from now you'll pull out $10,000. Some of that $5,000 profit you may get along the way in distributions. You'll also pay Spark's $59 membership fee 60 times, the LLC maintenance fee 5 times - $3.915 in expenses to use Spark as your "platform. " Net $1,085. The same $5,000 put in TBills and rolled over would net you $1,622.36 with zero risk, liquidity should you need it and no state income tax.

Furthermore, I find Spark's claims dubious at best. Only the person running the club chooses potential investments. In my opinion this characteristic results in Spark not meeting the definition of an investment club under SEC rules. If this ever becomes an issue while you're in a deal everyone invested will have to pay out a share of the compliance costs to get their investment entity legal with the SEC. I also believe, but cannot yet prove that Spark has earned remuneration for putting together the group of investors in that if they are buying a $50,000 share from a promoter they remit some amount less than that and receive the full share giving them a "share" of the LLC they created to hold everyone's funds. This is my opinion only and Spark denies it but the details will come out eventually. A savvy investor will impute a negative inference to the fact that Spark is unlicensed, cannot legally make investment recommendations and owe you no sort of duty (fiduciary or otherwise) to put your financial interest ahead of their own.

Proceed with extreme caution. Or just buy a TBill on Treasury Direct and call it a day. 

Melanie please stop mischaracterizing our business model. There's no loophole. If four friends go in on a syndication deal together, it's not a loophole. The same goes for ten people who get together every month in an investment club.

Your math doesn't make any sense, because people join the club to invest in many deals, not one. And if they decide they no longer want to invest through the club, they leave it and stop paying club membership dues. So in your example where someone only wants to invest in one deal alongside other members of the investment club, they would pay the $59 monthly fee once, then leave the club.

I'm also extremely offended that you're suggesting that we're lying about our business model. All members who go in on a syndication together get View access to the joint LLC bank account we create. They see exactly how much money each person - including me - puts into each deal.

Please stop libeling our investment club. It's unprofessional, spiteful, and downright false. If you want to see exactly how our investment club works, come attend a club meeting. Otherwise stop making things up. 

[G. Brian Davis]

Quote from @Ian Ippolito:

Quote from @Simone Montague-Jackson:

Hey everyone, 

I'm interested in RE syndications, but I'm quite cautious because I don't want to incur any scams. And I don't know how to start any on my own at the moment. However, I attended an RE meetup and learned about this company called Spark Rental (https://sparkrental.com/coinvesting/?utm_source=SparkRental+...). If anyone is currently investing with this company or know more about it, please comment below or PM me because I don't want to jump into anything that would cause me to lose money. 

Thanx in advance :) 

Every investor comes from a different risk tolerance, financial situation and has different financial goals. So what looks great to one investor will look terrible to another vice versa.

I'm a conservative investor and for me this sponsor is an easy "no":

1) I generally want to see at least one full real estate cycle experience in the exact strategy (and with little to no money lost).  This sponsor appears to be way too green for me. Other things that are red flags for me: Their bios don't even mention how long they've been managing other people's money.  I want to see their experience managing other people's money (and which is much harder than just buying properties for personal investing purposes).

2) No details on key things that indicate risk like co-investment, structure of debt etc. Often the lack of these things are associated with sponsors and deals that target unsophisticated investors. If that happens to be the case here then these types of sponsors and deals usually have multiple things that I can't stomach.

3) I'm not a fan of the gimmick of charging investors a recurring fee just for the potential chance to get access to an investment. There are many other ways to get access that don't do this.

Hi Ian, we're not a sponsor, and don't manage other people's money. That's why you can't find sponsor-related information on our website.
We invite sponsors to come present deals to our investment club members. Anyone who wants to go in on a deal can do so. Things like the debt structure vary by the deal, sponsor, etc.
Club membership dues go toward organizing semi-monthly club meetings, networking with sponsors, and otherwise making sure our club members can go in on new deals with each other each month.
Happy to connect and walk through exactly how each joint venture LLC is structured, and answer any other questions you have.

[Todd Dexheimer]

Spark is an investment club not a GP/Syndicator. You sign up for their group and you get access to deals that they are interested in. The group then decides if they want to invest. They don't run the investment as the GP, they invest passively as a group as an LP. 

If you want to learn more, I recently had Brian Davis on my podcast Pillars of Wealth Creation, where he explained what the group is all about. 

[Melanie P.]

 Brian, This is a discussion forum. If you're going to use it to generate leads for your "investing club" I'm going to put the dangers and risks close by so at least the small investor you're pursuing for these ventures knows there is more here than meets the eye. 

I agree with you there is no loophole. You seem to believe that using the words "investing club" makes what you're doing legitimate. It does not. These are not four friends investing together. You market the service across the Internet; nearly every time you post there's a reference to try to generate interest. You select every investment Spark creates. Your partner forms and controls the investor-LLC. You charge fees for these services. The investors in the LLC expect to earn a return from the efforts of you and the syndicator. You are acting as an Investment Advisor. The shares of the LLC you sell at your monthly meeting are unregistered securities. It's widespread practice in the Real Estate Syndications industry to compensate bundlers by selling them their shares at a discount to par. If you're not participating, as you say, OK, but I will keep looking into it until I'm satisfied that is not taking place. This happens every day, there's lots of marketing activity to say no to revenue, and oddly prior to anyone bringing it up you're screaming from the hilltops that Spark doesn't accept this money - well time will tell. If you are, together with the fact that you execute trades and maintain accounts for your customers you're a broker.

You market to the least sophisticated, smallest investors out there. If your investors had $50k to invest and were accredited, why would they need you? Small dollar, unaccredited investors with little real estate experience are wholly unsuitable for the investments you are selling. My math is correct. You are not licensed, at least in part, because the activity you're engaged in would be prohibited of any licensee.  Investors must remain in the club, paying dues for the life of their investment. You even have contractual language that allows you to withhold these fees from any remittances due the investor.

Not a single false word has been written about Spark. We do have a legitimate difference of opinion on the rules and regulations that govern Spark's activities. I will request the SEC give us their opinion and that should settle the matter. I recall you like chocolate.

[Melanie P.]

Quote from @Todd Dexheimer:

Spark is an investment club not a GP/Syndicator. You sign up for their group and you get access to deals that they are interested in. The group then decides if they want to invest. They don't run the investment as the GP, they invest passively as a group as an LP. 

If you want to learn more, I recently had Brian Davis on my podcast Pillars of Wealth Creation, where he explained what the group is all about.

Todd, See below and my comments to him above about how his actual activities relate to these rules. I do not recommend assisting in the marketing of this venture. Has his "club" ever invested with Enduras? 

Investment Clubs and the SEC

The SEC’s Office of Investor Education and Advocacy is issuing this publication to answer some common questions investors ask us about investment clubs. For additional investor education tools and resources, visit , the SEC’s website for individual investors.

Do the SEC and/or the states regulate investment clubs?

The SEC generally does not regulate investment clubs. But since each investment club is unique, each club will need to decide if it has any registration requirements.

• Membership interests in the investment club may be securities under the Securities Act of 1933 (Securities Act). If so, the SEC may regulate the offer and sale of those membership interests.
• An investment club may be an investment company under the Investment Company Act of 1940 (1940 Act). If so, one or more states or the SEC may regulate that investment club.
• A person who is paid for providing advice regarding the investments of the club or its members may be an investment adviser under the Investment Advisers Act of 1940 (Advisers Act) or state law. If so, one or more states or the SEC may regulate that person. Also, if one club member is paid for selecting investments for the club or its members, that person may be an investment adviser.

When does an investment club have to register the offer and sale of its membership interests with the SEC?

Since the Securities Act requires the registration of the offer and sale of most securities, the investment club must first decide if its membership interests are “securities.” Generally, a membership interest is a security if it is an “investment contract.”

Generally, a membership interest is an investment contract if members invest and expect to make a profit from the efforts of others. If every member in an investment club actively helps decide what investments to make, the membership interests in the club would probably not be considered securities. If the club has even one passive member, it may be issuing securities.

When does an investment club have to register with the SEC as an investment company?

An investment club must register with the SEC as an investment company under the 1940 Act if:

1. the club invests in securities;
2. the club issues membership interests that are securities (see above); and
3. the club is not able to rely on an exclusion from the definition of investment company.

For example, a “private investment company” may not need to register with the SEC. To qualify, an investment club:

• must not make, nor propose to make, a public offering of its securities; and
• must not have more than 100 members.

A public web site or other public communication that could be viewed as suggesting that a club is looking for new members might be considered a public offering. An attorney with experience in securities law can help the club evaluate, based on its particular facts, whether its membership interests are securities and whether the club is making a public offering of those securities.

Does a person who provides advice to an investment club have to register with the SEC?

If someone is paid for providing advice about the club’s investments, he or she may be an investment adviser. Also, if one club member (instead of all members) selects investments for the club, that person may be an investment adviser.

[G. Brian Davis]

Quote from @Melanie P.:

 Brian, This is a discussion forum. If you're going to use it to generate leads for your "investing club" I'm going to put the dangers and risks close by so at least the small investor you're pursuing for these ventures knows there is more here than meets the eye. 

I agree with you there is no loophole. You seem to believe that using the words "investing club" makes what you're doing legitimate. It does not. These are not four friends investing together. You market the service across the Internet; nearly every time you post there's a reference to try to generate interest. You select every investment Spark creates. Your partner forms and controls the investor-LLC. You charge fees for these services. The investors in the LLC expect to earn a return from the efforts of you and the syndicator. You are acting as an Investment Advisor. The shares of the LLC you sell at your monthly meeting are unregistered securities. It's widespread practice in the Real Estate Syndications industry to compensate bundlers by selling them their shares at a discount to par. If you're not participating, as you say, OK, but I will keep looking into it until I'm satisfied that is not taking place. This happens every day, there's lots of marketing activity to say no to revenue, and oddly prior to anyone bringing it up you're screaming from the hilltops that Spark doesn't accept this money - well time will tell. If you are, together with the fact that you execute trades and maintain accounts for your customers you're a broker.

You market to the least sophisticated, smallest investors out there. If your investors had $50k to invest and were accredited, why would they need you? Small dollar, unaccredited investors with little real estate experience are wholly unsuitable for the investments you are selling. My math is correct. You are not licensed, at least in part, because the activity you're engaged in would be prohibited of any licensee.  Investors must remain in the club, paying dues for the life of their investment. You even have contractual language that allows you to withhold these fees from any remittances due the investor.

Not a single false word has been written about Spark. We do have a legitimate difference of opinion on the rules and regulations that govern Spark's activities. I will request the SEC give us their opinion and that should settle the matter. I recall you like chocolate.

 The lengthy accusations are starting to feel like a personal vendetta Melanie. I invited you to come sit in on a club deal discussion to see exactly how we work. If you are genuinely interested, please message me and I'll send you an invitation link. If not, please stop heckling me on the forums.

[Todd Dexheimer]

Quote from @Melanie P.:

Quote from @Todd Dexheimer:

Spark is an investment club not a GP/Syndicator. You sign up for their group and you get access to deals that they are interested in. The group then decides if they want to invest. They don't run the investment as the GP, they invest passively as a group as an LP. 

If you want to learn more, I recently had Brian Davis on my podcast Pillars of Wealth Creation, where he explained what the group is all about.

Todd, See below and my comments to him above about how his actual activities relate to these rules. I do not recommend assisting in the marketing of this venture. Has his "club" ever invested with Enduras? 

Investment Clubs and the SEC

The SEC’s Office of Investor Education and Advocacy is issuing this publication to answer some common questions investors ask us about investment clubs. For additional investor education tools and resources, visit , the SEC’s website for individual investors.

Do the SEC and/or the states regulate investment clubs?

The SEC generally does not regulate investment clubs. But since each investment club is unique, each club will need to decide if it has any registration requirements.

• Membership interests in the investment club may be securities under the Securities Act of 1933 (Securities Act). If so, the SEC may regulate the offer and sale of those membership interests.
• An investment club may be an investment company under the Investment Company Act of 1940 (1940 Act). If so, one or more states or the SEC may regulate that investment club.
• A person who is paid for providing advice regarding the investments of the club or its members may be an investment adviser under the Investment Advisers Act of 1940 (Advisers Act) or state law. If so, one or more states or the SEC may regulate that person. Also, if one club member is paid for selecting investments for the club or its members, that person may be an investment adviser.

When does an investment club have to register the offer and sale of its membership interests with the SEC?

Since the Securities Act requires the registration of the offer and sale of most securities, the investment club must first decide if its membership interests are “securities.” Generally, a membership interest is a security if it is an “investment contract.”

Generally, a membership interest is an investment contract if members invest and expect to make a profit from the efforts of others. If every member in an investment club actively helps decide what investments to make, the membership interests in the club would probably not be considered securities. If the club has even one passive member, it may be issuing securities.

When does an investment club have to register with the SEC as an investment company?

An investment club must register with the SEC as an investment company under the 1940 Act if:

1. the club invests in securities;
2. the club issues membership interests that are securities (see above); and
3. the club is not able to rely on an exclusion from the definition of investment company.

For example, a “private investment company” may not need to register with the SEC. To qualify, an investment club:

• must not make, nor propose to make, a public offering of its securities; and
• must not have more than 100 members.

A public web site or other public communication that could be viewed as suggesting that a club is looking for new members might be considered a public offering. An attorney with experience in securities law can help the club evaluate, based on its particular facts, whether its membership interests are securities and whether the club is making a public offering of those securities.

Does a person who provides advice to an investment club have to register with the SEC?

If someone is paid for providing advice about the club’s investments, he or she may be an investment adviser. Also, if one club member (instead of all members) selects investments for the club, that person may be an investment adviser.

 I don't know much about Spark and they have not invested with Endurus. My point was that they are not a GP. Several comments referred to them as a GP. Clearly you have had a very bad experience with them and possibly other syndications, which is unfortunate.