Investment in The Summit Lofts in Georgetown TX. Is this a scam?

[Dianne Pettitt]

We were called by Novak Capital Management offering us to invest a minimum of $125,000 in a development named the Summit Lofts in Georgetown TX (209 mi south of Austin.  They project a profit of 200% in 3-4 years.  Is this a scam? How can we verify their legitimacy?

[Bill Crider]

Dianne;

It sounds like he was trying to see if you were a qualified investor. From these posts, it does not appear that you are. Although you may have funds, you need to educate yourself more before investing in such an endeavor. For example, most investors would know that IRR is Internal Rate of Return. If you don't understand an investment, you should not invest in it.

I live in Georgetown and drive past this development almost daily. It is very upscale and thus far seems successful. The brownstones are selling well. The Sheraton and most of the commercial buildings are built and occupied (except one restaurant space), the apartments appear to be all leased up. They are breaking ground now on the lofts. 

One observation I would make is that being at the highest end of the rental price range in Georgetown, they might be the most impacted when there is an eventual downturn in the market. 

The Novak brothers are well known in this area and have a good reputation. I have also been solicited to invest with them, but have not. I think they are probably a good company, but my focus is on single family homes which I personally own and manage, and also on lending money. So their type of investment is not what I am looking for. I have no affiliation with them. I make no recommendation one way or another regarding them.

My take away from this thread is that it is easy to get the wrong impression about a business, a development, or an investment simply by relying on internet information. No one on this thread so far has had first hand information as I have. Long-distance investing is hazardous, in my opinion. A person must do much more research, and not just rely on the internet. 

My recommendation to you is to invest in things closer to your home that you can personally inspect and research locally.

Regards,

Bill Crider