Anyone has invested with Open door capital? How was your experience?

[Hemal Adani]

Hi, I'm curious to learn how your experience has been with Open door capital or something similar. Pros & Cons. Also post if you know something similar.

[Chris John]

Quote from @Terry Hall:

Quote from @Chris John:

Quote from @Jesse Scroggins:

Quote from @Terry Hall:

I am in Fund 8. First year projection was 2-4%. I invested $50k; I received a whopping $125.very disappointed; I could have easily bought another rental or invested in a mutual fund and done so much better.

To be fair annually that would be a 3% return. 

@Jesse Scroggins  Is it me or are you off a digit?  3% on 50k would be over $1k.  He mentioned $125.

 I am not a digit off; I received $125.00. One hundred and twenty-five.

  @Terry Hall  My comment was to Jesse Scroggins as it appeared to me that his math was off.  Best wishes.

[Taik Kim]

Quote from @Madhan S.:

I have invested with Open door capital (Brandon Turner) in two different projects - Array at Austin and Cypress at Houston. Both of them have had poor results and stopped monthly distributions since June this year (they had projected 6% and 8% CoC). I am disappointed in their results due to poor NOI and I believe they didn't do a decent job in due diligence prior to purchase. Hope NOI and CoC will improve in the near term, until then avoid putting any new money.

I agree. In the same boat with Array apt. Disappointed for sure. Not sure when it might bounce back but the whole commercial market had a boom then busting with higher loan rates. It’s not wise to invest blindly trusting the operator reputation alone, without deep diving into many syndications. And if you’re not too sure, I think direct investment is the way to go. At least you can exit and recoup funds sooner. 

[Mark Fleming]

AaronQuote from @Aaron Gordy:

@Madhan S.  Boots on the ground is critical. I am not privy to any particulars of the deal at all. The array is located on Burton Drive. Burton drive is in the rapidly gentrifying Riverside/Oltorf corridor. 

Aaron, thank you for giving us some local visibility on the area.  I'm in the Array deal and it seems one of the issues they are facing is that the location may be a little more sketchy than they anticipated. They've had some vagrant issues and are trying to improve their tenant base.  Can you let us know what you think about the quality of the neighborhood and rate of change in that particular area.  I've lived and invested in areas like this before, and I know it can vary block by block. Either they expected change that hasn't yet materialized, or they didn't understand the local dynamics.

[Aaron Gordy]

@Mark Fleming

Its a good area. The property will do very well over the long term. In the short term there may be some hiccups given what I have heard. That entire 78741 zip code is good and has been in high demand historically due to its location. 

[Mark Fleming]

AaronQuote from @Aaron Gordy:

@Madhan S.  Boots on the ground is critical. I am not privy to any particulars of the deal at all. The array is located on Burton Drive. Burton drive is in the rapidly gentrifying Riverside/Oltorf corridor. 

Aaron, thank you for giving us some local visibility on the area.  I'm in the Array deal and it seems one of the issues they are facing is that the location may be a little more sketchy than they anticipated. They've had some vagrant issues and are trying to improve their tenant base.  Can you let us know what you think about the quality of the neighborhood and rate of change in that particular area.  I've lived and invested in areas like this before, and I know it can vary block by block. Either they expected change that hasn't yet materialized, or they didn't understand the local dynamics.

[Mark Fleming]

Quote from @Aaron Gordy:

@Mark Fleming

Its a good area. The property will do very well over the long term.  

 That's reassuring.  I appreciate the insight. Thanks!

[Elisa Rafol]

Stay away. Three funds, three disasters. Inexperience all around. 

[Chris Seveney]

Quote from @Elisa Rafol:

Stay away. Three funds, three disasters. Inexperience all around. 

 Which three are these? Are they MF, Mobile homes, the debt fund?

[Hyun Supul]

I know the sentiment on this thread has been negative. But what do people think of this offering? 

Diversified Cash Flow Fund:

InvestNext

This sounds a little bit too good to be true. But with the interest rate falling and the inflation stabilizing, they might be turning around the corner. At least I hope so, because I am invested in another (unrelated to ODC) mobile home syndication that had to suspend distribution and now restarting. 

[Chris Seveney]

Quote from @Hyun Supul:

I know the sentiment on this thread has been negative. But what do people think of this offering? 

Diversified Cash Flow Fund:

InvestNext

This sounds a little bit too good to be true. But with the interest rate falling and the inflation stabilizing, they might be turning around the corner. At least I hope so, because I am invested in another (unrelated to ODC) mobile home syndication that had to suspend distribution and now restarting. 

 I run a private credit fund - I need to pick their brain on how they can give investors 12-13% and make money. Look at it this way - If you are doing straight private lending, lets say you are lending at 12% + 2 points. You may think great thats 14%. But you have to account for:

1. You cannot deploy 100% of your funds - you need cash reserves

2. It takes time to deploy money. If you it takes 2 months to deploy, you are getting 10/12 of what you anticipated. This was why when I saw Norada and some of these other funds at 15% etc. it was comical.

3. They are investing 60% preferred equity in MF. How many MF deals let you out in 2-3 years?

4. What other funds have this business model diversified like this and have been successful? Have they successfully implemented this ? There is running private credit and running MF and then their is portfolio mgmt. Who is the portfolio manager?

These are questions I would ask and as you noted, if it seems to good to be true.....

I have not dove into this in detail, this is just what the "sniff test" questions I would ask - could be a great investment for people - I am just telling you what I would ask.

[Jay Hinrichs]

Quote from @Chris Seveney:

Quote from @Hyun Supul:

I know the sentiment on this thread has been negative. But what do people think of this offering? 

Diversified Cash Flow Fund:

InvestNext

This sounds a little bit too good to be true. But with the interest rate falling and the inflation stabilizing, they might be turning around the corner. At least I hope so, because I am invested in another (unrelated to ODC) mobile home syndication that had to suspend distribution and now restarting. 

 I run a private credit fund - I need to pick their brain on how they can give investors 12-13% and make money. Look at it this way - If you are doing straight private lending, lets say you are lending at 12% + 2 points. You may think great thats 14%. But you have to account for:

1. You cannot deploy 100% of your funds - you need cash reserves

2. It takes time to deploy money. If you it takes 2 months to deploy, you are getting 10/12 of what you anticipated. This was why when I saw Norada and some of these other funds at 15% etc. it was comical.

3. They are investing 60% preferred equity in MF. How many MF deals let you out in 2-3 years?

4. What other funds have this business model diversified like this and have been successful? Have they successfully implemented this ? There is running private credit and running MF and then their is portfolio mgmt. Who is the portfolio manager?

These are questions I would ask and as you noted, if it seems to good to be true.....

I have not dove into this in detail, this is just what the "sniff test" questions I would ask - could be a great investment for people - I am just telling you what I would ask.

question would be who is the lender with a proven track record as you note Chris that would be important to know is the fixed debt investments ( loans secured by RE) bringing in say 8 to 9% and the equity in the MF is making up the difference with rental returns.. so say rental returns are 6% and the Notes are at 7% that equals teh 13%  ???  it would be interesting to see the distribution between them.. And I have to assume the MF are their existing MF that needed cap calls ??? maybe ??  Drag is very real with HML which is what they are doing.. you sacrifice drag for high liquidity when your doing those types of deals as an investor in HML/PML 's  

[Evan Polaski]

@Hyun Supul, without diving too far into this, and the devil is always in the details, when I see this, I can't help but assume this whole offering is a way to for them to raise pref equity for their own deals, but wait, that won't look too good, so let's layer in some private credit, too.

It says it will lend money AND invest pref equity into MF deals owned by Disrupt and Open Door Capital.

Questions to ask: what allocation is going to loans versus pref equity in their own deals?  Why do their deals need capital infused, and are those reasons due to poor management or things that were truly out of their control and/or could not have been foreseen at acquisition?

On the loans side, who is the lender JV? What is their book of business? Is this lender going to sending money back, as second mortgages to ODC/Disrupt deals?

@Chris Seveney, I can only imagine two things here:
1. They are lending to people who are so desperate they will pay 16+% for the loan.  Which in itself gives me major pause, because these rescue capital loans almost never work out.

2. They aren't making money on the loans and the true business driver is the pref equity raise for their own deals.  It allows them to keep those afloat and can collect fees on that side by retaining ownership of the deal.

[Dan Rowley]

@Hyun Supul  I would be VERY careful here.  If ODC cannot execute on their funds and are falling well short of performance expectations, then I'm not sure how any potential investor would feel secure in this new 'private credit fund'.  As has been pointed out already, it's a different business model and do they even know to manage it?  I would not envy investors who participate in this vehicle when the team has not track record of success with it.  And a whole other matter is the fact they may use/direct some of these new funds to prop up their struggling funds...

[Jim Peret]

Dan,

Why are you acting like mismanaged ODC is the gold standard?  

[Dan Rowley]

Quote from @Jim Peret:

Dan,

Why are you acting like mismanaged ODC is the gold standard?  

 Jim,

I'm not sure you how you would interpret my comment to me I represent ODC as a gold standard.  It's quite the contrary.  I have not nor would I invest in ODC and RE: my comment - I was focusing in on the fact they are now offering a private credit fund, which is a very different business/investment VS. a syndication, and so I'm advising that potential investors should be wary of this.

[Jim Peret]

Sorry Dan I misinterpreted your post. 

I invested in ODC Sunbelt Diversified Porfilio and 2.5 years in NOI. They also raising more capitol to cover the monthly loses which dilutes our shares. They're missed every metric. Vacancy rate, insurances taxes, interest rate, repairs and maintenance. One or two maybe but everything. It's unbelievable that anyone could be so bad at buying real estate. Unless you're partying in Hawaii and picking real estate without doing any due diligence at all. To top it off he's out selling guru stuff and has been. He should be digging his heels in every day to make his investor profitable. That is if he gives a Sh t.

[Dan Rowley]

Quote from @Jim Peret:

Sorry Dan I misinterpreted your post. 

I invested in ODC Sunbelt Diversified Porfilio and 2.5 years in NOI. They also raising more capitol to cover the monthly loses which dilutes our shares. They're missed every metric. Vacancy rate, insurances taxes, interest rate, repairs and maintenance. One or two maybe but everything. It's unbelievable that anyone could be so bad at buying real estate. Unless you're partying in Hawaii and picking real estate without doing any due diligence at all. To top it off he's out selling guru stuff and has been. He should be digging his heels in every day to make his investor profitable. That is if he gives a Sh t.

 Jim - yes, 100%

I feel like especially in these type of syndicated FUNDS, there were operators that raised a bunch of money and then rushed out to immediately deploy the capital - overpaying for assets at the peak of the market and/or using risky bridge debt.  So, so it's not real surprising to see some of these results.... sigh

[John McCullough]

Quote from @John McCullough:

Yes,  I invested in the Lone Star Portfolio earlier this year and the distributions and improvements are preforming as expected. There are some great webinars which go in depth to explain the details. Not sure of cons other than not being able to directly control the investment like I can my rentals.  What are you considering?

 Latest update is distributions have paused and they are now raising additional capital. 

[Jay Hinrichs]

Quote from @Evan Polaski:

@Hyun Supul, without diving too far into this, and the devil is always in the details, when I see this, I can't help but assume this whole offering is a way to for them to raise pref equity for their own deals, but wait, that won't look too good, so let's layer in some private credit, too.

It says it will lend money AND invest pref equity into MF deals owned by Disrupt and Open Door Capital.

Questions to ask: what allocation is going to loans versus pref equity in their own deals?  Why do their deals need capital infused, and are those reasons due to poor management or things that were truly out of their control and/or could not have been foreseen at acquisition?

On the loans side, who is the lender JV? What is their book of business? Is this lender going to sending money back, as second mortgages to ODC/Disrupt deals?

@Chris Seveney, I can only imagine two things here:
1. They are lending to people who are so desperate they will pay 16+% for the loan.  Which in itself gives me major pause, because these rescue capital loans almost never work out.

2. They aren't making money on the loans and the true business driver is the pref equity raise for their own deals.  It allows them to keep those afloat and can collect fees on that side by retaining ownership of the deal.

OH gosh I just read this and this is what led a company I worked for in the 80s into a massive BK loaning between partnerships.. Not sure about this I hope they can pull it out. 

[Chris Seveney]

Quote from @Jay Hinrichs:

Quote from @Evan Polaski:

@Hyun Supul, without diving too far into this, and the devil is always in the details, when I see this, I can't help but assume this whole offering is a way to for them to raise pref equity for their own deals, but wait, that won't look too good, so let's layer in some private credit, too.

It says it will lend money AND invest pref equity into MF deals owned by Disrupt and Open Door Capital.

Questions to ask: what allocation is going to loans versus pref equity in their own deals?  Why do their deals need capital infused, and are those reasons due to poor management or things that were truly out of their control and/or could not have been foreseen at acquisition?

On the loans side, who is the lender JV? What is their book of business? Is this lender going to sending money back, as second mortgages to ODC/Disrupt deals?

@Chris Seveney, I can only imagine two things here:
1. They are lending to people who are so desperate they will pay 16+% for the loan.  Which in itself gives me major pause, because these rescue capital loans almost never work out.

2. They aren't making money on the loans and the true business driver is the pref equity raise for their own deals.  It allows them to keep those afloat and can collect fees on that side by retaining ownership of the deal.

OH gosh I just read this and this is what led a company I worked for in the 80s into a massive BK loaning between partnerships.. Not sure about this I hope they can pull it out. 

 Do not quote me on this but I think someone told me the new fund was a debt fund (along with some other asset classes) and a percentage of the money raised was to invest in their other funds (ie. instead of capital calls).  This is what I heard third hand, so not sure if it is true but i believe the person got this from the PPM which was noting where the monies were going. 

I know the "survive till 25" crowd was banking on interest rates going down to the 4's or low 5's next year and that was going to save these deals. If that is the case, I unfortunately do not see that happen.

What do others think?

[Dan Rowley]

Quote from @Chris Seveney:

Quote from @Jay Hinrichs:

Quote from @Evan Polaski:

@Hyun Supul, without diving too far into this, and the devil is always in the details, when I see this, I can't help but assume this whole offering is a way to for them to raise pref equity for their own deals, but wait, that won't look too good, so let's layer in some private credit, too.

It says it will lend money AND invest pref equity into MF deals owned by Disrupt and Open Door Capital.

Questions to ask: what allocation is going to loans versus pref equity in their own deals?  Why do their deals need capital infused, and are those reasons due to poor management or things that were truly out of their control and/or could not have been foreseen at acquisition?

On the loans side, who is the lender JV? What is their book of business? Is this lender going to sending money back, as second mortgages to ODC/Disrupt deals?

@Chris Seveney, I can only imagine two things here:
1. They are lending to people who are so desperate they will pay 16+% for the loan.  Which in itself gives me major pause, because these rescue capital loans almost never work out.

2. They aren't making money on the loans and the true business driver is the pref equity raise for their own deals.  It allows them to keep those afloat and can collect fees on that side by retaining ownership of the deal.

OH gosh I just read this and this is what led a company I worked for in the 80s into a massive BK loaning between partnerships.. Not sure about this I hope they can pull it out. 

 Do not quote me on this but I think someone told me the new fund was a debt fund (along with some other asset classes) and a percentage of the money raised was to invest in their other funds (ie. instead of capital calls).  This is what I heard third hand, so not sure if it is true but i believe the person got this from the PPM which was noting where the monies were going. 

I know the "survive till 25" crowd was banking on interest rates going down to the 4's or low 5's next year and that was going to save these deals. If that is the case, I unfortunately do not see that happen.

What do others think?

 Chris, Agreed & I see a VERY low probability that interest rates will be in 4s or 5s in 2025, so those deals with variable rate debt will likely continue to bleed.

[Jay Hinrichs]

Quote from @Dan Rowley:

Quote from @Chris Seveney:

Quote from @Jay Hinrichs:

Quote from @Evan Polaski:

@Hyun Supul, without diving too far into this, and the devil is always in the details, when I see this, I can't help but assume this whole offering is a way to for them to raise pref equity for their own deals, but wait, that won't look too good, so let's layer in some private credit, too.

It says it will lend money AND invest pref equity into MF deals owned by Disrupt and Open Door Capital.

Questions to ask: what allocation is going to loans versus pref equity in their own deals?  Why do their deals need capital infused, and are those reasons due to poor management or things that were truly out of their control and/or could not have been foreseen at acquisition?

On the loans side, who is the lender JV? What is their book of business? Is this lender going to sending money back, as second mortgages to ODC/Disrupt deals?

@Chris Seveney, I can only imagine two things here:
1. They are lending to people who are so desperate they will pay 16+% for the loan.  Which in itself gives me major pause, because these rescue capital loans almost never work out.

2. They aren't making money on the loans and the true business driver is the pref equity raise for their own deals.  It allows them to keep those afloat and can collect fees on that side by retaining ownership of the deal.

OH gosh I just read this and this is what led a company I worked for in the 80s into a massive BK loaning between partnerships.. Not sure about this I hope they can pull it out. 

 Do not quote me on this but I think someone told me the new fund was a debt fund (along with some other asset classes) and a percentage of the money raised was to invest in their other funds (ie. instead of capital calls).  This is what I heard third hand, so not sure if it is true but i believe the person got this from the PPM which was noting where the monies were going. 

I know the "survive till 25" crowd was banking on interest rates going down to the 4's or low 5's next year and that was going to save these deals. If that is the case, I unfortunately do not see that happen.

What do others think?

 Chris, Agreed & I see a VERY low probability that interest rates will be in 4s or 5s in 2025, so those deals with variable rate debt will likely continue to bleed.

no chance rates will be in the 4s  potentiall higher or mid 5s though.. we just locked in a 6% so getting close. 

[Henry Clark]

All LPs on this post.  Please post your due diligence checklist.

[Henry Clark]

All LPs on this post if your fund is not performing to your expectation which of your due diligence items failed and why?

[Henry Clark]

All LPs on this post if an item in your due diligence list failed.   And now they are asking for a capital call or delayed distribution.   What is the gap in that item and what is the plan to close the gap?  

Example:  occupancy was 85%, plan was 95%, after 2 years at 87%.   What are the GP plans and timing to close the gap?  

Or plan was to recondition 100% of units.  Currently 85% done.   Will capital call close that gap?