Norada Capital Management suspending payments

[Paula Impala]

I invested in Norada Capital Management and was coming here to connect with others who have invested. Did not receive my payment from Norada this month (June) and just received the following notification in my email.

Any thoughts or recommendations from fellow investors.  Thank you in advance for any advice or insight.

Dear Valued Investor,

I hope you are well. As a lender (aka “Maker”) to Norada, you are a valued member of the Norada family.
The purpose of this correspondence is to provide you with an update on the repayment under the terms of the promissory note (“Note”) as an obligation of Norada Capital Management, LLC (“Norada”).
As with all businesses, Norada is subject to market factors that could impact its ability to make payments. Due to current market conditions and unforeseen financial challenges, we have decided to temporarily suspend distribution payments. This decision was not made lightly and comes after thorough deliberation and analysis of our current financial position.
This requires us to exercise our right to convert your Note and issue equity (aka membership interests) in Norada. You will recall that your Note allows Norada to convert the outstanding balance owed into equity and that it can redeem that equity in the future by repayment of the Note principal in full. There is nothing required by you related to your Note being converted. It happens automatically upon notice being sent.
As such, this email will provide you notice that Norada has chosen to exercise its right under the Note §6 to issue equity to you in Norada. Your equity is valued at the unpaid face value of the Note plus any accrued but unpaid interest. We expect to be in a position to redeem your interests in short order, and we will keep you posted, as always, on any developments in this regard.

We understand the importance of distributions to our investors and recognize the impact this decision may have on your financial planning. Please be assured that this suspension is temporary. We are committed to resuming regular distributions as soon as our financial situation stabilizes and improves.

Our primary goal is to ensure the long-term stability and sustainability of our business. By temporarily halting distributions, we can preserve capital, manage our resources more effectively, and invest in key areas that will drive future growth and profitability.

In the interim, we are taking strategic steps to strengthen our financial health, including cost-reduction measures, revenue-generating initiatives, and debt restructuring options. Our management team is dedicated to navigating through these challenges and emerging stronger.
We greatly appreciate your understanding and patience during this time. We remain committed to transparency and will keep you informed of any significant developments. If you have any questions or need further clarification, please feel free to contact me directly. (I will do my best to reply to your email in a timely manner.)
Thank you for your continued trust and support.
Sincerely,

Marco SantarelliFounder & CEONorada Capital Management

[V.G Jason]

Quote from @Terra Padgett:

Quote from @Paula Impala:

I invested in Norada Capital Management and was coming here to connect with others who have invested. Did not receive my payment from Norada this month (June) and just received the following notification in my email.

Any thoughts or recommendations from fellow investors.  Thank you in advance for any advice or insight.

Dear Valued Investor,

I hope you are well. As a lender (aka “Maker”) to Norada, you are a valued member of the Norada family.
The purpose of this correspondence is to provide you with an update on the repayment under the terms of the promissory note (“Note”) as an obligation of Norada Capital Management, LLC (“Norada”).
As with all businesses, Norada is subject to market factors that could impact its ability to make payments. Due to current market conditions and unforeseen financial challenges, we have decided to temporarily suspend distribution payments. This decision was not made lightly and comes after thorough deliberation and analysis of our current financial position.
This requires us to exercise our right to convert your Note and issue equity (aka membership interests) in Norada. You will recall that your Note allows Norada to convert the outstanding balance owed into equity and that it can redeem that equity in the future by repayment of the Note principal in full. There is nothing required by you related to your Note being converted. It happens automatically upon notice being sent.
As such, this email will provide you notice that Norada has chosen to exercise its right under the Note §6 to issue equity to you in Norada. Your equity is valued at the unpaid face value of the Note plus any accrued but unpaid interest. We expect to be in a position to redeem your interests in short order, and we will keep you posted, as always, on any developments in this regard.

We understand the importance of distributions to our investors and recognize the impact this decision may have on your financial planning. Please be assured that this suspension is temporary. We are committed to resuming regular distributions as soon as our financial situation stabilizes and improves.

Our primary goal is to ensure the long-term stability and sustainability of our business. By temporarily halting distributions, we can preserve capital, manage our resources more effectively, and invest in key areas that will drive future growth and profitability.

In the interim, we are taking strategic steps to strengthen our financial health, including cost-reduction measures, revenue-generating initiatives, and debt restructuring options. Our management team is dedicated to navigating through these challenges and emerging stronger.
We greatly appreciate your understanding and patience during this time. We remain committed to transparency and will keep you informed of any significant developments. If you have any questions or need further clarification, please feel free to contact me directly. (I will do my best to reply to your email in a timely manner.)
Thank you for your continued trust and support.
Sincerely,

Marco SantarelliFounder & CEONorada Capital Management

I hate to see/hear this. We looked at investing in the Norada Notes last year with my Investment Club. It was an unsecured note NOT backed by any real estate or hard asset. But rather how we understood it, the note was tied to the performance of previous Brick & Mortar stores that Norada said were performing well as online e-commerce stores now. We requested to see financials as part of our due diligence (numerous times), however they declined to provide anything saying that since they were a private company they didn’t provide financials. They offered to provide projections or a pro-forma. That was not acceptable to us as projections wouldn’t tell us how the company or portfolio of companies have been performing to date or give us any confidence in the degree of certainty with their ability to repay the note. We didn’t believe those old online retailers were performing well and didn’t even know they were still around. We decided to pass on investing.
I hope this works out well for all in the end, but I would certainly be concerned with them converting a Debt Position to an Equity Position at discretion. Especially if it was just in the fine print. That should have been highlighted. You’re just bumping investors down to the very bottom of the capital stack. I’d rather they just pause distributions and pick back up once the “economic conditions” are sorted out. But they wouldn’t want to accrue that kind of interest with those 12-15% notes. Again, I hope it works out well for all once all is said and done. 

 More people need to read this. Not just on the basis of Norada's clearly ******** passive note capital fund scheme but anyone who invests.

Stick to near prime-ish returns. Once you see those, then investigate what's behind the investment. You'll likely see something asset-backed, and you're good to move provided other diligence. Just make sure other downsides are covered-- is capital callable, if so at what redemption cost, the tenure of the GP, do  you want to be an LP on the asset, etc.

Assume everything will fail; are you okay with it? That's investing. For one anyone that says its gambling, it's a blurry line and a cold world.

[Jon P.]

Quote from @Jay Hinrichs:

@Jon P.

"-Proper SEC guidelines/filings were not followed to raise capital from a
large group of unaccredited investors. This is a big legal issue that
may weigh in favor of the investor. Probably some predatory or
fraudulent activity here that should be investigated."

John I am in no way defending this company.. However I  do want to know why you think the statement above is true.. How do you know the SEC guidelines were not followed?  I am a firm believer that if companies just send a simple Are you accredited sign here form that many investors simply fib.. And then invest and the company does no other verification of their status. The few syndication I have done over the years I had to provide a letter from my CPA stating our accredited status.  Unless of course they were using a SEC vehicle that allowed a certain amount of non accredited. 

I can see how this happened though.. Monster data base  tons of credibility with your RE clients one has sold to over the years.. RE sales slows a LOT to generate revenue find a new investment.

 @Jay Hinrichs SEC filings are public information, so anyone can look this up, which I did.  Just do a simple google search.

This was filed as a 506(c) in 2020, which a 506(c) is only available to accredited investors only and has strict rules around solicitation!  I have been on the email list for some time and no advertisement ever mentioned anything about accredited investor status.  Here are the key points that led me to believe the SEC to be inappropriately filed and inappropriately executed leading to this disaster:

-This was clearly solicited to unaccredited investors with no mention of accreditation status.  It appears that many that invested are not accredited investors.  @Paula Impala, are you an accredited investor, or were you ever asked about this prior to giving them money?

-It is stated that this would not last more than one year.  They first filed this and sold it in 2020, but it's still ongoing now in 2024 as they continue to solicit it.

-It is listed as a debt security, which seems to be inappropriate as this was not a debt offering and they are offering equity to investors.  Equity was not identified in the SEC filing even though it's a clear option.

-Looks like they already sold this to 59 investors for $4M at time of filing.  

Now, I'm no SEC expert, but on the surface, there seems to be quite a bit that doesn't line up here.

The OP on this thread came here asking for help and suggestions on what to do.  I see a ton of posting about unrelated information.  It would be nice if the people that seem to live on these forum threads would actually chime in to offer some advice for the OP along with anyone else that invested in these funds instead of just commenting on how crappy of an offering this was!

[Basit Siddiqi]

Quote from @Jon P.:

Quote from @Jay Hinrichs:

@Jon P.

"-Proper SEC guidelines/filings were not followed to raise capital from a
large group of unaccredited investors. This is a big legal issue that
may weigh in favor of the investor. Probably some predatory or
fraudulent activity here that should be investigated."

John I am in no way defending this company.. However I  do want to know why you think the statement above is true.. How do you know the SEC guidelines were not followed?  I am a firm believer that if companies just send a simple Are you accredited sign here form that many investors simply fib.. And then invest and the company does no other verification of their status. The few syndication I have done over the years I had to provide a letter from my CPA stating our accredited status.  Unless of course they were using a SEC vehicle that allowed a certain amount of non accredited. 

I can see how this happened though.. Monster data base  tons of credibility with your RE clients one has sold to over the years.. RE sales slows a LOT to generate revenue find a new investment.

 @Jay Hinrichs SEC filings are public information, so anyone can look this up, which I did.  Just do a simple google search.

This was filed as a 506(c) in 2020, which a 506(c) is only available to accredited investors only and has strict rules around solicitation!  I have been on the email list for some time and no advertisement ever mentioned anything about accredited investor status.  Here are the key points that led me to believe the SEC to be inappropriately filed and inappropriately executed leading to this disaster:

-This was clearly solicited to unaccredited investors with no mention of accreditation status.  It appears that many that invested are not accredited investors.  @Paula Impala, are you an accredited investor, or were you ever asked about this prior to giving them money?

-It is stated that this would not last more than one year.  They first filed this and sold it in 2020, but it's still ongoing now in 2024 as they continue to solicit it.

-It is listed as a debt security, which seems to be inappropriate as this was not a debt offering and they are offering equity to investors.  Equity was not identified in the SEC filing even though it's a clear option.

-Looks like they already sold this to 59 investors for $4M at time of filing.  

Now, I'm no SEC expert, but on the surface, there seems to be quite a bit that doesn't line up here.

The OP on this thread came here asking for help and suggestions on what to do.  I see a ton of posting about unrelated information.  It would be nice if the people that seem to live on these forum threads would actually chime in to offer some advice for the OP along with anyone else that invested in these funds instead of just commenting on how crappy of an offering this was!

 Agree, it is very distasteful to read many comments regard how 'crappy' of an investment that people made and then add little to no value to to any one in this thread.

[Chris Seveney]

@Basit Siddiqi

Simple answer is get an attorney to read all the offering documents and start communicating with the sponsor. Otherwise you are going to be at the mercy of getting information when the sponsor deems fit - anytime something like this happens - does not matter who the sponsor is you need to have an attorney on speed dial and get them involved and advising what to do and make sure you are agressive not passive

I have seen someone who was afraid to file a lawsuit end up at the back of the line and if they would have taken everyone’s advice they would have gotten close to their $250k back but instead they got zero.

[Jay Hinrichs]

Quote from @Jon P.:

Quote from @Jay Hinrichs:

@Jon P.

"-Proper SEC guidelines/filings were not followed to raise capital from a
large group of unaccredited investors. This is a big legal issue that
may weigh in favor of the investor. Probably some predatory or
fraudulent activity here that should be investigated."

John I am in no way defending this company.. However I  do want to know why you think the statement above is true.. How do you know the SEC guidelines were not followed?  I am a firm believer that if companies just send a simple Are you accredited sign here form that many investors simply fib.. And then invest and the company does no other verification of their status. The few syndication I have done over the years I had to provide a letter from my CPA stating our accredited status.  Unless of course they were using a SEC vehicle that allowed a certain amount of non accredited. 

I can see how this happened though.. Monster data base  tons of credibility with your RE clients one has sold to over the years.. RE sales slows a LOT to generate revenue find a new investment.

 @Jay Hinrichs SEC filings are public information, so anyone can look this up, which I did.  Just do a simple google search.

This was filed as a 506(c) in 2020, which a 506(c) is only available to accredited investors only and has strict rules around solicitation!  I have been on the email list for some time and no advertisement ever mentioned anything about accredited investor status.  Here are the key points that led me to believe the SEC to be inappropriately filed and inappropriately executed leading to this disaster:

-This was clearly solicited to unaccredited investors with no mention of accreditation status.  It appears that many that invested are not accredited investors.  @Paula Impala, are you an accredited investor, or were you ever asked about this prior to giving them money?

-It is stated that this would not last more than one year.  They first filed this and sold it in 2020, but it's still ongoing now in 2024 as they continue to solicit it.

-It is listed as a debt security, which seems to be inappropriate as this was not a debt offering and they are offering equity to investors.  Equity was not identified in the SEC filing even though it's a clear option.

-Looks like they already sold this to 59 investors for $4M at time of filing.  

Now, I'm no SEC expert, but on the surface, there seems to be quite a bit that doesn't line up here.

The OP on this thread came here asking for help and suggestions on what to do.  I see a ton of posting about unrelated information.  It would be nice if the people that seem to live on these forum threads would actually chime in to offer some advice for the OP along with anyone else that invested in these funds instead of just commenting on how crappy of an offering this was!

Thank you for your detailed response .. sounds like my assumptions maybe correct about accredited status etc.. I dont think this is unique to this offering though from what I see out there these days the gloss over of accredited status and investors not telling the truth about their status.

As for actionable advice for the investors.. there is not much to say really. When you go into these deals you lose all control the day the money left your account and your relying 100% on the sponsor.
Litigation is always an option although one has to weigh throwing  good money after bad. And or wait it out maybe it rights itself that is always a possibility. Rates at the time this was offered were where 1 to 3 % so to get 12 to 17 denotes a certain amount of risk.. So there should not be a shock and this could just boil down to the sponsor simply made a bad investment.  I mean look at all the MF deals go sideways big time  by flushing those out on BP we find many were done because of keep up with the Jones offering highest return possible and to do that took on the most aggressive debt stances and proforma s of caps lower and rents rising and or refis in the offing.. now we see that in hindsight those structures are not working given that rates rose cap rates rose ( instead of fall( and rents are flat or falling)..

As for this offering I think the sponsor can send that out to anyone in their data base that they determine they have a business relationship with.. ??

So for now what we are seeing as these deals are not working as advertised is many investors just dont want to admit they invested in a very high risk venture and if its not going right it has to be the Sponors fault so  like the little statue on my Dads attorneys desk said  SUE the BASTARDS :)

[Jay Hinrichs]

@Jon P.  Jon I just happen to see another thread on Norada and a post by Marco himself.

As you can see he clearly states the accredited criteria. at least in this post 

Good morning gentleman.

Just to provide clarity in this post, there are three (3) separate companies:

1) Norada Real Estate Investments

2) Norada Real Estate Funding

3) Norada Capital Management

The Promissory Notes you're referring to belong to Norada Capital Management. These are not specifically real estate related. They are business notes backed by our portfolio of 10+ businesses which does include some real estate.

The note returns range based on investment but is double-digit. There are also bonus rates for larger investments. Interest payments are paid monthly, and Note lengths are currently 2- or 3-year terms.

Note that you must be an accredited investor as defined by the SEC.

Please let me know if you have any questions.

Continued success!

• Norada Real Estate Investments
• https://www.NoradaRealEstate.com

[Carlos Ptriawan]

Quote from @Chris Seveney:

@Basit Siddiqi

Simple answer is get an attorney to read all the offering documents and start communicating with the sponsor. Otherwise you are going to be at the mercy of getting information when the sponsor deems fit - anytime something like this happens - does not matter who the sponsor is you need to have an attorney on speed dial and get them involved and advising what to do and make sure you are agressive not passive

I have seen someone who was afraid to file a lawsuit end up at the back of the line and if they would have taken everyone’s advice they would have gotten close to their $250k back but instead they got zero.

I seriously think people does not understand how Ponzi operates. You don't even need to check the accredited route.

First, FBI and SEC already mentioned any investment promising a very high return is Ponzi.
It's known investment of 20% and above is Ponzi and would be very fast liquidated.

Madoff for example does't open his fund to everyone but use a feeder fund, in this instance, Norada is the feeder fund and may receive kickback/commision from the Lopez guy.

For me it's very transparent Ponzyyy just by opening their website, there're thousand of warning spread out of internet.

[Edward Condon]

@Paula Impala
From what I can see on this thread, the investors let Norada toss the coin and say, "You call it. Heads, I win. Tails, you lose." Had everything gone well, investors would have gotten "debt returns". With things going badly, investors get "equity risk". I can't know from where I sit, but the possibility exists that this is a genuinely crappy, asymmetric, yet legal deal.
This requires us to exercise our right to convert your Note and issue equity (aka membership interests) in Norada. You will recall that your Note allows Norada to convert the outstanding balance owed into equity and that it can redeem that equity in the future by repayment of the Note principal in full.

[Edward Condon]

@Jay Hinrichs
Dear Jay,
You, sir, are an optimist.  You appear to take a much less dim view of your fellow man than I do.
"Norada is one of the largest and successful turn key Brokers in the US.. so equity in the company is probably a very good thing while they shore up whatever it is they need to shore up."
The way I read the text, when times get bad, Norada flips debt holders to equity holders.  If good times return, they flip the new equity holders back to debt.  If good times don't return, the new equity holders go down with the ship.  (P.S.  With nothing on which to foreclose, these "Note Holders" were "Note Holders" in name only. They were equity holders with capped returns.)

[Michael Thompson]

Paula was on investor zoom for Norada MGMT loan note not long ago. I recognized someone. Said nothing.  Knew the company's days were numbered. Contact this guy on tiktoc. 

oneminuteonfraud

[Jay Hinrichs]

Quote from @Edward Condon:

@Jay Hinrichs
Dear Jay,
You, sir, are an optimist.  You appear to take a much less dim view of your fellow man than I do.
"Norada is one of the largest and successful turn key Brokers in the US.. so equity in the company is probably a very good thing while they shore up whatever it is they need to shore up."
The way I read the text, when times get bad, Norada flips debt holders to equity holders.  If good times return, they flip the new equity holders back to debt.  If good times don't return, the new equity holders go down with the ship.  (P.S.  With nothing on which to foreclose, these "Note Holders" were "Note Holders" in name only. They were equity holders with capped returns.)

that was early in the thread I was under the impression that the equity was going to be vested in their brokerage business which is one of the top turnkey marketers in the country. At this point I too am unclear how this will all shake out..

[Chris Clothier]

I just found this thread tonight, and I am trying to make sense of what I am reading.

I received two emails in the last few days, literally, offering a limited opportunity to invest in a new fundraising expansion capital for some new business that is part of the Norada family.  12-month secured note at 17%.  Now, I am not a sophisticated investor, but I have enough scars to know better than to respond to those emails, but they lean heavily into their brand and reputation and even have some big names right here on BP leaning into those as defenses in this thread.  I could see others jumping in, even really smart people who should know better.  

I think it's best I read the whole thread and do some more research before I comment or even if I comment further. This could be a reputation and brand killer.  

[Don Konipol]

Quote from @Carlos Ptriawan:

Quote from @Chris Seveney:

@Basit Siddiqi

Simple answer is get an attorney to read all the offering documents and start communicating with the sponsor. Otherwise you are going to be at the mercy of getting information when the sponsor deems fit - anytime something like this happens - does not matter who the sponsor is you need to have an attorney on speed dial and get them involved and advising what to do and make sure you are agressive not passive

I have seen someone who was afraid to file a lawsuit end up at the back of the line and if they would have taken everyone’s advice they would have gotten close to their $250k back but instead they got zero.

 First, FBI and SEC already mentioned any investment promising a very high return is Ponzi. It's known investment of 20% and above is Ponzi and would be very fast liquidated.

I seriously think people does not understand how Ponzi operates. You don't even need to check the accredited route.

First, FBI and SEC already mentioned any investment promising a very high return is Ponzi.
It's First, FBI and SEC already mentioned any investment promising a very high return is Ponzi. It's known investment of 20% and above is Ponzi and would be very fast liquidated.known investment of 20% and above is Ponzi and would be very fast liquidated.

Madoff for example does't open his fund to everyone but use a feeder fund, in this instance, Norada is the feeder fund and may receive kickback/commision from the Lopez guy.

For me it's very transparent Ponzyyy just by opening their website, there're thousand of warning spread out of internet.

‘First, FBI and SEC already mentioned any investment promising a very high return is Ponzi.
It's known investment of 20% and above is Ponzi and would be very fast liquidated.”

 
where in the world did you come up with that? Lots of investments return 20%+ and are legit, perhaps high risk (like venture cap, hedge funds, real estate value added). The DEFINITION of Ponzi is providing early investors with a supposed earned return which is actually provided not by ROI but by using the investment of later investors. There is no specific promised ROI that defines an investment as being a "Ponzi Scheme".
Madoff, for example didn’t “promise” investors any particular return.  In fact, he delivered returns “only” in the 11% ROI range.  What made it a Ponzi Scheme was the use of new incoming investment capital to pay existing investors a return.  

[Patti Robertson]

Quote from @Chris Clothier:

I think it's best I read the whole thread and do some more research before I comment or even if I comment further. This could be a reputation and brand killer.  

What it could be is a retirement fund killer!  Sure sounds like they are raising funds to pay back earlier investors.

[James Wise]

Quote from @Chris Clothier:

I just found this thread tonight, and I am trying to make sense of what I am reading.

I received two emails in the last few days, literally, offering a limited opportunity to invest in a new fundraising expansion capital for some new business that is part of the Norada family.  12-month secured note at 17%.  Now, I am not a sophisticated investor, but I have enough scars to know better than to respond to those emails, but they lean heavily into their brand and reputation and even have some big names right here on BP leaning into those as defenses in this thread.  I could see others jumping in, even really smart people who should know better.  

I think it's best I read the whole thread and do some more research before I comment or even if I comment further. This could be a reputation and brand killer.  

 Once the company sends out an email telling their customers that they are their "family" you know everything else after that is going to be a line of b/s and deflection lol.

I hope you are well. As a lender (aka “Maker”) to Norada, you are a valued member of the Norada family.

As the CEO of HoltonWise, I vow that we will never refer to any of you freaks as family lol.

[Chris Seveney]

@Don Konipol

100% agree

Who knows how this pans out but if you go to

https://noradacapital.com it says current holdings and those include radio shack, pier 1, linens and things etc.

So without seeing any paperwork you were investing in essentially an accredited mutual fund from someone who says they were a real estate guy

For me - if I put myself in those shoes as a real estate guy trying to run a fund of private or public companies all not real estate related- I have ZERO experience in that. What was the sponsors ?

[Don Konipol]

Quote from @Chris Seveney:

@Don Konipol

100% agree

Who knows how this pans out but if you go to

https://noradacapital.com it says current holdings and those include radio shack, pier 1, linens and things etc.

So without seeing any paperwork you were investing in essentially an accredited mutual fund from someone who says they were a real estate guy

For me - if I put myself in those shoes as a real estate guy trying to run a fund of private or public companies all not real estate related- I have ZERO experience in that. What was the sponsors ?

Right Chris

you’d think people would research the HOW to invest before investing their “life” savings. 
If someone is worth $10 million and wants to take a $50k or $100k “flyer’ without thorough investigation, that’s okay.  But placing a significant amount of your capital with some stooges without a clue as to what they’re doing is flushing money down the toilet.  And if you invest but have no idea either WHAT your investment is or HOW it is secured or IF it is a debt investment, equity investment, or hybrid of the two is a sure fire way to get burned.  What’s worse is many investors who do get burned become afraid of investments in general and keep their money “safe” at bank rates of return.  

In my mind this all goes back to RISK.  unless or until an investor understands and can somehow quantify risk in each investment they’re considering they can not make a proper investment decision.  It’s like asking whether you should invest in an investment that has an expected return of 20% or an investment with an expected return of 10%.  If you can’t quantify risk and don’t understand the mechanics of “weighted” average of expected return and range of returns (standard deviation) then you are at a severe disadvantage and should consider a competent investment / financial manager for your investment capital.  

Btw, I’ve seen people with a great deal of success in ACTIVE REAL ESTATE BUSINESS lose large sums in passive investment for just these reasons.  Running a real estate business, active investing in real estate, and passive investing in real estate are three related but DIFFERENT categories.  And investing in “other” than real estate is even more different.  It’s like you and I leveraging our success in notes/lending to raise $100 million to invest in art.  And investors thinking they’ve done their “due diligence” because they checked our track record in note investing.  

[Jay Hinrichs]

Quote from @Don Konipol:

Quote from @Chris Seveney:

@Don Konipol

100% agree

Who knows how this pans out but if you go to

https://noradacapital.com it says current holdings and those include radio shack, pier 1, linens and things etc.

So without seeing any paperwork you were investing in essentially an accredited mutual fund from someone who says they were a real estate guy

For me - if I put myself in those shoes as a real estate guy trying to run a fund of private or public companies all not real estate related- I have ZERO experience in that. What was the sponsors ?

Right Chris

you’d think people would research the HOW to invest before investing their “life” savings. 
If someone is worth $10 million and wants to take a $50k or $100k “flyer’ without thorough investigation, that’s okay.  But placing a significant amount of your capital with some stooges without a clue as to what they’re doing is flushing money down the toilet.  And if you invest but have no idea either WHAT your investment is or HOW it is secured or IF it is a debt investment, equity investment, or hybrid of the two is a sure fire way to get burned.  What’s worse is many investors who do get burned become afraid of investments in general and keep their money “safe” at bank rates of return.  

In my mind this all goes back to RISK.  unless or until an investor understands and can somehow quantify risk in each investment they’re considering they can not make a proper investment decision.  It’s like asking whether you should invest in an investment that has an expected return of 20% or an investment with an expected return of 10%.  If you can’t quantify risk and don’t understand the mechanics of “weighted” average of expected return and range of returns (standard deviation) then you are at a severe disadvantage and should consider a competent investment / financial manager for your investment capital.  

Btw, I’ve seen people with a great deal of success in ACTIVE REAL ESTATE BUSINESS lose large sums in passive investment for just these reasons.  Running a real estate business, active investing in real estate, and passive investing in real estate are three related but DIFFERENT categories.  And investing in “other” than real estate is even more different.  It’s like you and I leveraging our success in notes/lending to raise $100 million to invest in art.  And investors thinking they’ve done their “due diligence” because they checked our track record in note investing.  

over the years I have tried different investment away from RE and they did not work out for me but it was personal funds.  I mean trying to make great returns for our investors is tough enough as it is and of course not every deal is going to go perfectly one just has to look at back to the GFC some pretty smart folks took a beating.  We just try to have way more winners than losers :) But to this day I am never perfect we have some bummers when your doing volume.. But we also have some great wins that returns are substantially higher than whats being talked about here but I would never publicize them as folks first would not believe it and second think it was not legal or something.  I mean I look just at my timber days.. getting 100% financing from a mill at 0 interest and making 100 200  500k on a deal Net net net in less than 6 months.. who is going to really believe that right. But thats value add in the land and Timber space.. Also with my new construction 100% COC is very common for us in one year or less but again who is going to beleive that is safe and real ??

[Don Konipol]

Quote from @Jay Hinrichs:

Quote from @Don Konipol:

Quote from @Chris Seveney:

@Don Konipol

100% agree

Who knows how this pans out but if you go to

https://noradacapital.com it says current holdings and those include radio shack, pier 1, linens and things etc.

So without seeing any paperwork you were investing in essentially an accredited mutual fund from someone who says they were a real estate guy

For me - if I put myself in those shoes as a real estate guy trying to run a fund of private or public companies all not real estate related- I have ZERO experience in that. What was the sponsors ?

Right Chris

you’d think people would research the HOW to invest before investing their “life” savings. 
If someone is worth $10 million and wants to take a $50k or $100k “flyer’ without thorough investigation, that’s okay.  But placing a significant amount of your capital with some stooges without a clue as to what they’re doing is flushing money down the toilet.  And if you invest but have no idea either WHAT your investment is or HOW it is secured or IF it is a debt investment, equity investment, or hybrid of the two is a sure fire way to get burned.  What’s worse is many investors who do get burned become afraid of investments in general and keep their money “safe” at bank rates of return.  

In my mind this all goes back to RISK.  unless or until an investor understands and can somehow quantify risk in each investment they’re considering they can not make a proper investment decision.  It’s like asking whether you should invest in an investment that has an expected return of 20% or an investment with an expected return of 10%.  If you can’t quantify risk and don’t understand the mechanics of “weighted” average of expected return and range of returns (standard deviation) then you are at a severe disadvantage and should consider a competent investment / financial manager for your investment capital.  

Btw, I’ve seen people with a great deal of success in ACTIVE REAL ESTATE BUSINESS lose large sums in passive investment for just these reasons.  Running a real estate business, active investing in real estate, and passive investing in real estate are three related but DIFFERENT categories.  And investing in “other” than real estate is even more different.  It’s like you and I leveraging our success in notes/lending to raise $100 million to invest in art.  And investors thinking they’ve done their “due diligence” because they checked our track record in note investing.  

over the years I have tried different investment away from RE and they did not work out for me but it was personal funds.  I mean trying to make great returns for our investors is tough enough as it is and of course not every deal is going to go perfectly one just has to look at back to the GFC some pretty smart folks took a beating.  We just try to have way more winners than losers :) But to this day I am never perfect we have some bummers when your doing volume.. But we also have some great wins that returns are substantially higher than whats being talked about here but I would never publicize them as folks first would not believe it and second think it was not legal or something.  I mean I look just at my timber days.. getting 100% financing from a mill at 0 interest and making 100 200  500k on a deal Net net net in less than 6 months.. who is going to really believe that right. But thats value add in the land and Timber space.. Also with my new construction 100% COC is very common for us in one year or less but again who is going to beleive that is safe and real ??

Hey Jay, Happy 4th! 
The key in the deals you mentioned is that you CREATE the large ROI, it’s not a passive investment, it an ACTIVE investment. Some of our deals produce out size returns, but most are in the mid teens.  If an investor invested in every one of our 100 + deals since 2015 they’d have an annualized return of 12.4% .  Since these are high yield DEBT deals at 60% LTV or less on commercial property it’s a RELATIVELY low risk compared to value added or new build equity participations.  

We have a large investment in question not included in the above that consists of a $3.4 million note we purchased for $1.9 million.  When this pays off it should bring the ROI for all our investments up towards the 13% figure.  

I personally also do smaller deals myself or with my partner (investments below our minimum $700k threshold of our fund/syndications) that are more risky but provide a possible higher return.  Our average on these investments have been near 37% annual ROI.  But they’re really hard to find, and often involve “working” the deal.  While your value added is in the physical aspect of real estate (building SFR, developing subdivisions, etc) our emphasis is on deal structuring (loan modification, wrap mortgages, interest rate arbitration, real property consolidation, tenant repositioning, etc.). 

This is exactly why I believe that most people interested in actively participating in real estate (as opposed to just buying shares in REITs) biggest failure is that they want to skip the 12 - 36 months necessary to learn and experience real estate principles, real estate finance, and real estate law.  You just can’t successfully operate in the real estate industry unless you master these concepts.  A good start is the courses required for real estate licensure.  Not necessarily to become licensed, just to learn In an efficient and cost effective manner the basics that are necessary knowledge to be able to make informed decisions in the real estate field.  

[Chris Seveney]

Quote from @Don Konipol:

Quote from @Chris Seveney:

@Don Konipol

100% agree

Who knows how this pans out but if you go to

https://noradacapital.com it says current holdings and those include radio shack, pier 1, linens and things etc.

So without seeing any paperwork you were investing in essentially an accredited mutual fund from someone who says they were a real estate guy

For me - if I put myself in those shoes as a real estate guy trying to run a fund of private or public companies all not real estate related- I have ZERO experience in that. What was the sponsors ?

Right Chris

you’d think people would research the HOW to invest before investing their “life” savings. 
If someone is worth $10 million and wants to take a $50k or $100k “flyer’ without thorough investigation, that’s okay.  But placing a significant amount of your capital with some stooges without a clue as to what they’re doing is flushing money down the toilet.  And if you invest but have no idea either WHAT your investment is or HOW it is secured or IF it is a debt investment, equity investment, or hybrid of the two is a sure fire way to get burned.  What’s worse is many investors who do get burned become afraid of investments in general and keep their money “safe” at bank rates of return.  

In my mind this all goes back to RISK.  unless or until an investor understands and can somehow quantify risk in each investment they’re considering they can not make a proper investment decision.  It’s like asking whether you should invest in an investment that has an expected return of 20% or an investment with an expected return of 10%.  If you can’t quantify risk and don’t understand the mechanics of “weighted” average of expected return and range of returns (standard deviation) then you are at a severe disadvantage and should consider a competent investment / financial manager for your investment capital.  

Btw, I’ve seen people with a great deal of success in ACTIVE REAL ESTATE BUSINESS lose large sums in passive investment for just these reasons.  Running a real estate business, active investing in real estate, and passive investing in real estate are three related but DIFFERENT categories.  And investing in “other” than real estate is even more different.  It’s like you and I leveraging our success in notes/lending to raise $100 million to invest in art.  And investors thinking they’ve done their “due diligence” because they checked our track record in note investing.  

 This is why the numbers for an accredited investor should be changed. The $200k is from like 1982..... Back in 1982 a net worth of $1M or $200k a year was ALOT. One report said by 2027 it will be over 30% of population.

The issue with it is if you make $200k a year - $50k for an initial investment could be your life savings,  most people I know who make $200k do not even have $50k saved. As you have mentioned in the past, you should not put more than 10-15% of your money in one investment - so if you have $500k and want to throw $50k ok - but it still hurts. if its your first and only 50k, there are plenty of other opportunities out there to get in the game for less

For many - Goes back to greed and FOMO as well, last few years everyone and their brother wanted to jump in on the STR and MF space because of these great returns - no different than NFT's and bitcoin before that, but when something moves up quickly, it typically drops pretty quickly as well. Next we are going to see it on all this crazy "creative finance" that is going around where people are buying or selling via seller finance to those who are unqualified...

[Jay Hinrichs]

Quote from @Chris Seveney:

Quote from @Don Konipol:

Quote from @Chris Seveney:

@Don Konipol

100% agree

Who knows how this pans out but if you go to

https://noradacapital.com it says current holdings and those include radio shack, pier 1, linens and things etc.

So without seeing any paperwork you were investing in essentially an accredited mutual fund from someone who says they were a real estate guy

For me - if I put myself in those shoes as a real estate guy trying to run a fund of private or public companies all not real estate related- I have ZERO experience in that. What was the sponsors ?

Right Chris

you’d think people would research the HOW to invest before investing their “life” savings. 
If someone is worth $10 million and wants to take a $50k or $100k “flyer’ without thorough investigation, that’s okay.  But placing a significant amount of your capital with some stooges without a clue as to what they’re doing is flushing money down the toilet.  And if you invest but have no idea either WHAT your investment is or HOW it is secured or IF it is a debt investment, equity investment, or hybrid of the two is a sure fire way to get burned.  What’s worse is many investors who do get burned become afraid of investments in general and keep their money “safe” at bank rates of return.  

In my mind this all goes back to RISK.  unless or until an investor understands and can somehow quantify risk in each investment they’re considering they can not make a proper investment decision.  It’s like asking whether you should invest in an investment that has an expected return of 20% or an investment with an expected return of 10%.  If you can’t quantify risk and don’t understand the mechanics of “weighted” average of expected return and range of returns (standard deviation) then you are at a severe disadvantage and should consider a competent investment / financial manager for your investment capital.  

Btw, I’ve seen people with a great deal of success in ACTIVE REAL ESTATE BUSINESS lose large sums in passive investment for just these reasons.  Running a real estate business, active investing in real estate, and passive investing in real estate are three related but DIFFERENT categories.  And investing in “other” than real estate is even more different.  It’s like you and I leveraging our success in notes/lending to raise $100 million to invest in art.  And investors thinking they’ve done their “due diligence” because they checked our track record in note investing.  

 This is why the numbers for an accredited investor should be changed. The $200k is from like 1982..... Back in 1982 a net worth of $1M or $200k a year was ALOT. One report said by 2027 it will be over 30% of population.

The issue with it is if you make $200k a year - $50k for an initial investment could be your life savings,  most people I know who make $200k do not even have $50k saved. As you have mentioned in the past, you should not put more than 10-15% of your money in one investment - so if you have $500k and want to throw $50k ok - but it still hurts. if its your first and only 50k, there are plenty of other opportunities out there to get in the game for less

For many - Goes back to greed and FOMO as well, last few years everyone and their brother wanted to jump in on the STR and MF space because of these great returns - no different than NFT's and bitcoin before that, but when something moves up quickly, it typically drops pretty quickly as well. Next we are going to see it on all this crazy "creative finance" that is going around where people are buying or selling via seller finance to those who are unqualified...

 plus i am a firm believer that many who get into these deals fib about the accredited investor status and of course is there not a carve out in some of these offerings that allow a small number of non accredited. ?  

[Don Konipol]

Quote from @Jay Hinrichs:

Quote from @Chris Seveney:

Quote from @Don Konipol:

Quote from @Chris Seveney:

@Don Konipol

100% agree

Who knows how this pans out but if you go to

https://noradacapital.com it says current holdings and those include radio shack, pier 1, linens and things etc.

So without seeing any paperwork you were investing in essentially an accredited mutual fund from someone who says they were a real estate guy

For me - if I put myself in those shoes as a real estate guy trying to run a fund of private or public companies all not real estate related- I have ZERO experience in that. What was the sponsors ?

Right Chris

you’d think people would research the HOW to invest before investing their “life” savings. 
If someone is worth $10 million and wants to take a $50k or $100k “flyer’ without thorough investigation, that’s okay.  But placing a significant amount of your capital with some stooges without a clue as to what they’re doing is flushing money down the toilet.  And if you invest but have no idea either WHAT your investment is or HOW it is secured or IF it is a debt investment, equity investment, or hybrid of the two is a sure fire way to get burned.  What’s worse is many investors who do get burned become afraid of investments in general and keep their money “safe” at bank rates of return.  

In my mind this all goes back to RISK.  unless or until an investor understands and can somehow quantify risk in each investment they’re considering they can not make a proper investment decision.  It’s like asking whether you should invest in an investment that has an expected return of 20% or an investment with an expected return of 10%.  If you can’t quantify risk and don’t understand the mechanics of “weighted” average of expected return and range of returns (standard deviation) then you are at a severe disadvantage and should consider a competent investment / financial manager for your investment capital.  

Btw, I’ve seen people with a great deal of success in ACTIVE REAL ESTATE BUSINESS lose large sums in passive investment for just these reasons.  Running a real estate business, active investing in real estate, and passive investing in real estate are three related but DIFFERENT categories.  And investing in “other” than real estate is even more different.  It’s like you and I leveraging our success in notes/lending to raise $100 million to invest in art.  And investors thinking they’ve done their “due diligence” because they checked our track record in note investing.  

 This is why the numbers for an accredited investor should be changed. The $200k is from like 1982..... Back in 1982 a net worth of $1M or $200k a year was ALOT. One report said by 2027 it will be over 30% of population.

The issue with it is if you make $200k a year - $50k for an initial investment could be your life savings,  most people I know who make $200k do not even have $50k saved. As you have mentioned in the past, you should not put more than 10-15% of your money in one investment - so if you have $500k and want to throw $50k ok - but it still hurts. if its your first and only 50k, there are plenty of other opportunities out there to get in the game for less

For many - Goes back to greed and FOMO as well, last few years everyone and their brother wanted to jump in on the STR and MF space because of these great returns - no different than NFT's and bitcoin before that, but when something moves up quickly, it typically drops pretty quickly as well. Next we are going to see it on all this crazy "creative finance" that is going around where people are buying or selling via seller finance to those who are unqualified...

 plus i am a firm believer that many who get into these deals fib about the accredited investor status and of course is there not a carve out in some of these offerings that allow a small number of non accredited. ?  

 Reg D 506 b allows "self accreditation".  Reg D 506 c requires that the sponsor verify accreditation status.  Reg D 504 allows non accredited but "sophisticated" investors.  You are going to be tested on this tomorrow....

[Chris Seveney]

@Jay Hinrichs

Agree

Many use their primary residence appreciation as a factor which cannot be taken into consideration.

[Edward Condon]

@Don Konipol
Hi Don,
This is a little beside the point.  Re: Madoff.  The "tell" was not suspiciously high returns.  It was impossibly low volatility.  He claimed to be investing in the US equity market (18%-ish annual volatility).  Yet, he reported monthly returns to his investors that rarely, if ever, fell outside the 0.80% to 1.20% range.  If the S&P 500 is down 3.50% for the month and the fund manager reports a 0.80% gain, either he is not invested in the US equity market, or he is lying.  Madoff had true victims.  But, many of Madoff's "victims" thought Madoff was skimming market-making profits to subsidize their returns.  Some of the "victims" were victims of their own greed.  In some cases, the maxim "You can't cheat an honest man" applied.

[Michael Thompson]

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