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All Forum Posts by: Austin Fowler

Austin Fowler has started 45 posts and replied 163 times.

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @V.G Jason:
Quote from @Austin Fowler:
Quote from @V.G Jason:
Quote from @Matthew Failor:

@Austin Fowler very creative. I don't see how the property in question cash flows even taking out the numbers questioned above.

I like how you essentially are a case study on how a bank works and people's first thought is fraud and jail time. Note, life insurance companies do the same thing. Do you think they have 1 to 1 reserves on every policy? No! You might say what about the re-insurance companies? Neither do they! Just ask an actuary.

Insurance companies operate on a different set of rules. We all state we know how a bank works. You think proprietary investor here operates on the same set of rules as them?

 It's really not that complicated, raise capital, keep 20% in reserve, rest in illiquid assets that provide a return on the entire raised capital. Make sure the contract specifies what happens if the reserve runs dry (investor gets penalty interest). In 20 years of operation, I've never needed to pay penalty interest. The math behind fractional reserve banking is sound. Many clients, small balances, smooth operation.


 The concept is simple. We all already know what it is.

The execution though doesn't come at an amateur level without issues. 20 years without hiccups is great, I genuinely hope you don't falter for the sake of your investors. But the entirety of the situation doesn't add up math wise. You still hold collateral in stocks, houses that don't have equity, credit lines. That's just a bad recipe.



In my mind, learning how to buy an asset with 100% finance that grows your net worth faster than the finance eats it is and at the same time absorbs little of your time is the holy grail of investing. With sufficient capital you can scale arbitrarily. Open to ideas as to how to make the approach lower risk while preserving the arbitrary scalability, but it's currently as low as I know how to make it.

Note that with sufficient scale the 20% reserve mathematically becomes more and more sufficient without any additional source of liquidity. Could you please confirm we are on the same page on this? The more clients you have and the smaller each client is relative to the reserve the lower the probability of the reserve being sufficient assuming you avoid a bank run, which means keeping your investors informed every step of the way, which I do. Appreciate the discussion!

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @Jeremy Horton:
Quote from @Austin Fowler:

I'd also mention that I received a $190k tax return this year which is double the total interest owed to clients for the year, so very strongly no, I don't routinely need to replace withdrawals with explicit capital raises. I have enough depreciation banked to get the same next year, and likely the next as well. Also, please well note, that under normal operation deposits and withdrawals balance out.

 A cashflow of one month does not equal cashflow over a long period of time (month to month varies to due a number of factors, more important to look at this annually, in my opinion). Debt paydown - especially for the first 5-10 years is so little I'd argue it's a moot point especially if the house is 100% financed. There's nothing you can do with that money other than sell the house to recoup it. Understood though. 

You may have the right to return capital and close accounts - but how would you do this? You don't have access to liquid money for all investors. You have access to 20%. So yea you could close a couple accounts - but then you'd have to raise new funds to pay back investors if you chose to close more than 20% of the investors balance. This is the same as if investors chose to close out their account - you'd have to raise new capital to pay them back. These houses are all so new they have no equity - so I'd argue this isn't a source of revenue - in 10+ years ok now you have so equity to liquidate if you needed to. 

The equity buffer? What is it exactly? 

The tax return and likely CSS bonus depreciation is great - the key is you can essentially never sell and you have to keep buying in order to get the depreciation. I understand it has worked so far. But with higher interest rates and your strategy to wait for them to come back down - you won't be getting the same depreciation every year. Nevertheless, I do understand this, and if you can keep it going indefinitely that's great, but you have to buy continually. 

I think your big W2 job (Mine is roughly 1/3rd-1/2 of what yours is and I wouldn't feel comfortable playing bank) gives you a big security. 

Saying withdrawls and deposits balance out under normal operation - what's the definition of normal operation? Chase bank? State Farm? You? I think this varies too widely to assume they would always balance out - hence why you need reserves - because operation is not normal. If evertyhing always went normal, we'd never run into any issues. 

This concept is still somewhat intriguing even while highly leveraged, unique to your individual finances, and full of risk. 


 I used November as an example month because it was not a good month. 3 new leases, only partial payment of rent, another 3 properties vacant, no rent, two other tenants behind on rent. Averaged over the year it works out to about $10k a month or $120k per year.

Debt paydown of $8k / month is ~$100k per year. What scale do you operate on? This is certainly not negligible to me, not when all of this was achieved on just $1.2M of private capital. The debt paydown covers the interest owed to investors, the cashflow and tax benefits and long-term capital growth are mine to keep and either spend or reinvest. The $190k tax return plus cashflow could make a very significant dent in paying down outstanding debt if I wanted to. You wouldn't use the reserve.

Equity buffer just means I didn't start buying houses in this manner before having a couple of $M to my name to ensure I have the capacity to keep my investors safe.

Purchasing is currently paused. I'll wait till the Fed indicates they are happy with how high they are, not wait for them to come back down. 8% is already less than quotes I have got recently for mortgages, the plan will be to assemble capital to buy houses outright with 8% money then hold them till the rates go back down.

I've been doing this for 20 years, so normal conditions really means all conditions. I've weathered the 2008 GFC. When times are good, some people sell assets, some buy, and money moves in and out in roughly equal measures. When times are bad it's the same. Some people deposit looking for safe haven stability, some withdraw to buy assets.

When it comes to risk, I focus on the lowest risk assets I'm aware of, namely professionally managed turnkey long term SFRs. If you are aware of a lower risk asset class in real estate, please let me know. The returns on the 33 such SFRs I have are sufficient to pay investors, in the short and long term.

In my mind, learning how to buy an asset with 100% finance that grows your net worth faster than the finance eats it is and at the same time absorbs little of your time is the holy grail of investing. With sufficient capital you can scale arbitrarily. Open to ideas as to how to make the approach lower risk, but it's currently as low as I know how to make it. Appreciate the discussion!

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @Jeremy Horton:
Quote from @Austin Fowler:
I would argue that most banks make money in many more ways and are also regulated, but I understand the concept.  

The epitome if your business is to raise private funds from investors - use their money as the downpayment on SFH, and offer them a 8% savings account. If an investor wants to cash out you simply raise new to funds to pay them (you don't actually pay anyone interest until they cash out, so the money to pay them doesn't exist without raising new funds)  - and the idea is that no more than 20% will ever cash out at one time. This is a highly leveraged strategy and even the money that you have access to isn't liquid - so you would essentially have to raise new funds to pay investors. As the investors account balances increase (due to interest) it becomes even more risky, so you have so raise new capital or increase reserves (in order to keep their percentage of the reserves low or penalize them for having an account balance too high). You have to ensure no one's account reaches over some arbitrary percentage (5%-10%) of your reserves, or you could risk liquidity problems.  

The thing is there is absolutely no exit strategy, you literally can't exit - the houses don't substantially cashflow, the tax deductions have been taken up front, they are 80-100% financed, they can't be refinanced for many many years (because they have no equity and the interest rate will go up), they can't be sold for many years because they were bought at market price (and we are seeing the beginning of a downturn, even without a downturn it would be an L to sell). 

You say you have a solid equity buffer before buying more assets...What is the equity buffer?

See the other kicker is that there is no profit here (the only profit is 20 years out when you start getting some equity paid down and appreciation). The profit would be buying under market value, OR having substantial cashflow - neither of which I see. How do the investors make a profit? By putting their money in an account which you pay 8% on. How do you pay someone 8% when they cash out? You raise new capital because the money to pay them doesn't exist. Rinse and repeat. The only thing keeping this going is raising more capital than the amount of withdraws made. If you stopped raising new capital or couldn't raise new capital the entire thing collapses when people slowly start asking for their money (because you cannot pay them so you have to start liquidating assets, and the value of the assets isn't enough to pay back the investors...so you are back to raising new capital). The business model here is raising more private capital than capital that is withdrawn at 8%. The assets being purchased are just icing on the cake for you. 



 This month alone I have positive cash flow of over $10k (just got another $2k of late rent) and debt paydown of over $8k. Total interest owed to all clients approximately $8k. Why would I want to exit this? Is there an exit strategy? Of course!, I can start directing my excess cash flow into paying off investor debt. I have the right to return capital and close accounts. I have an equity buffer of nearly $2M and while I'm cashflowing I'm happy to hold such assets through the coming downturn.

I'd also mention that I received a $190k tax return this year which is double the total interest owed to clients for the year, so very strongly no, I don't routinely need to replace withdrawals with explicit capital raises. I have enough depreciation banked to get the same next year, and likely the next as well. Also, please well note, that under normal operation deposits and withdrawals balance out.

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @V.G Jason:
Quote from @Matthew Failor:

@Austin Fowler very creative. I don't see how the property in question cash flows even taking out the numbers questioned above.

I like how you essentially are a case study on how a bank works and people's first thought is fraud and jail time. Note, life insurance companies do the same thing. Do you think they have 1 to 1 reserves on every policy? No! You might say what about the re-insurance companies? Neither do they! Just ask an actuary.

Insurance companies operate on a different set of rules. We all state we know how a bank works. You think proprietary investor here operates on the same set of rules as them?

 It's really not that complicated, raise capital, keep 20% in reserve, rest in illiquid assets that provide a return on the entire raised capital. Make sure the contract specifies what happens if the reserve runs dry (investor gets penalty interest). In 20 years of operation, I've never needed to pay penalty interest. The math behind fractional reserve banking is sound. Many clients, small balances, smooth operation.

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @Steve K.:
Quote from @Austin Fowler:
Quote from @Jeremy Horton:
Quote from @Austin Fowler:

I don't understand how you have any substantial equity in houses that are financed 100% or even 75% - there's no way to get access to this money other than sell, you can't refi and take anything out either because there is no equity there. You've been doing this with SFH for 2 years - likely everything you bought in from mid 2021 onward will sell for less today than it would have then. That was literally the peak of prices.

So you back your clients investments with your personal assets?

The thing is you are still relatively small - if this got much bigger it could get out of hand really quick. One swing in the economy OR over 20% of people want their money out and you would be getting screwed. I hope these investors don't know each other or speak to each other - if there is any kind of cohesiveness between them it can be a real problem for you. 


 I've been doing this a long time. Not every property I ever bought was bought with 100% finance. I make sure I have a solid equity buffer before raising capital and buying more assets. Regarding current values, I'd prefer to argue that with data. My experience with property tax assessments says these properties have gone up significantly since time of purchase. I have the cash flow to hold on to them indefinitely, so only really need growth over the very long-term. I'm getting an appraisal done at the end of the month and will update this thread with that data. Opinions, are great, and I appreciate yours, but where data can be obtained that should dominate the discussion.

 Did you really just say that you're using tax assessed value as a data point to determine market value? If you don't know even the most basic stuff like the difference between tax assessed value and actual market value, you shouldn't be investing other people's money IMO. This whole thing smells as fishy as Good Friday to me, sorry. 

Yes, I understand the difference between tax assessed value and market value, and know how to protest the tax assessed value to help keep property taxes under control. However, when I need to protest tax assessed values as the city wants to raise them significantly, it does hint that the market value hasn't gone down.

As mentioned, I'm in the process of getting a professional assessed value of one of my properties which will at least provide an example of the capital growth. More to come.

Ultimately, I'm running my operation the same way a bank runs an operation. If it seems unusual to you, I'd suggest looking deeper into how banking is done. Raise capital, fractional reserve, rest in illiquid assets is standard practice in banking.

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @Steve Vaughan:
Quote from @Austin Fowler:
Quote from @Steve Vaughan:
Quote from @Austin Fowler:

Account Terms and Conditions

Maximum balance: $1.5M

1) The funds in the account are secured with full recourse to the worldwide assets of the borrower, no matter how indirect the ownership structure is, no exceptions.

2) Deposits and withdrawals can only be made electronically to ensure unambiguous dates of transactions and secure transfers.

3) The lender can initiate a deposit by performing an electronic transfer to the borrower's account.

4) The date of deposit will be the date of receipt of funds listed on the borrower's bank statement.

5) If the received deposit would take the lender's account balance over the maximum balance, this deposit shall be returned in full within 7 days during which no interest will accrue on these funds. Failure to do so will result in the lender's account switching to the penalty interest rate and the deposit posting to the lender's account 7 days after receipt until the excess deposit is returned.

6) The lender can initiate a withdrawal at any time by sending an email requesting funds. Interest shall continue to accrue until these funds are sent. The funds must be sent within 7 days of the email requesting withdrawal. Failure to do so will result in the lender's account switching to the penalty interest rate until the funds are sent.

7) Transactions, interest, and current balance shall be provided via an online portal.

8) There shall be no fees or transaction limits associated with the account.

9) The borrower has the right to close the account at any time by sending all owed funds.

10) Even in the event of death or incapacitation of the borrower, this contract gives the lender full recourse to the borrower's estate, even after transfer to other beneficiaries of the estate, without exception or limitation.

 Interesting.   Thank you for providing capital preservation stage accredited investors an alternative savings option.

Will we know the fund balance or be made aware when it is approaching $1.5M? The risk for us are dollars earning zero above $1.5M. 


That limit is a per account limit. As a client, you can see in your own account if you are approaching that maximum. As a business owner, the limit is determined by your personal income, essentially the maximum balance you could handle sitting in a bank account and paying out-of-pocket. With a $625k W-2, $1.5M is an appropriate balance that I can afford to keep in cash if necessary.

 Gotcha, thanks. 

I assume we'd be issued an annual 1098 or 1099 for interest reporting?

Can we be an entity?  A few of my contracts are in LLCs that owned the buildings.

 Yes, each client gets a 1099-INT each year with their interest earnings. Yes, an entity can have an account with one or two signatories.

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @Steve Vaughan:
Quote from @Austin Fowler:

Account Terms and Conditions

Maximum balance: $1.5M

1) The funds in the account are secured with full recourse to the worldwide assets of the borrower, no matter how indirect the ownership structure is, no exceptions.

2) Deposits and withdrawals can only be made electronically to ensure unambiguous dates of transactions and secure transfers.

3) The lender can initiate a deposit by performing an electronic transfer to the borrower's account.

4) The date of deposit will be the date of receipt of funds listed on the borrower's bank statement.

5) If the received deposit would take the lender's account balance over the maximum balance, this deposit shall be returned in full within 7 days during which no interest will accrue on these funds. Failure to do so will result in the lender's account switching to the penalty interest rate and the deposit posting to the lender's account 7 days after receipt until the excess deposit is returned.

6) The lender can initiate a withdrawal at any time by sending an email requesting funds. Interest shall continue to accrue until these funds are sent. The funds must be sent within 7 days of the email requesting withdrawal. Failure to do so will result in the lender's account switching to the penalty interest rate until the funds are sent.

7) Transactions, interest, and current balance shall be provided via an online portal.

8) There shall be no fees or transaction limits associated with the account.

9) The borrower has the right to close the account at any time by sending all owed funds.

10) Even in the event of death or incapacitation of the borrower, this contract gives the lender full recourse to the borrower's estate, even after transfer to other beneficiaries of the estate, without exception or limitation.

 Interesting.   Thank you for providing capital preservation stage accredited investors an alternative savings option.

Will we know the fund balance or be made aware when it is approaching $1.5M? The risk for us are dollars earning zero above $1.5M. 


That limit is a per account limit. As a client, you can see in your own account if you are approaching that maximum. As a business owner, the limit is determined by your personal income, essentially the maximum balance you could handle sitting in a bank account and paying out-of-pocket. With a $625k W-2, $1.5M is an appropriate balance that I can afford to keep in cash if necessary.

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @Nicholas L.:

@Austin Fowler

I think part of the problem with looking at one specific property is, how do we treat the down payment?  Is it borrowed, or is it cash?  If it's treated as borrowed at 8%, then the property doesn't cash flow.

This goes back to my question of whether we look at your portfolio of SFRs in the aggregate or not.


Fractional reserve banking is the business model I use, and has been around for over 350 years. In this model, the business owner effectively has an infinite time loan at 8% per annum. All that matters then is that you have the capacity as an investor to make money grow faster than this. Properly run, this money is never due, you simply need to constantly prove to your clients that you are investing responsibly.

It doesn't actually matter whether you look at a single property or many properties, the business simply becomes lower risk and smoother the more properties you have. Investors have a claim on your global net worth. You grow your net worth through a combination of cash flow, debt paydown, and capital growth. So long as the aggregate of this growth is greater than your obligation to your clients, you are running the business responsibly.

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @Matthew Failor:

@Austin Fowler very creative. I don't see how the property in question cash flows even taking out the numbers questioned above.

I like how you essentially are a case study on how a bank works and people's first thought is fraud and jail time. Note, life insurance companies do the same thing. Do you think they have 1 to 1 reserves on every policy? No! You might say what about the re-insurance companies? Neither do they! Just ask an actuary.


 Thanks Matthew!

Ok, let's look at the property in question once more. This time in gratuitous detail. Note that REI Nation put $67k into this property, and the list of new items in the home is long, including a new furnace and AC. There is no deferred maintenance, in stark contrast to properties I've bought on the market.

Purchase price: $225k

Purchase appraisal: $225k

Total investor funds allocated to secure property, this includes all of the appraisal, title, escrow, legal, etc, etc fees: $61,436.60. This is the amount of money that I need to make grow at a rate above 10%, since a 20% reserve means 0.25 of $61,436.60 = $15,359.15 is kept in reserve and a 25% increase in funds means the need for a 25% increase in the return required on the growing part, so 1.25 * 8% = 10%. If this doesn't make sense, message me.

Monthly rent: $1765

Management: 8% = $141.20

Let's go super conservative on vacancy and maintenance and say that on average we miss out on two months of rent a year to cover these, so 16.6% of rent = $292.99

Taxes and insurance: $369.12

Ignoring the mortgage, that leaves a net operating income of $961.69. Again, if I've lost anyone, please message me.

Interest on mortgage: $395.68

Principal paydown: $304.45

Cashflow after all expenses: $261.56

This is positive cashflow in my mind no matter how you wish to cut it.

The elephant in the room that perhaps I didn't go into enough detail is the fact that when you buy a property that appraises at purchase price, all of the fees of acquisition will mean that your net worth goes down, a substantial negative return if nothing compensates for it. In the case of my family, my wife is a real estate professional, and we get to claim accelerated depreciation, which means in the first year of purchase, approximately one third of the purchase price of the house becomes a deduction against my substantial W-2 income. Given my high tax bracket this means that approximately one third of this deduction becomes cash that comes back to me from the IRS, or to summarize, whenever I buy a house, the IRS will send me approximately 10% of the value of the house in the form of a cash return the following year. This more than compensates for the loss of net worth associated with the fees of buying a house, but to keep things simple, I will ignore this very substantial bonus and just call it break even and call the $61,436.60 the equity in the property. If you want to discuss accelerated depreciation in more detail, please message me.

Let's now calculate the return on money invested.

Conservative return just from cashflow after all expenses: $261.56 * 12 / $61,436.60 = 5.11%

Conservative return including debt paydown:  ($261.56+$304.45) * 12 / $61,436.60 = 11.06%

Now let's assume just 2% annual growth of the property over the long haul. Maybe it will go down in value next year, maybe it will stay down for a long time, but over the long haul you can expect inflation to push up the value by at least this long term. That would add an average of a further $4,500.00 to my net worth each year.

So in total you have: [($261.56+$304.45) * 12 + $4,500] / $61,436.60 = 18.38%

This is a growth in my net worth. This growth outpaces the growth of my debt obligation to clients. This is all I need to run an orderly business. I have purchased an asset with 100% finance, that cash flows, and pays down its debt to zero one day.

Yes, there are additional details. There may be some refinancing along the way, there may be some 1031 exchange along the way, but hopefully everyone can clearly see that this is very possible to do even making extremely conservative assumptions on the performance of the asset.

If you don't agree with any of the above, then please message me. I am very happy to take you through it all step-by-step. I am very happy to listen to your opposing points of view. There is rarely a conversation where I don't learn something myself regardless of your level of experience high or low or your style of investing. I like people in general and love talking real estate. Let's connect!

Post: Property 8, 100% financed

Austin Fowler
Posted
  • Investor
  • Reseda, CA
  • Posts 192
  • Votes 81
Quote from @V.G Jason:
Quote from @Austin Fowler:
Quote from @V.G Jason:
Quote from @Austin Fowler:
Quote from @V.G Jason:

What's the language for the investors? Do they have a minimum period for hold, or a time period they must withdraw ahead of time(like if they want to be paid end of Q1, they must state that by end of Q4). When's the exit period? You're literally just a run on from being wiped. Yes banks can do that, but they also got FDIC insurance behind that'll get involved and a lot more. You have houses you'd have to liquidate.

Are your investors aware you're reserving 20% of total funds, have they seen the balance sheet?

With house prices dropping & rates increasing, I'm quite confident if they'd get a look they may hit the withdraw button. Now hopefully you don't have anything capex wise happen too especially in this Panhandle area with weather coming in. Otherwise, your investors will wipe your 20% reserves out and you'll be force to liquidate the houses to get proceeds over. Your strategy has a lot of holes in it, you're basically leveraged 80% on illiquid assets that are coming down as rates are going up, and hoping you can see it through it with nobody asking for money basically? If you do, you'll do well. I don't think significantly well to bare this risk, but that's your call.


As for the language for investors, below is the 1-page summary of the 61-page PPM. No minimum hold time. If you want to put money in one day and take it out the next, that's fine by me. A single day of interest is cheap to pay and I'm happy to build relationships with clients simple by providing good service. No specific exit period. This is a savings account service. Yes, my investors are aware I run a fractional reserve investment bank that is ultimately personally guaranteed only by my worldwide assets. But these assets are substantial and sufficient to provide a meaningful level of safety. To be very clear, I can afford to cash out (through cash, credit, and stocks) all of my investors without selling a single house.

As for rates, all of my mortgages are 30-year fixed. The inflationary environment we live is has so far put upward pressure on rents. And yes, I share much more than my balance sheet with investors. W-2s, tax returns, the lot. My net worth is multiples my total debt obligation to clients, I run my business conservatively. 

-----------------------

Account Terms and Conditions

Maximum balance: $1.5M

The borrower agrees to provide a bank account service to the lender paying 8% per annum, with interest calculated and credited daily at midnight PST via balance(t+1) = balance(t) * (1.08)^(1/365). The account shall operate according to the following terms and conditions. Some of these conditions can lead to the account switching to a penalty interest rate of 25% per annum.

1) The funds in the account are secured with full recourse to the worldwide assets of the borrower, no matter how indirect the ownership structure is, no exceptions.

2) Deposits and withdrawals can only be made electronically to ensure unambiguous dates of transactions and secure transfers.

3) The lender can initiate a deposit by performing an electronic transfer to the borrower's account.

4) The date of deposit will be the date of receipt of funds listed on the borrower's bank statement.

5) If the received deposit would take the lender's account balance over the maximum balance, this deposit shall be returned in full within 7 days during which no interest will accrue on these funds. Failure to do so will result in the lender's account switching to the penalty interest rate and the deposit posting to the lender's account 7 days after receipt until the excess deposit is returned.

6) The lender can initiate a withdrawal at any time by sending an email requesting funds. Interest shall continue to accrue until these funds are sent. The funds must be sent within 7 days of the email requesting withdrawal. Failure to do so will result in the lender's account switching to the penalty interest rate until the funds are sent.

7) Transactions, interest, and current balance shall be provided via an online portal.

8) There shall be no fees or transaction limits associated with the account.


9) The borrower has the right to close the account at any time by sending all owed funds.

10) Even in the event of death or incapacitation of the borrower, this contract gives the lender full recourse to the borrower's estate, even after transfer to other beneficiaries of the estate, without exception or limitation.

 so this is one they can exit. why would you say differently?


 My experience of how an investor uses the accounts that they don't close the account. That's what I mean by not exiting. Investors use the account as they would use any other savings account. The balance fluctuates, and the average of all the fluctuations across all of the clients equals a constant from my end.


 You offer a savings account for investors, that isn't backed 1:1. You're definition of 1:1 is lines of credit, personal income, personal equities, and personal home equity. Go talk to a lawyer, you need to re-arrange this asap. 


 This has all been set up through a securities lawyer. I have a Reg D 506c. Happy to send you a PPM.