All Forum Posts by: Michael Wang

1.Is our investment so bad that's it's only worth 38% of what we paid for it? And they plan it going from .38 to 1.5 -2.0 if it's kept? I'd think there'd be a line of experienced syndicators at 38%. Or maybe some of Brandon's Hawaiian buds.

2.How many people are voting or how many votes are there? Does your vote count for more or less depending on the amount you invested?

3.What happens if they have a capital call and I don't give additional capital?

4.If the future billionaire doesn't want to fund his mistakes maybe they could sell one property to fund the other two?

5. How can you trust someone that was so wrong on his due diligence?

I'm just thinking out loud here and maybe I shouldn't put it all in writing but I don't have any SDP investors to talk to face to face. I have more but I wrote enough.

1. Based on the financials I believe it’s that bad or worse. I also think there’s no chance that they can come anywhere close to their new projections.

2. I believe that votes count for nothing. They don’t really want votes, they wrote this e-mail to show how “good” they are and to be able to shift blame to the LPs. Statements like “we’ve unanimously agreed to change the return structure.” They know this doesn’t matter at all since they won’t be making it above the pref return. If they were truly “good” they’d reduce their entire fee structure which is among the highest in the industry. We’re losing money and they’re continuing to get paid.

3. It doesn’t look like they’re considering a capital call. They know that’s a death blow to their company which is why they’ll instead dilute us by tricking unsuspecting investors into a new pref equity raise with unrealistic returns. I fully believe that in the end the new capital will save the deal for ODC, they’ll be able to return a small single digit EM to the pref equity holders after 10 years and the original LPs will still lose a portion of our investment. But that gives them ten years to continue raising money for other deals, charging fees and getting rich. This isn’t about saving your investment, it’s about delaying the inevitable so that they can keep the cash machine running for them.

4. Agreed but if they sell a property, that’s less fees they’ll collect every year and you’d want to sell the worst property which would be a significant hit. Two properties are holding the third one up to make the financials look not as bad as they are.

5. There are so many things in this letter that are deceptive. You cannot trust anything they say. That’s why I’m voting sell (not that it matters). I’m considering the investment a complete loss.

Have to agree with alot of what you said here. Also both ODC and Disrupt Equity both brag on their websites that they manage nearly 1 billion dollars of real estate but are unwilling to fork in the 3 million needed on this Sunbelt fund to keep these deals afloat? Shows how much confidence they have in these deals and would rather raise it towards additional investors....

1 Vote

Quote from @Sean Barber:

Quote from @Michael Wang:

Quote from @Sean Barber:

Quote from @Jim Peret:

Quote from @Sean Barber:

Quote from @Jim Peret:

I'm in the Sunbelt Diversified Fund. They just suspended distributions. After 1.5 years I received 4 months of distributions at around 1% annually. I think Brandon is a better sales person then he is at running syndications especially if they aren't doing well. But he will still be a very rich man.

Jim, what do you think about the most recent update for sunbelt? Seems like they’re prepping us for a capital call. Not sure how you can be 94% below projections without some gross lack of due diligence prior to purchasing these assets.

It's bad. I hope not. It's like he missed everything when doing due diligence.

And there it is. Capital call alternative e-mail in your inbox. They are wanting to issue pref equity to save the deal. I have 0 faith in them and seriously considering voting for the sale at a 62% loss of equity.

Yep just received this email as well in the Sunbelt Portfolio Fund (My first ODC investment and not a good one at all). Baffling to me that they’re raising new funds while current funds are struggling. I recommended in the feedback on the vote that if the owners of ODC and Disrupt were really serious in their strategy and committed, they should fund the majority of this pref equity (put their money where their mouth is). Hope others will recommend this as well and not put all the risk on the pref equity investors as well as us LP's invested in this fund.

I’m voting to sell. They are being overly optimistic in their new projection just like their original projections. They are counting on lower rates, higher rents and lower cap rates and a ten year hold, all to give me a very low 5-15% total return over a ten year hold!. Better to take the 38% now and invest in something else I believe can be successful with a 12-15% annual return.

Completely understand your decision. I have been in another syndication where they had a deal go south but the GP's decided to fund the entire remaining capital they needed and eventually turned the deal around for a profit. This showed me their confidence in their abilities and really respect them for putting their own capital to see it through. I have no previous dealings with ODC and so far the GP's personally have not shown their capability to operate or look after investors by funding additional capital on their own (Without looking for additional investor capital). Also raising other funds while some of their funds are falling apart really shows a lack of respect to their current investors.

6 Votes

Quote from @Sean Barber:

Quote from @Jim Peret:

Quote from @Sean Barber:

Quote from @Jim Peret:

It's bad. I hope not. It's like he missed everything when doing due diligence.

Yep just received this email as well in the Sunbelt Portfolio Fund (My first ODC investment and not a good one at all). Baffling to me that their raising new funds while current funds are struggling. I recommended in the feedback on the vote that if the owners of ODC and Disrupt were really serious in their strategy and committed, they should fund the majority of this pref equity (put their money where their mouth is). Hope others will recommend this as well and not put all the risk on the pref equity investors as well as us LP's invested in this fund.

5 Votes

Originally posted by @Chris Grenzig:

@Michael Wang I believe if you have a W-2 in a non real estate company or not at least a 5% owner (like @Basit Siddiqi mentioned) than you need to be able to show a certain amount of hours to be denoted as a real estate professional in which case your passive losses would offset...I believe...maybe

Hi Chris,

Will have to look into this. Thanks for the input!

0 Votes

Originally posted by @Travis Watts:

@Michael Wang Good question. It appears this has been answered; however, I too am an LP investor in numerous syndications. I'm happy to share my K1 examples with you to help visually explain.

Great thanks Travis I sent a PM to you. Would be great to collaborate!

1 Vote

Originally posted by @Scott Morongell:

@Michael Wang I am not a CPA but here is my opinion based off what my RE focused CPA would say. "It Depends". Do you file taxes as a real estate professional? If yes, you are able to offset not only passive income but ordinary income as well. If the syndicators are not doing cost seg studies and taking bonus depreciation your paper losses will not be as glamorous as you might think. Check to make sure they are doing cost seg!

*As far as the syndications that you invested in, can you speak more about the ones that are not bringing returns in for several years? What type of assets are these? Why aren't they generating cashflow day 1? What types of returns are being projected? What ultimately made you invest in them? I am a syndicator and only look for deals that cashflow from day1. I am selfishly asking the questions above to see if it can spark a layer of creativity for my company. Thanks Michael

Hi Scott,

No I am not considered a real estate professional and thank you I will ask them if they are doing cost segs!

As for the syndication's, the assets are all multi families that are needing significant rehab the first 2-3 years. As for why I invested into them ultimately came down to the trust I have in the operators to fulfill their business plans.

0 Votes

Originally posted by @Ivan Barratt:

I have had several clients offset the gains but the rentals were passive as well. key question: is your rental a passive investment or do you actively manage it? you'll need to pull in a cpa on this. if your cpa says no I'd ask another just be sure.

Hi Ivan and Dominick,

Would having a tenant manager classify the property as being passive? As for paying yearly taxes and insurances, I did manage those aspects.

0 Votes

Originally posted by @Basit Siddiqi:

@Michael Wang

Investments in real estate syndication as an LP normally result in passive losses from a tax perspective.
Sale of a rental investment is a 1231 gain/(loss).

You can't offset 1231 gain with passive losses.

Hi Basit,

Understood thank you very much this clarifies it.

0 Votes

Hi guys,

I have a tax related question if any of you guys have personal experience or knowledge.

This year I have invested in several syndication's as an LP (passive investor) at the same time in which I have sold a rental investment. Since all the syndication's are relatively new, I'm assuming I will be taking losses on those investments (as some of the syndication's do not bring in returns for several years). Can or will those losses be able to be used against my large capital gains income from the sale of my recent rental property? Both of the LP investments and rental property sale are from my LLC.

Thanks everyone

0 Votes

Originally posted by @Billie Young:

That’s not rude, I agree. I don’t follow many people. GC is one of the few. Every person is unique so based on my situation I don’t know if I have time on my side so trying to find ways to quantum leap in this arena. I cannot underwrite today. I will be able to in some time so meanwhile looking for a good place to put a little bit of cash that sitting in savings not earning. I have other investments none of which are real estate.

Hey Billie,

Sorry for not responding earlier have not been back to this site for awhile. But yes I invested in Cardone Capital fund IV and yes so far it seems to be ok. I initially invested December 31st 2018 but my funds were not utilized until January 28th 2019 which I was a little upset about. I assumed that investing into a fund meant that the money would immediately start working for you but apparently that’s not the case. So my advice there is to ask when the funds that you invest will immediately be used/invested into a deal so that the funds won’t be sitting around dormant in their bank.

I believe I’ve been getting a little over 4% return not quite the 6% preferred, but that maybe the case at the end of the year. I also do like the fact that the distributions are monthly. I have 4 other syndications I’m invested in which 1 of those are annual distributions and 3 are quarterly. Most syndications are quarterly so Cardone does have a unique advantage there.

Another point with Cardone Capital that I do not particularly like is that they do not update you on your investments as far as how the investments are doing or why you are receiving this 4% return. Other syndications I’m in are direct investments into single apartments so there are updated webinars/newsletters on how the properties are performing. You can learn alot through these webinars as well.

So ultimately I believe it comes down to whether you just want something passive or if you want to learn and perhaps get into the space yourself (which then I can refer you to other syndications I’m in). But I do want to make the point that the operator is the most important factor of choosing your investments.

Let me know if you have any other questions :).

2 Votes

All Forum Posts by: Michael Wang

Michael Wang has started 3 posts and replied 28 times.

Post: Brandon Turner ODC fund

Post: Brandon Turner ODC fund

Post: Brandon Turner ODC fund

Post: Tax question for LP passive investments and personal capital gain

Post: Tax question for LP passive investments and personal capital gain

Post: Tax question for LP passive investments and personal capital gain

Post: Tax question for LP passive investments and personal capital gain

Post: Tax question for LP passive investments and personal capital gain

Post: Tax question for LP passive investments and personal capital gain

Post: Cardone Capital and your thoughts?