Quote from @Melanie P.:
@Simone Montague-Jackson Spark's main claim to fame is that they have created what they believe is a loophole to allow non-accredited investors to invest in Reg. D offerings together as an "investing club LLC." There are additional fees incurred investing this way: membership fees, fees to maintain the entity that carries every deal you get involved with and possibly other non-disclosed fees.
Syndications are EXTREMELY risky investments suitable only for highly-experienced accredited investors who can appreciate the risk both to their principal in the case of bad planning or a scam AND to having their capital locked up for 5 years+. If everything goes according to plan you might make some dollars along the way and a payout when the asset sells. All deals have their own unique structure and you should understand the advantage and disadvantage to taking distributions along the way vs. a higher payout of profits at the end. And you must not forget that WHEN (not if) there are bumps in the road the monthly distributions will be put on hold, you may be told to have to invest more (a "capital call"), or you may lose some or all of the principal originally invested.
Spark's self-reported record is "two dozen or so" investments, 2 of those have had their distributions paused and one of the two had a capital call. The record is not terrible, but I'm not a fan of their model because it targets investors for whom these are wholly inappropriate investments. Here's why: Let's say you put $5,000 into one of their deals and everything goes well. This means sometime five years from now you'll pull out $10,000. Some of that $5,000 profit you may get along the way in distributions. You'll also pay Spark's $59 membership fee 60 times, the LLC maintenance fee 5 times - $3.915 in expenses to use Spark as your "platform. " Net $1,085. The same $5,000 put in TBills and rolled over would net you $1,622.36 with zero risk, liquidity should you need it and no state income tax.
Furthermore, I find Spark's claims dubious at best. Only the person running the club chooses potential investments. In my opinion this characteristic results in Spark not meeting the definition of an investment club under SEC rules. If this ever becomes an issue while you're in a deal everyone invested will have to pay out a share of the compliance costs to get their investment entity legal with the SEC. I also believe, but cannot yet prove that Spark has earned remuneration for putting together the group of investors in that if they are buying a $50,000 share from a promoter they remit some amount less than that and receive the full share giving them a "share" of the LLC they created to hold everyone's funds. This is my opinion only and Spark denies it but the details will come out eventually. A savvy investor will impute a negative inference to the fact that Spark is unlicensed, cannot legally make investment recommendations and owe you no sort of duty (fiduciary or otherwise) to put your financial interest ahead of their own.
Proceed with extreme caution. Or just buy a TBill on Treasury Direct and call it a day.
Melanie please stop mischaracterizing our business model. There's no loophole. If four friends go in on a syndication deal together, it's not a loophole. The same goes for ten people who get together every month in an investment club.
Your math doesn't make any sense, because people join the club to invest in many deals, not one. And if they decide they no longer want to invest through the club, they leave it and stop paying club membership dues. So in your example where someone only wants to invest in one deal alongside other members of the investment club, they would pay the $59 monthly fee once, then leave the club.
I'm also extremely offended that you're suggesting that we're lying about our business model. All members who go in on a syndication together get View access to the joint LLC bank account we create. They see exactly how much money each person - including me - puts into each deal.
Please stop libeling our investment club. It's unprofessional, spiteful, and downright false. If you want to see exactly how our investment club works, come attend a club meeting. Otherwise stop making things up.
