All Forum Posts by: Mark Robertson

I had a Realty Shares fix and flip deal pay off today. The principal payment was less than my investment. I will show a capital loss on my tax return. However, it did pay interest for about 1 year of the 2 year hold. My total payments are more than my investment. It was about a 3% IRR vs the projected 15%.

I've done close to 100 RE crowdfunding deals and none have actually lost money. Another RS fix and flip deal broke even.  I do not know of any where investor have lost principle. It's not if, but when it will happen.  I suspect it has happened, but the 506b platforms are not very transparent and I've heard rumors of deals that did lose money.  There are a few threads on BP about deals not going according to plan on BP. No platform wants to be the poster child for a money losing deal.

If you go the crowdfunding or syndication route, I would diversify as much as possible. You now have the options to diversify not only with multiple sponsors, but across different asset classes and geographic regions. The key advantages to crowdfunding are the lower minimums and deal flow.  Take advantage of both. 

@Andrew Savikas I tried lendingRobot over a year ago. They picked every loan and they forecasted over a 9% IRR. I bailed about 6 months ago and my current return per LendingClub is 4%. 4% when the economy is doing well! I hate to see how it does during a recession. I would much rather have debt exposure with AlpaFlow or Broadmark. If I can get my Lendingclub investment back without a loss, I will be happy.

If your accredited (million dollar net worth of income over $200k) there are many options in the crowdfunding area. The two I like that are paying 9% to 11% are AlphaFlow and Broadmark. Alpha Flow is a portfolio of SFH fix and flip loans, while Broadmark is a portfolio of commercial loans. LTV is in the 70% range. They are backed by real estate so in my opinion much less risky than LendingClub or Prosper.

@Hope S. That was an especially harsh review.  Realty Shares has had their fair share of problems and it's best to only invest with a quality sponsor with a long track record.  Stay away from equity fix and flip sponsors would be my recommendation.  I had much better crowdfunding experience with RE than this author.  Check out my results on by BP blog over the last 3 years, for a more diverse and larger sample of deals and results.  

There are over 100 crowdfunding sites out there, but only 10 or fewer worth your time.  Its also late in the real estate cycle, so its important to be very picky and not to invest for the sake of investing.

Realty Mogul offers DST's from time to time The cash on cash is usually pretty low and the fees are tough to swallow. What you can't do is put 1031 money into the typical crowdfunding syndication deal. It would have to be structured as a TIC and getting loans on a TIC is a real pain, so most will not want to bother.

The 506 Investor Group for the second month in a row has doubled its membership base. 506 Group is a private and confidential group for accredited real estate investors only. Information and due diligence is shared on both private syndicated real estate investments as well as deals on real estate crowdfunding platforms.

The group often gets early access to real estate investments, exclusive access to private deals, lower minimums, and lower sponsor fees. Individual group members have invested over $39 million in crowdfunded & syndicated real estate deals. Reach out to me if you would like more information on the 506 Investor Group.

You will be competing for investor dollars against other deals. Investors look for strong sponsors with experience and a long track record. Once you pas that test its fees, IRR, cash on cash, location, cap rates etc.. They then compare what you have to offer vs the rest of the crowdfunding world. In the end how does it stack up against the competition on a risk reward basis?

From an investor's perspective, we expect the terms to be fair and our interest aligned. We know you have to pay the bills so some fees are expected.  However, a sponsor should only make real money on successful projects. If the investor makes money first, then we expect the sponsor to profit on good deals.

The standard these days is a 8% preferred with a 70/30 split. The higher the preferred and the better the split the interest will be higher from investors.  Track record and experience usually dictates what you can offer.

Asset management fees are my new pet peeve. 1% seems reasonable to me.  Less is better but 1% is fine.  However, how you define the 1% fee makes all the difference in the world. 1% of gross revenue, 1% of equity raised, 1% of committed capital or 1% of total assets (debt and equity) . As a percentage of investor equity, the fee can go from 1/2% of less on revenue to over 5% if its on committed capital or total assets. Unsophisticated investors may not notice in the beginning, but once they do, you may have a problem.

If in fact a sponsor takes the first 5% of return in fees before I get my pref, then our interest are not aligned. If a project is going nowhere and the sponsor makes 5% and the investor makes nothing, I have a problem with the structure.

Also, go easy on the acquisition, construction, loan, disposition fees etc.  My group has a fee spreadsheet of over 50 deals and growing.  Fees as a percentage of equity range from 3% to 29%.  29% in fees is CRAZY!