The Real Estate Crowdfunding Review November 2019 Update

November 24, 2019

Comprehensive review of Roofstock One. Four club feeders that are onboarding. "How to evaluate sponsor compensation". SEC clamps down on IFunding and KPMG for fraud and more...

 

 

 

(Usual disclaimer: I'm just an investor expressing my personal opinion and not a financial advisor, attorney or accountant. Consult your own financial professionals before making any financial decisions. Code of Ethics: We do not accept any money from any sponsor or platform for anything, including postings, reviews, referring investors, affiliate leads or advertising. Nor do we negotiate special terms for ourselves in the club above what we negotiate for the benefit of members.).
 

New Comprehensive Review

 

  • RoofStock One

    Roofstock One is the latest residential real estate product from Roofstock.

    An investor in Roofstock One has the option to purchase a small portion of a rental property (versus having to pay for the whole thing in the original RoofStock). This is nice because an investor can get in at a much lower minimum.

    And another great improvement is that investors no longer have to take on the huge burden of the loan themselves (like they did with the original). This greatly reduces investor risk and hassle. This is a standard feature on other crowdfunding sites, and is a good to see here.

    And the debt itself is at a moderate 50-60% LTV which many moderate investors will probably like.

    Roofstock One also puts their own money on the line with 10% skin in the game. (Although this is only guaranteed for one year, which is arguably too brief to know if the investment is going to truly hit its projected numbers or not).

    The investor also has the ability to liquidate in six months. But this is limited by requiring the investor to know the person who will purchase from them, or through a non-guaranteed redemption scheme that Roofstock One may not be setting aside explicit reserves for (unlike competitors).

    On the minus side: bankruptcy protection is incomplete and there is no audit (which is unusual for a firm that claims $1 billion in transactions).

    Also certain information vital to managing crucial cost overruns seems to be missing. Additionally lack of transparency on performance, medium-term debt, limited time-span skin in the game and certain legal and financial structures may cause small to large concerns for others.

    (Read more...)

 


Private Investor Club Updates:

(Membership in the club is free, but requires verification that the investor has no ties to platforms or sponsors. New members can apply here.)

 


Club-only Feeder Fund Updates

Feeders allow club members to access funds that significantly lower minimums than direct investment. They can also offer better diversification and simpler taxes.

  • Leading Litigation finance fund (Name kept private)
     

    • ​Litigation finance isn't directly correlated to the business cycle and can provide good diversification and protection in a recession/downturn.
       

    • Experiencelongest track record in the industry. Founders in this business since before the great recession.
       

    • Projected return: 18-20% IRR (net of all target, feeder fees and cash drag from reserves).
       

    • Minimums : $25k via feeder versus $5 million when investing direct.
       

    • Note: investor must self verify that they have $5 million in net assets ("qualified purchaser") and third-party verify that they are an accredited investor (with Assure).
       

    • (More...)
       

  • Leading Life Settlement Fund (Name kept private)
     

    • Asset class is not directly correlated to the business cycle/recessions. This can be a nice protection and diversification to a portfolio during a downturn/recession
       

    • Strategy: Purchase life insurance settlement policies from individuals who no longer wish to pay for them (due to price getting too high, no longer needing it, immediate need for cash etc). Continue making the payments until the person passes away and collect the life settlement.
       

    • Experience: Sponsor is the largest and most experienced underwriter in the industry and claims best-in-class analytics and underwriting.
       

    • Projected return: 7.2-10.1% net  (after all sponsor and feeder fees and reserves) uncorrelated to and with with lower volatility than US equity markets.
       

    • Preferential tax treatment: projected to be qualified dividends (taxed at just 20%).
       

    • Investment minimum:$25k via feeder versus $5 million when investing direct.
       

    • Requirements: Must be qualified purchaser (self-verify as $5 million+ in investments and 3rd party verify as accredited).
       

    • (More...)
       

  • Leading Debt Fund (Name kept private)
     

    • Debt fund sponsor (non-real estate related) that has an exceptional recession track record.
       

    • Employees and family have over hundreds of millions dollars of skin in the game, and it has won many industry awards.
       

    • #1 investment for members of Tiger 21 (investment club that requires $10 million in investments minimum and $30,000/ year membership fee).
       

    • $25k minimum via feeder (vs. $1 million minimum direct).
       

    • To protect the sponsor's confidential information, you must take an introductory phone call with them first, before receiving the pitchdeck, due diligence and Q&A. 
       

    • (More...)
       

  • Multi-fund feeder: Leading Office, healthcare, mixed-use and multi-family sponsors
     

    • This is a diversified multi-fund feeder-fund that invests in:
       

    • Sponsor 1: 
       

      • Very experienced sponsor in development and acquisition of office, healthcare, mixed-use and industrial development (often pre-leased to premier tenants). 
         

      • Claims multiple real estate cycle experience (30 year track record) and zero investor losses.
         

      • Conservative debt.
         

    • Sponsor 2:
       

      • very experienced value-added multifamily sponsor in the West. 
         

      • Claims multiple real estate cycle experience and zero investor losses. 
         

      • Conservative leverage and high skin in the game (10%+). 
         

      • Very favorable tax treatment (passive "super shielder").
         

      • Offers investors a fairly unique chance to 1031 exchange at the end of the investment into another one to indefinitely defer ALL taxes.
         

    • (More...)
       

  • Want more? 
     

 

News and Analysis

 

  • Is that Sponsor Taking Fair Compensation? Or Ripping Me Off? What's normal and what's out of line? Are there times when I should be willing to pay more? This article explains how I evaluate these things. https://buff.ly/35iU63O
     

  • SEC rules that William Skelley and Sohin Shah, the co-founders and senior executives of iFunding illegally diverted more than $1 million of investor funds for their personal usehttps://buff.ly/2JOEDP5  
     

  • SEC Fines "Big 3" Accounting Firm KPMG $50 Million for “Astounding” Misconduct" https://buff.ly/2WVw26O
     

  • Thank you Bobby Sharma for interviewing me on your Higher Profits podcast. I got a chance to talk about one of my favorite subjects: due diligence of crowdfunding platforms and investment deals. https://buff.ly/2KjfgG2

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About Ian Ippolito

Ian Ippolito is an investor and serial entrepreneur. He has been interviewed by the Wall Street Journal, Business Week, Forbes, TIME, Fast Company, TechCrunch, CBS News, FOX News and more.

 

Ian was impressed by the potential of real estate crowdfunding, but frustrated by the lack of quality site reviews and investment analysis. He created The Real Estate Crowdfunding Review to fill that gap.

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© 2015-2018 By Exhedra Solutions, Inc. All rights reserved. Use of this site constitutes your acceptance of it's terms and conditions.
 

Code of Ethics: I do not receive any money from any sponsor or platform for anything including guides, tutorials, postings, reviews, referring investors, affiliate leads or advertising. Nor do I negotiate special terms for myself above what I negotiate for the benefit of members. For clarity: I do receive monetary compensation in 2 ways. Site members can send donations (and a $200 donation entitles them to access my personal low-level due diligence notes on investments I've put money into). And if the club chooses to create a feeder, I take a fee as manager (and keep the excess beyond expenses). Additionally I receive the same non-monetary compensation all club members do: access to otherwise inaccessible sponsors, millions of dollars of special deals and discounts, the satisfaction of giving back and helping others, and more.

We are just investors expressing our opinion, and are not licensed financial advisors, nor attorneys nor accountants. Always consult with your own licensed professional before making any investment decision. All information provided is personal opinion only, and does not constitute professional, financial, tax, legal or other advice.