Growth Equity Group - How 170+ investors were scammed

Growth Equity Group - How 170+ investors were scammed

Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes

In 2014-2015, more than 170 investors purchased 2 and 3 bedroom condo units from Growth Equity Group. This company specializes in investment properties in a self-directed IRA. More than 85% of their sales are bought in this fashion.

Business was solicited mainly at investment conferences (Las Vegas a popular site), and some here at BP. I was one of those people who fell for their marketing.

I was sold a condo in a neighborhood in Virginia (specific details to be disclosed later). They sold me the condo for almost $90K. The property value was however, at best, $65K. They came with sweet talk, a personable friendly nature, like a predator (although I didn't know it at the time.) They only allowed an appraisal to be performed through them. One can see why, a legitimate appraiser operating legally would not appraise these condos for what they were selling for.

Growth Equity Group sold units to more than 170+ investors. 3BRs went for $96K, 2BR for $86K. Of course, they also used an "in house" lender specializing in non-recourse loans. They wouldn't allow you to use your own lender. It sounds fishy looking back at it, but not when they present it in a such a welcoming and favorable way. The rate would be 5%, which would balloon to 9% in 4 years!

I see three main issues with what transpired:

1. Sales. Growth Equity Group knowingly sold condos which were valued at $60-65K, for $85K-100K. They did this with open eyes and a smile. They even rushed me to sign on the dotted line.

2. The Appraisal process. Appraisers in the past have been fined and jailed for falsifying numbers, for elevating the appraisal amount. If the appraiser is on the payroll of the company who is selling you a property, or they are getting business or money from the company who is selling you the property, this is a major conflict of interest.

3. Financing. Industry standard for a non-resource loan is - during the balloon period, the interest rate cannot go up more than 0.5% per year or more than 2% total, no matter the interest rate environment. Growth Equity Group again used a lender that they were "working with" and did not let you use your own lender. Their loans carried an interest rate of 5%, which immediately jumps to 9% at the 4 year mark.

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Asheville, NC · Member since 2017 · 170 posts · 242 votes
7y

@Andrey Y.

I’m so sorry this happened to you.

I would comment further but I got stuck at the part where you refer to people in their 50’s as elderly.

See this reply in the discussion

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  • Developer · Point Pleasant Beach, NJ · Member since 2015 · 303 posts · 216 votes
    7y

    @Andrey Y. If 170 people were willing to pay those prices, I think the appraiser was correct in the value at the time of the sale. Prices are usually higher for new construction than on the secondary market. I’m sure you are correct and these guys were probably scammers but if that’s what people were willing to pay then that would seem to be a fair appraisal. In any investment though you need to do you due diligence and figure out the true value for yourself. Never put your money at risk if the person telling you it’s a deal doesn’t have their money at risk as well.

  • Rental Property Investor · Philadelphia, PA · Member since 2018 · 1 post · 0 votes
    7y

    How  were they scramed? By Ron Bridges

  • Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Josh Carlegis:

    Can you refinance to a lower fixed rate and make it cashflow?

     We have been discussing that possibility earlier in the thread. Haven't found a lender yet that would fund a non-recourse loan below $50,000.

  • Investor · Wichita, KS · Member since 2017 · 584 posts · 813 votes
    7y

    Seeing all this new info from when I commented last night, I think you sell. You said it balloons in 2021. Other investors will be trying to get out in the next couple years. It isn’t cash flowing. You can get better returns elsewhere. Quietly get this on the market for what it will sell for at top dollar and move on.

  • Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    7y

    @Andrey Y. Sell it an move on; at least you're not upside down. 

  • Investor · Wichita, KS · Member since 2017 · 584 posts · 813 votes
    7y

    @Andrey Y. I’m now in the looking into legal action camp. These guys need to be exposed, this has to stop. After you quietly sell see if you can get a class action thing going but don’t spend too much time on this. My guess is by 2021 some of the other investors will calling you anyway.

  • Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Jonathan R.:

    @Andrey Y. I’m now in the looking into legal action camp. These guys need to be exposed, this has to stop. After you quietly sell see if you can get a class action thing going but don’t spend too much time on this. My guess is by 2021 some of the other investors will calling you anyway.

     Thank you very much. Keep me posted. Yep, I will very likely sell since I don't think the headaches will be really worth it.

  • Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Mike Dymski:

    Hey Andrey.  Sorry to hear about this.  I don't have any solutions...just replying so my colleagues can see it and to keep the post active.  You may want to bump it on Sunday or Monday evening.  The weekends can be tough for replies.

     Will do!

  • Rental Property Investor · Corrales, NM · Member since 2016 · 117 posts · 28 votes
    7y

    Have there been any recent sells in the complex?   Like a previous poster said you need to get ahead of the herd and sell ASAP.

    On the other side of the coin in a year of so you could market that complex and probably pick up some cheap rentals and recoup your losses. 

  • Member since 2018 · 2 posts · 1 vote
    7y

    When I am told I can't use my own appraiser, lender or even title company if I am expected to pay all the closing costs I know 100% we have pure rats here and I say NO DEAL and I am done. No amount of smooth talking will change my mind. You also have to watch out for some of the wholesalers too. While looking to buy to fix and flip I saw one property (as others I have seen) for sale for $70,000 and needs renovation. After my due diligence these units sell for around $64,000 already rehabbled .. LOL ... So I ran from that one. One can never be too careful when it comes to due diligence. 1st rule of business is NEVER TRUST ANYONE, especially sellers. Also when at seminars google them while sat in the chair or before you go, the sales people job is to sell, sell, sell and they have the gift of the gab. Keep emotions out of it with the sellers, contractors, lenders and everyone else in the business because this is a business and most will shaft you as quick as they look at you. Keep this in mind and think of it as business and bottom line, you have to watch out for yourself and you will be find.

  • Flipper/Rehabber · Friendly Hills, CA · Member since 2015 · 43 posts · 20 votes
    7y

    @Andrey Y.

    Buyer beware, you bought it, you own it. Learn from the mistake, or sell it if you can write off the loss and make a better choice and make some

    Cash on the next one. It’s all a learning experience

  • Shawnee Mission, KS · Member since 2016 · 719 posts · 313 votes
    7y

    I see on the link posted of the scammers getting sued by a local Bank from Overland park, KS.

    I take away from this 

    1- folks are gambling 401- k money on risky investments, what happens when we have a massive short fall from self-directed 401-k accounts that falls short, tax payer bail out?

    2- Good to keep refreshed on scams out there.

  • Rental Property Investor · Clarksville, TN · Member since 2019 · 44 posts · 31 votes
    7y

    @Andrey Y. As someone who is just starting out. Literally I think it will be a few years at best before I purchase my first property, I appreciate the story. It’s a little bit of real world in the midst of success stories. Definitely appreciated. Especially for someone who hasn’t purchased a first property, I recognize that I will be more gullible to scams like this. Living vicariously through others just might be the difference between having a clue and not.

  • Commercial Real Estate Broker · Sacramento, CA · Member since 2015 · 102 posts · 50 votes
    7y

     Wow. So this is the same Brett Immel from Chicago, IL who has indicted for mortgage fraud in a similar real estate shady business practice. And this man is at it again? On to the next way to cheat others out of their money while smiling right to their face.

    http://www.mortgagefraudblog.com/manipulated-hud-1...

    I will not let this go unnoticed. Why is Mr. Immel still allowed to continue? I cannot believe this.

     Yea, they tend to move around...

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Andrey Y.:
    Originally posted by @Andrey Y.:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Andrey Y.:
    Originally posted by @Jay Hinrichs:
    Originally posted by @Andrey Y.:
    Mid Atlantic Holdings LLC

    Originally posted by @Jay Hinrichs:

    OK were they the original beneficiary or did they buy the note ??  and who owns mid Atlantic  what state are they organized in ?

    Does not sound like a pure lender.. sounds like an investment firm.

     They were the original and as far as I know, the current.

     Ok look at your settlement statement see what the name of the company that sold you the asset is. ?  also on the settlement statement will be the name of the lender / beneficiary.. those would be good to know..   

    Growth Equity Group, LLC

    Brett Immel

    Manager

     Wow. So this is the same Brett Immel from Chicago, IL who has indicted for mortgage fraud in a similar real estate shady business practice. And this man is at it again? On to the next way to cheat others out of their money while smiling right to their face.

    http://www.mortgagefraudblog.com/manipulated-hud-1...

    I will not let this go unnoticed. Why is Mr. Immel still allowed to continue? I cannot believe this.

    what was the outcome of the trial.. that would be important to know.

  • Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Andrey Y. I’m sorry this happened to you. I would suggest looking into a lawsuit but like others have said it’s probably not a really viable option.

    I also wanted to chime in to what @Dean Letfus and @Mike M said about the stock market. It's not gambling and I wish people on BP would stop making such comments. REI May be your preferred way to invest and that is fine but don't say the stock market is some voodoo magic that's gambling. Long term you will make 7-9 percent. It's the people who invest short term that lose money.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Caleb Heimsoth:

    @Andrey Y. I’m sorry this happened to you. I would suggest looking into a lawsuit but like others have said it’s probably not a really viable option.

    I also wanted to chime in to what @Dean Letfus and @Mike M said about the stock market. It's not gambling and I wish people on BP would stop making such comments. REI May be your preferred way to invest and that is fine but don't say the stock market is some voodoo magic that's gambling. Long term you will make 7-9 percent. It's the people who invest short term that lose money.

    I am not a stock market investor.. but I did buy stock in my bank that i use.. and they got bought by a bigger bank.. and my stock jumped up about 5X I sold it all and got a pretty nice wire into my IRA.. tax differed.. but i have also bought stock were it was listed one day and delisted the next.. all of these investments are long term.. if your going to play the ups and downs then it needs to be your day job and or like some guys i know that are micro traders and sit at there computer making 10 to 15 minutes trades.. to me its way to boring.

  • Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Andrey Y.:

     Without having read the rest of this thread, this seems like the best idea to me.  

    You lost money, but to my understanding you have not personally lost money that will ruin your life.  You lost "play" money, and you have the ability to replace that money in a relatively short period of time.  I know, it doesn't make the loss any more pleasant for you, but it beats being one of the people who lost on this deal and will have to sell their personal home to make up for the loss.

    If you can afford it, sell it now and take the loss.  You own a property 5000 miles from where you live.  It is a relative low-income rental with relatively thin margins and yearly (more or less) turnover.  You're basically upside down (you would be if you didn't pay 50% down) on the property and the interest rate is about to rise.

    I see two options.  1) sell now, eat the $30K loss, and be able to smile more without this failure of laziness hanging around your neck to remind you monthly of your mistake.  2) keep it and between the management costs and turnover fees, you fail to cashflow and are reminded monthly of your investment mistake.  If I could afford it, I would sell asap and move on with my life.

  • Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    7y

    Warren Buffett is a great gambler, I kid but when he was ask recently is he concerned about his apple stock going down, he said he invests for 10 to 20 years timelines, he said that he is not. He mostly owns the staples,  phones, food and banks. 

  • Rental Property Investor · Clarksville, TN · Member since 2019 · 44 posts · 31 votes
    7y

    @Jay Hinrichs yes

  • Developer · Tampa, FL · Member since 2018 · 16 posts · 3 votes
    7y
    Originally posted by @Lauren B.:

    @Andrey Y.

    I’m so sorry this happened to you.

    I would comment further but I got stuck at the part where you refer to people in their 50’s as elderly.

  • Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Randy E.:
    Originally posted by @Andrey Y.:

     Without having read the rest of this thread, this seems like the best idea to me.  

    You lost money, but to my understanding you have not personally lost money that will ruin your life.  You lost "play" money, and you have the ability to replace that money in a relatively short period of time.  I know, it doesn't make the loss any more pleasant for you, but it beats being one of the people who lost on this deal and will have to sell their personal home to make up for the loss.

    If you can afford it, sell it now and take the loss.  You own a property 5000 miles from where you live.  It is a relative low-income rental with relatively thin margins and yearly (more or less) turnover.  You're basically upside down (you would be if you didn't pay 50% down) on the property and the interest rate is about to rise.

    I see two options.  1) sell now, eat the $30K loss, and be able to smile more without this failure of laziness hanging around your neck to remind you monthly of your mistake.  2) keep it and between the management costs and turnover fees, you fail to cashflow and are reminded monthly of your investment mistake.  If I could afford it, I would sell asap and move on with my life.

     I tend to agree with you. Probably best to rip off the band-aid and take the loss. Even if I end up making 20 years from now, probably not worth all the hassle and reminders of it constantly. 

    How sure are you that interest rates are about to rise? 

  • San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    7y

     Why the anger, condescension, and self-righteousness?

    If I have any anger it is toward the floggers of self-directed 401k and self-directed IRA plans here on BiggerPockets.  They draw in people like you who haven't taken the time to carefully vet their investments.   

    I don't think you read most of my comments. I mentioned several times that I take responsibility for taking this deal. My main goal it to prevent others who may come into the same situation. Smiles, great salesman, and tactics to make you sign on the dotted line.

    FYI - the world is full of smiling salesmen trying to separate you from your money. 

    Half of your comment are assumptions. I didn't attend an investment conference in Las Vegas. I said that that is one of Growth Equity Group's major ways to advertise this money-making scheme (for them apparently).

    I think you are correct that the Growth Equity guys are hustlers and took you for a ride.  You took actions (self-directed IRA investment) that ought to have some standard of experience.  In our next downturn, many people like you (who 'figured out' Self-Directed accounts at Bigger Pockets) will also come to grips with their inexperience.  Your message does serve a purpose as a warning.   Buyer beware.

    So when I get a bunch of assumptions and inaccurate information from a guy without a profile picture, its not very helpful. 

    Not sure what my profile picture has to do with anything.  Yours is of a young man throwing the "hang loose" sign in front of a pool lit at night.  You seem to project a cavalier attitude, which is fine, but also consistent your experience with GEG. 

    P.S. 1 - I'm not a "doctor living in Hawaii". I did my training there and no longer reside there.

    Okay - I assumed you were from Hawaii because your profile says you are in Hawaii and you said you are a doctor. 

    P.P.S - $50K is not a "paltry" sum. That disappointing that you would say that. That was like 7 years of max Roth IRA contributions to reach that. That was most of my savings.

    For owning an individual piece of investment real estate (not in a fund, etc.) $50K is pretty paltry.  It's not intended to offend, it's intended for you to appreciate that if you don't have capital for when something goes wrong, you should not play this game.  

    By the way, knowing more than the average doctor about investing is not saying much. Doctors are well known to be terrible with finances. Unlike most doctors, I don't identify as a physician when I think of myself. My occupation is probably 4th or 5th on the list.

    I hope you tell your patients that you don't identify as a physician.  That's a pretty weird thing to say if you practice medicine with real people. 

  • Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Andrey Y.:
    Originally posted by @Randy E.:
    Originally posted by @Andrey Y.:

     Without having read the rest of this thread, this seems like the best idea to me.  

    You lost money, but to my understanding you have not personally lost money that will ruin your life.  You lost "play" money, and you have the ability to replace that money in a relatively short period of time.  I know, it doesn't make the loss any more pleasant for you, but it beats being one of the people who lost on this deal and will have to sell their personal home to make up for the loss.

    If you can afford it, sell it now and take the loss.  You own a property 5000 miles from where you live.  It is a relative low-income rental with relatively thin margins and yearly (more or less) turnover.  You're basically upside down (you would be if you didn't pay 50% down) on the property and the interest rate is about to rise.

    I see two options.  1) sell now, eat the $30K loss, and be able to smile more without this failure of laziness hanging around your neck to remind you monthly of your mistake.  2) keep it and between the management costs and turnover fees, you fail to cashflow and are reminded monthly of your investment mistake.  If I could afford it, I would sell asap and move on with my life.

     I tend to agree with you. Probably best to rip off the band-aid and take the loss. Even if I end up making 20 years from now, probably not worth all the hassle and reminders of it constantly. 

    How sure are you that interest rates are about to rise? 

     I *think* the Fed will raise rates again once or twice this year, but that isn't what I meant.  I was referring to your statement that your loan's interest rate was rising from 5% to 9%.

  • Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Randy E.:
    Originally posted by @Andrey Y.:
    Originally posted by @Randy E.:
    Originally posted by @Andrey Y.:

     Without having read the rest of this thread, this seems like the best idea to me.  

    You lost money, but to my understanding you have not personally lost money that will ruin your life.  You lost "play" money, and you have the ability to replace that money in a relatively short period of time.  I know, it doesn't make the loss any more pleasant for you, but it beats being one of the people who lost on this deal and will have to sell their personal home to make up for the loss.

    If you can afford it, sell it now and take the loss.  You own a property 5000 miles from where you live.  It is a relative low-income rental with relatively thin margins and yearly (more or less) turnover.  You're basically upside down (you would be if you didn't pay 50% down) on the property and the interest rate is about to rise.

    I see two options.  1) sell now, eat the $30K loss, and be able to smile more without this failure of laziness hanging around your neck to remind you monthly of your mistake.  2) keep it and between the management costs and turnover fees, you fail to cashflow and are reminded monthly of your investment mistake.  If I could afford it, I would sell asap and move on with my life.

     I tend to agree with you. Probably best to rip off the band-aid and take the loss. Even if I end up making 20 years from now, probably not worth all the hassle and reminders of it constantly. 

    How sure are you that interest rates are about to rise? 

     I *think* the Fed will raise rates again once or twice this year, but that isn't what I meant.  I was referring to your statement that your loan's interest rate was rising from 5% to 9%.

     Ohh, gotcha. I tend to agree on the twice interest rate hike. But it can also be once or thrice ;)

    Yep. If I can't solidify new financing by end of Jan, will sell for a loss and move on. No other choice in this situation.

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