PEP fund with Lane Kawaoka

Member since 2021 · 11 posts · 13 votes

Has anyone else invested with this guy? I got roped into this PEP fund he was advertising by a friend who had invested with him before. The fund was advertised as a boring "preferred equity" fund that pays 10% a year (or something along those lines). So I took money I was saving for a down payment and went in with this guy. They sent out an email last Friday saying they are stopping distributions. The email was replete with grammatical and spelling mistakes too for added professionalism. Plus they sent out late Friday afternoon which always spells "disaster." Anyone familiar with this? Now they won't respond to my emails or calls of course. Lane sent out a form email which he probably sends out to all his investors. Can't believe I fell for this. The email advertising this deal literally has a "pyramid" drawing in it.

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Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

@Victor S. I am not aware of Lane's participation on any BiggerPockets podcasts - it is possible, as I have not reviewed all 1,000 of them, that he has appeared on a BiggerPockets show, but I was not able to find one from a simple search. We have no control over whether Lane appears on other shows outside of our network.

Lane has contributed to a "Member blog" at one point, but has not published an article in the last 3 years. This is distinct from the BiggerPockets professionally produced blog content.

Lane is being accused of bad behavior and of losing investor capital by investors in this thread and others. BiggerPockets is not in a place to verify the truth or falsity of these claims. We are, however, providing a forum where this and other types of discussion can happen.

I believe it would be irresponsible to remove Lane's ability to post to the forums, as that would remove his ability to defend himself.

@Lane Kawaoka is surely aware of these posts. Whether he chooses to respond is up to him. We will remove members if they violate our rules or terms of use.

Last, I want to call out that many investors, LP and GP, are losing in today's environment. I have no way of knowing if losses are due to bad luck, fraud, negligence, naivete, or acts of god. I suspect that we will see each of those at play as factors in wins and losses for investors in the coming years.

As an LP myself, who will likely get flushed on a deal with a syndicator, I believe that this industry needs a bright light shined on as many operators and capital raisers as possible. A place where we can review sponsors, provide direct feedback, positive or negative, and practice reviewing deals, now that the tide has gone out and we are starting to see syndicators and sponsors swimming naked.

We are creating PassivePockets.com to drive this accountability and anticipate a Q3 launch.

I take the issue of sponsors acting as fiduciary to their investors very seriously, regardless if they are legally required to or not, and plan to create a platform that calls out those who don't, and celebrates those who do. However, I cannot personally call out specific bad actors.

Even if I am right, I could create risk for the company. Instead, I will let the community discuss who is good, who is bad, and call out their perceptions of the unethical/unprofessional.

I will of course, however, let those accused respond, as long as they abide by our forum rules.

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Bob Regent
Member since 2019 · 5 posts · 4 votes
2y

Frank are you not accredited? I already had several investments with Lane and they still required me to provide 3rd party proof of accreditation to invest in PEP.
In regards to your story of the friend that lost everything, that was with a different syndicator, correct?
0 Reply
Bob Regent
Member since 2019 · 5 posts · 4 votes
2y
Frank, which investments was your friend in that lost everything?
0 Reply
Kelly Doolittle
Member since 2018 · 1 post · 1 vote
2y
Quote from @Bob Regent:

Frank, which investments was your friend in that lost everything?
Bob and Frank - just found your posts here. I’m in same situation , lots invested and came across this thread after a Google search - would love to have a call. Very sad and concerned as wanting to go into retirement.
1 Reply
Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y
Quote from @Kelly Doolittle:

Quote from @Bob Regent:

Frank, which investments was your friend in that lost everything?
Bob and Frank - just found your posts here. I’m in same situation , lots invested and came across this thread after a Google search - would love to have a call. Very sad and concerned as wanting to go into retirement.
Did you tell the syndicators that you were approaching retirement and could not swing high-risk investments? They shouldn't have taken your money if you were honest with them about your risk tolerance.
1 Reply
Forest Wu
Member since 2023 · 72 posts · 44 votes
2y
@Account Closed- has Lane even attempted to respond or contact you directly?
0 Reply
Account Closed
OP
Member since 2021 · 11 posts · 13 votes
2y
@Forest Yes his staff has been communicating with investors including me regarding the fund for the past couple of months.
0 Reply
Steven Gesis
Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes
2y
Quote from @Bob Regent:

I was also disappointed to see that distributions for the PEP fund have stopped. If that was the only investment that wasn't distributing I wouldn't think too much about it, but I have 5 or 6 other investments with Lane and none are distributing. Some have never distributed a dime, even though they were advertised as cash flow investments.
When I initially spoke with Lane I told him that I was retiring and looking for cash flow opportunities and we discussed the best options for that. Now the line he is telling us is that we should not worry about cash flow, and if a little cash flow is what you're after then they don't want you as a customer. His words, not mine. I started investing with him at the beginning of 2020 and so far, my average annual return has been 2.6% with the biggest portion of that coming from the PEP fund. Average annual return from all other investments with him is 1.8%. I now also have an alert about cash calls on some of my investments!
I know that many things in the real estate world are hard to predict and out of the operators control. But his website is a complete mess and hasn't worked correctly in almost 2 years so it's impossible to find the status of your investments. One of the properties sold back in December 2023 and we were told that we would be receiving an update of the profit in January. It's now mid-March and still have not heard anything.
Keeping my fingers crossed that he is able to sell some of these properties at profit.

Bob Regent - all I can say is OMG
0 Reply
Victor S.
WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
2y
where are BP moderators/staff, etc.?! apparently, this clown is still posting and appearing on podcasts. c'mon, guys... do better.
1 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
2y
Moderators are volunteer. We have no say in matters like these. That would be for Scott Trench the CEO to comment on.
Josh the owner of the company Bigger Pockets is retired for the most part.
Bigger Pockets can't stop sponsors from going on other sites (podcasts). It's up to the individual accredited investor to perform research and make an informed decision.
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Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
2y
@Victor S. I am not aware of Lane's participation on any BiggerPockets podcasts - it is possible, as I have not reviewed all 1,000 of them, that he has appeared on a BiggerPockets show, but I was not able to find one from a simple search. We have no control over whether Lane appears on other shows outside of our network.

Lane has contributed to a "Member blog" at one point, but has not published an article in the last 3 years. This is distinct from the BiggerPockets professionally produced blog content.

Lane is being accused of bad behavior and of losing investor capital by investors in this thread and others. BiggerPockets is not in a place to verify the truth or falsity of these claims. We are, however, providing a forum where this and other types of discussion can happen.

I believe it would be irresponsible to remove Lane's ability to post to the forums, as that would remove his ability to defend himself.

@Lane Kawaoka is surely aware of these posts. Whether he chooses to respond is up to him. We will remove members if they violate our rules or terms of use.

Last, I want to call out that many investors, LP and GP, are losing in today's environment. I have no way of knowing if losses are due to bad luck, fraud, negligence, naivete, or acts of god. I suspect that we will see each of those at play as factors in wins and losses for investors in the coming years.

As an LP myself, who will likely get flushed on a deal with a syndicator, I believe that this industry needs a bright light shined on as many operators and capital raisers as possible. A place where we can review sponsors, provide direct feedback, positive or negative, and practice reviewing deals, now that the tide has gone out and we are starting to see syndicators and sponsors swimming naked.

We are creating PassivePockets.com to drive this accountability and anticipate a Q3 launch.

I take the issue of sponsors acting as fiduciary to their investors very seriously, regardless if they are legally required to or not, and plan to create a platform that calls out those who don't, and celebrates those who do. However, I cannot personally call out specific bad actors.

Even if I am right, I could create risk for the company. Instead, I will let the community discuss who is good, who is bad, and call out their perceptions of the unethical/unprofessional.

I will of course, however, let those accused respond, as long as they abide by our forum rules.

Podcast Guest on Show #223
12 Reply
Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y
Quote from @Scott Trench:
However, I cannot personally call out specific bad actors.
Not to worry, Scott. Someone will call them out.
PassivePockets might consider a wiki type database that allows every deal to be linked by principal, LLC, promoter etc. Something that would allow a user to drill down and get some transaction history on who they're considering and how that person or entity links back to the deals and other people/entities in the database.
2 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Scott Trench
Agree 100% with you on how operate this company on this topic
LP’s and GP’s can use this forum to comment or respond to comments.
Personally I don’t think anyone should be banned unless they have been convicted of a crime that could harm people on this site.
This is a place for people to gain knowledge and education and ask questions to get guidance.
I have seen sites where GP’s are not allowed to comment on posts (or even see posts in some instances) that were from a ticked off investor and personally not a fan as if someone can throw shade at another person / company without any consequence and / or allow the other party to respond - I feel like it’s just another form of censorship which I oppose
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Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y
Not to mention the fact that the criminals, once identified, can be counted on to dig themselves in even deeper on the way to realizing their jig is up.
0 Reply
Brian L.
West Coast USA · Member since 2013 · 4 posts · 0 votes
2y
It's been a while since I've been on BP but heard about the Scott Trench post about Syndicator/lawsuits on twitter so came over to read what was going on.
I invested in deals with Lane about 4years ago so I've had time to see how they are managed. I feel he has managed the deals well despite covid and interest rates jumping significantly higher during that time. Hopefully the claims mentioned above can be addressed or resolved.
I think PassivePockets.com is a great idea and hopefully be a good resource for LP's to become smarter investors.
0 Reply
Brent Sutherland
Investor · Pittsburgh, PA · Member since 2015 · 12 posts · 13 votes
2y
Quote from @Scott Trench:

@Victor S. I am not aware of Lane's participation on any BiggerPockets podcasts - it is possible, as I have not reviewed all 1,000 of them, that he has appeared on a BiggerPockets show, but I was not able to find one from a simple search. We have no control over whether Lane appears on other shows outside of our network.

Lane has contributed to a "Member blog" at one point, but has not published an article in the last 3 years. This is distinct from the BiggerPockets professionally produced blog content.

Lane is being accused of bad behavior and of losing investor capital by investors in this thread and others. BiggerPockets is not in a place to verify the truth or falsity of these claims. We are, however, providing a forum where this and other types of discussion can happen.

I believe it would be irresponsible to remove Lane's ability to post to the forums, as that would remove his ability to defend himself.

@Lane Kawaoka is surely aware of these posts. Whether he chooses to respond is up to him. We will remove members if they violate our rules or terms of use.

Last, I want to call out that many investors, LP and GP, are losing in today's environment. I have no way of knowing if losses are due to bad luck, fraud, negligence, naivete, or acts of god. I suspect that we will see each of those at play as factors in wins and losses for investors in the coming years.

As an LP myself, who will likely get flushed on a deal with a syndicator, I believe that this industry needs a bright light shined on as many operators and capital raisers as possible. A place where we can review sponsors, provide direct feedback, positive or negative, and practice reviewing deals, now that the tide has gone out and we are starting to see syndicators and sponsors swimming naked.

We are creating PassivePockets.com to drive this accountability and anticipate a Q3 launch.

I take the issue of sponsors acting as fiduciary to their investors very seriously, regardless if they are legally required to or not, and plan to create a platform that calls out those who don't, and celebrates those who do. However, I cannot personally call out specific bad actors.

Even if I am right, I could create risk for the company. Instead, I will let the community discuss who is good, who is bad, and call out their perceptions of the unethical/unprofessional.

I will of course, however, let those accused respond, as long as they abide by our forum rules.

Love the idea of passivepockets.com to help investors vet and review syndicators! Great idea. And needed. However, $400/year (from what I’m seeing now on the site) is going to keep a lot of people, aka a lot of valuable feedback, away. I was excited to dig in and contribute but was immediately turned off by that price.

Some other will probably feel different. Just my two cents.
2 Reply
Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
2y
@Brent Sutherland

PassivePockets will have both free and paid components to it, just like BiggerPockets is free for members, but also has a pro membership.

Anyone trying to solve this problem will be faced with the problem of producing positive cash flow to have the business model endure. I am not aware of anyone who solves problems in a lasting way without a cash-flow positive business.

Competitors and other solutions will have to monetize, eventually, in one of the following ways:

- Make money raising capital themselves, and therefore be another GP (Fund of Funds)

- Make money raising capital for sponsors

- Make money serving LPs by charging LPs

The free components of PassivePockets will be supported by advertising dollars from sponsors. The parts behind the paywall will allow us to focus on our paying customer - the LPs. LPs will have to decide if PassivePockets LP-Only sections have the potential to reduce their risk or will enable them to increase their returns by 1% or more (1% of $50K invested is $500 per year). If we are unable to provide that value, then LPs won't sign up and/or will cancel their accounts with us. We believe we can justify that price point, and will need it. This is a smaller market, and even 1,000 LPs paying the subscription fee will support less than 5 full time employees.

If you have other ways to make money solving this problem, so that PassivePockets has a way to endure, that resolves this conflict, please let me know.

Podcast Guest on Show #223
2 Reply
Brent Sutherland
Investor · Pittsburgh, PA · Member since 2015 · 12 posts · 13 votes
2y
@Scott Trench
Thanks for the clarification. I didn’t see the free option upon initially going to the site, as the landing page directs you straight to the paid membership. So good to know there is another option for those that want to test the waters before jumping in. Can certainly see the value add the paid membership has the potential to bring.
Kudos for making this an area of focus at BP. It will help out many investors.
Cheers!

1 Reply
Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y
Most syndicators have minimums of $50k or $100k. If you're not willing to spend a couple thousand prior to sending off your money to get some data on who you're sending it to you deserve to lose your capital. Syndicators prey on greed and laziness.
That said, it would be nice to see Passive Pockets develop a certification model where syndicators paid to become certified. Some verification steps are taken. Complaints can be forwarded via the site to certified companies, etc. Not a stamp of approval but rather a confirmation that basic industry practices are being followed. The companies can and should pay a lot more than $400.
1 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Melanie P.
There are companies out there like buttonwood, factright and mick law who do due diligence reports already. Reports cost $15-$20k but they are done by CFA’s, attorneys and others and are extremely detailed (we had one done).
I don’t think you will find any company to provide a certification for legal reasons.
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Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y
Quote from @Chris Seveney:

@Melanie P.
There are companies out there like buttonwood, factright and mick law who do due diligence reports already. Reports cost $15-$20k but they are done by CFA’s, attorneys and others and are extremely detailed (we had one done).
I don’t think you will find any company to provide a certification for legal reasons.

I've worked with the CFE/attorney/investigative journalist reports in the past. I learned almost all of my techniques for DD studying those memos. That is not what I'm proposing here.

The certification isn't an endorsement of the investment. It's a certification that the company meets basic industry-standard criteria. Some I can think of off the top of my head would be salaried sales reps, basic record of past performance, proper offering documents, back office procedures, policies and procedures for proper vetting of investor accreditation.

These are just a few of many potential standards. As a group we could come up with a detailed list of 30-50 items that are the basics a company needs to have before they ever speak with a potential investor. Helping the space create some norms and baselines will make the bad apples start to stink a lot sooner.

Every industry's association from cleaners to Community Associations has some sort of certification or accreditation program for their members. The syndication space lacks this and perhaps that's an area passive pockets can fill.
0 Reply
Anton Mattli
Lender · Dallas, TX · Member since 2014 · 36 posts · 32 votes
2y
Quote from @Scott Trench:

@Brent Sutherland

PassivePockets will have both free and paid components to it, just like BiggerPockets is free for members, but also has a pro membership.

Anyone trying to solve this problem will be faced with the problem of producing positive cash flow to have the business model endure. I am not aware of anyone who solves problems in a lasting way without a cash-flow positive business.

Competitors and other solutions will have to monetize, eventually, in one of the following ways:

- Make money raising capital themselves, and therefore be another GP (Fund of Funds)

- Make money raising capital for sponsors

- Make money serving LPs by charging LPs

The free components of PassivePockets will be supported by advertising dollars from sponsors. The parts behind the paywall will allow us to focus on our paying customer - the LPs. LPs will have to decide if PassivePockets LP-Only sections have the potential to reduce their risk or will enable them to increase their returns by 1% or more (1% of $50K invested is $500 per year). If we are unable to provide that value, then LPs won't sign up and/or will cancel their accounts with us. We believe we can justify that price point, and will need it. This is a smaller market, and even 1,000 LPs paying the subscription fee will support less than 5 full time employees.

If you have other ways to make money solving this problem, so that PassivePockets has a way to endure, that resolves this conflict, please let me know.

@Scott Trench Creating a website focused on passive investor education that is sponsored by deal sponsors is removing the independence of the site, IMO.
0 Reply
Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
2y
@Anton Mattli Could you please provide a recommendation on how we can sustain a business with another model?
Either the LP will pay a fee for private advice, or the GP will pay to get in front of potential investors.
We have opted for a hybrid approach - LPs who want to pay for access can get an exclusive network, privately discuss operators, privately review and see other LP reviews of sponsors, and discuss "red flag" sponsors.
LPs who do not want to pay for access can learn from free content, and we will fund that content from sponsorships, which may include from capital raisers.
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0 Reply
Anton Mattli
Lender · Dallas, TX · Member since 2014 · 36 posts · 32 votes
2y
Quote from @Scott Trench:

@Anton Mattli Could you please provide a recommendation on how we can sustain a business with another model?
Either the LP will pay a fee for private advice, or the GP will pay to get in front of potential investors.
We have opted for a hybrid approach - LPs who want to pay for access can get an exclusive network, privately discuss operators, privately review and see other LP reviews of sponsors, and discuss "red flag" sponsors.
LPs who do not want to pay for access can learn from free content, and we will fund that content from sponsorships, which may include from capital raisers.

@Scott Trench Whether you intend it or not, as soon as you have website sponsors on your site, LPs will regard those names as "vetted" and will more likely trust content or deal offerings by those sponsors. To maintain true independence, I think a strict subscription model is the better way to go. As you know, there are other communities that behave like investor clubs/networking groups that present themselves as educational platforms, yet they are either operated by deal sponsors/syndicators or have a number of deal sponsors/syndicators that sponsor the website (they may not call them sponsors but preferred vendors or similar).
4 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
2y
I can offer a unique perspective. I have been a NNN real estate broker for 20 plus years. I am also a syndicator as well where I am GP on value add and stabilized syndications we typically take down all cash.
I have been on this site a very long time pretty much since the beginning and have seen it change a lot over the decades.
Unless you have developed software or paid someone to do it people often do not understand the cost involved. I am currently building a back end NNN software for my website at an initial cost close to 100,000. Even when it is completed there is ongoing monthly cost to keep the code from breaking and keep it secure and updated. This does not even cover more costs to keep improving and adding to the software. You can get software built cheaper overseas initially but it is often junk and you still end up paying the same from all the ongoing fixes and have less adopters use the software because of the initial problems. Coders overseas know many businesses want something for cheap cost so they slam out junk with lots of bugs and then charge them over time to fix it.
So when you build software the money has to come from somewhere. The users and or sponsors or BOTH have to contribute to keep the site going.
For syndicators you can put everything out there for diligence and accredited investors still invest with some groups I would not invest with. The LP investors thought process is they make millions per year at job or business and do not have time for deep dive into every nook and cranny with a syndicator offering. They put 100k here plus here and there over dozens of deals and hope the portfolio average stays positive over time.
I know I deal with very wealthy people on a daily basis and have talked to thousands of millionaires over the phone through the decades. I am wealthy myself so I know how hard it is to earn the money and make the money. What people need to watch out for is newer syndicators with little experience trying to build teams and have to keep doing mediocre deals to feed their team to survive. Also syndicators massaging debt to make deals pencil to entice LP investment and are now struggling with existing deals blowing up. I like buying all cash because we can decide when to use debt if any and when to sell. We are not chained to debt markets or what lenders want for our business model.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Scott Trench:

@Anton Mattli Could you please provide a recommendation on how we can sustain a business with another model?
Either the LP will pay a fee for private advice, or the GP will pay to get in front of potential investors.
We have opted for a hybrid approach - LPs who want to pay for access can get an exclusive network, privately discuss operators, privately review and see other LP reviews of sponsors, and discuss "red flag" sponsors.
LPs who do not want to pay for access can learn from free content, and we will fund that content from sponsorships, which may include from capital raisers.
One way to balance this is to have experienced people on any sponsored content to "ask the hard questions". For example I have seen a note fund where the manager collected fees based on the payoff of the loans. So lets say I raise $5M and buy loans at 50% and are charging 3% management fee - tht is really a 6% fee because its based on $10M loan balance when they raised $5M.
I am in a group that has a passive investing club and when they have a webinar the people who run the group are very experienced and will call out BS or tell people they should question whether someone can buy a class A at 6 cap and think in 24 months and put lipstick on a pig its a 4 cap.
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