How to tell if an investment is real or not?

Question

I got an email from Alexx Varga the other day, inviting me to invest in his company, NextGen Housing.

"We've got a great opportunity for you where you can lend a minimum of

$10,000 at 15% interest and get your return in six months."

http://www.nextgenhousing.com/

He is local to me in San Diego, but I'm not sure how to tell if it is a sound investment opportunity? The ROI sounds quite good, but the website is only 1.5 years old and the more I look into it, the more I question things.

I'm just curious how you all vet your investment opportunities?

Scott England · Answer

Well, I for one think it's a great opportunity. All of my home run investments came as a result of unsolicited emails from people I've never met.

Jay Hinrichs · Answer

sounds like they are looking for unsecured capital.. which with very strong borrowers is fine.. I have a significant amount of it that investor place with myself in my company... but i don't have a website.. and my minimum is 6 figures LOL.. my website is to come and visit me and walk through all my projects.. then decide.. meet my banker my lawyer etc etc. along with background /criminal if they want it.. you would be surprised... how people will lend money and not even vette the payor like they do a tenant who just wants to rent a unit..

Scott England · Answer

@Jay Hinrichs Quite true. But I'm not one to pass up the opportunity for quality sarcasm.

Brent Coombs · Answer

@Joe LaGreca, my question is: who are they selling their lending services to, who'll happily pay significantly more than 15%/y (with hardly any risk?), but who can't borrow money any cheaper?

"Typically, Ponzi schemes require an initial investment and promise well-above-average returns". [I wonder why I thought to quote this, from Wikipedia?] @Scott England, yep,"quality sarcasm"!

Justin R. · Answer

@Joe LaGreca I'm always looking at what the collateral will be, and the value of that. From looking at the website, I'm not sure exactly what the capital would be used for, so hard to say how you're protected.

No borrower wants to pay more than they have to for their money, of course ... so I always want to know why they're pursuing relatively high rates (15%) instead of cheaper options.

Do you know what the collateral here is?

Vince DeCrow · Answer

Hi Joe - It sounds like they are going to pretty good lengths to attract capital. To me this is a sign of inexperience or un-proven returns, especially when coupled with the age of the website. If you are considering making passive real estate investments and need to vet your potential partners/operators I focus on a few main things to start:

• Do you trust the operators?
• Operator's experience?
• Operator's historical returns?
• Does the sponsor have a good level of skin in the game to prove that their interests are aligned with yours?
• What level of risk are you taking on to achieve the returns

In addition to the responses from other Bigger Pocket's members in your discussion, Investormint has some good unbiased reviews of operators that you can partner with that have proven track records of solid returns.

-Vince

Scott England · Answer

@Jay Hinrichs HA!! I'm sure they are watching you closely.

Jay Hinrichs · Answer

@Scott England it was well played no doubt !!! they already don't like me on this site if I started down that path I would get booted LOL you keep it up though I love it.. I will live vicariously through your wit and wisdom.

@Mike Cumbie and your another one with witty come backs keep it up...

Mike Cumbie · Answer

@Jay Hinrichs

"my minimum is 6 figures LOL"

Is that including decimal places?

:)

Jay Hinrichs · Answer

@Scott England but in reality that is what much of investing is these days when it comes to crowdfunding and other large group investments.. Also I suspect many top syndicators have never acutally met some of their investors in person.

How to tell if an investment is real or not?

How to tell if an investment is real or not?

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