I put 2 million into 20 crowd fund deals. Posting performance:

166 Replies

Just seeing this interesting thread!   11% +/- Yes yes to bond or money market investers this is astronomical.  But since the risk is same as being a principal in a deal and I won't do a deal for less than 20% cash on cash it makes me happy with my hands on approach plus my 20+% does not include capital gains.

Diverting slightly, what does a similar experiment investing in "turn key" rentals return year after year?   I have a poor view of turnkeys because of the difficulty of NOT being sold a pig with lipstick and then the usual high PM costs.  But what is the gain year after year?  11% or better when cap gain is added in?

@Curt Smith

Not sure how you figure you have the same risk as equity. its still debt, you are still in (or you should be) at very low % of ARV, its still an obligation of the borrower and you still are not on title for the property so there is less risk there. yes there is still risk that is why the rates are high and yes if the sponser blows up, your do a poor underwrite or the RE world does you are still in trouble but I think much less trouble than equity in all but the worst case. You have seen some stories of problems but in many cases I think either the investor assumed it would be a smooth ride (not for 11% - 12% for sure), they didn't diversify or they took on deals they should not have.

Good Point @Curt Smith . As long as I am baring my soul, I might as well add my rentals and flips on other tabs and compare the overall performance... I guess I have not thought to do that before.... but I think they will all look decent. 

I did invested in Wealthfront and Betterment... as they seemed like something kind of new... I will add a tab for those too I suppose since they are recent and easily accessible.

IF I added my investments in equities and futures over the last 20 years, It would NOT look decent and frankly, I think it would be too much depression and work for me to reconstruct all my accounts and my chaotic trades. Maybe thats something else I like about real estate... if forces a more thoughtful and slower pace... and for me, its easier to know what I actually have. [START RANT] I just don't trust the quarter to quarter manipulation of public company financials and I happen to think the entire market is way over-priced in terms of multiples. Why is a company immediately worth 3X - 4X when it goes from private to public???  I also don't trust the market is fair. Tons of day-traders with more information that you will ever have, etc. Lots of sleaze balls like Enron.  Its why Hilary can quickly make 100X her investment over months, while people like me lose money. Huge place for outsiders to hand their money to insiders. Govt intervention that is over my head... (Lets save AIG investors but not Lehman investors).  My 401-k that I contributed to for 15 years and didn't micro-manage yielded less than I put in. Mutual fund companies that create tons of funds and then kill the ones that fail and publish the glorious numbers of the ones that hit. Put simply, I'm bad at stocks and I realize that...and I just don't trust anyone else is consistently any better. [END RANT].    

Anyway, If I had to guess my performance in equities and futures I would say -15% over the last 20 years? Some might say that I can easily beat this just putting it all in a mutual fund or index. Well... good luck with that. I did have some great trades (like I was early in Tesla, but I always offset these with astoundingly bad ones. Chesapeake oil at $8? I'm in!!   

I have the same view of publicly traded companies. People don't invest anymore, they day trade. All they care about is their stock being worth more tomorrow or next quarter instead of 5 - 10 years from now.

Well, maybe I shouldn't slam stock investing... maybe more fair to say I'm just not good at it, and maybe more importantly, I don't enjoy it. 

Something neat about improving homes and neighborhoods... Seems like I get to win, other people get to win, neighbors win, etc.. Like real value is being added. 

A low/no load S&P500 fund would be in line with the above historic performance. 2014 was up 12%+, 2015 down 1%.  (credit to the site at URL above...)

The point is you don't have to pick individual stocks to participate.

@Chris Martin - And that return is most likely classified as a long term capital gain for the buy and hold investor. Matthew is involved in a lot of debt investments...an automatic 30+% hit when Mr. Tax man comes for his share. That being said, I am pessimistic that the next 30 years will bring the same type of stock market growth as the previous 30—I'm overweight debt RE investments for this reason. 

I'll take a tax adjusted 7-8% return any day over the mystical valuations and returns of the stock market. 

Thanks @Matthew R. for the suggested questions for Lending Home. I have asked some of them along the way. They handle the servicing in house with dedicated 16 member team until they need to take legal action. Then they turn it over to outside professionals after putting together all documents needed. They use this same process for their large commercial customer. So, for the loan that is behind, they are still working with the borrower and they received just a payment. Now I need to wait to see if it clears.

Agreed @Chris Martin .

I hear a lot of people talk about ways to get around taxes... but again, I guess I am just not that smart. I think the reality is that you are going to pay taxes on your income, unless you want to jump through a lot of hoops. I am OK paying taxes. I think there are basically four realistic ways to approach these from an extremely simplistic perspective. 

1) Its a business. Write offs include overhead, capital investments, etc. profit on deal one reduced by expenses on next deal in the same year. I spend enough hours a year to qualify as active.  
2) Its a cap gain. I buy, maybe fix up, I deduct costs, I sell 1+ year later and pay cap gains rates. I can offset gains with other unrelated capital losses.
3) Its passive investment in things like debt. I pay regular income tax in interest income.
4) Its my personal home. I buy, I live there, I fix up over 2+ years. I sell and take a very large 250k - 500k exclusion on taxes. If I was smarter I would do this more I suppose.   

OK... As promised I have added two tabs:


1) Robo-Investing (This is congruent with the  idea of tracking performance of new investment vehicles)
2) I added a tab for recent Flip houses (This is more congruent with the intent of this site and is a good basis for comparison of other vehicles)

I think this is a healthy exercise as I have never clearly compared effort, returns, etc...

I suppose this means that I need some sort of Tab that totals and compares them.

I will see if there is interest and maybe feedback on format before I go nuts and add rest of recent flip properties and related things. 

I am pretty surprised that Betterment seems to be doing so well... unsure if I factored tax loss harvesting correctly..

Hi @Dan Kiehl

Payouts come mid month... so I will know (and update the sheet) in a few days. I must admit I have held off a bit. I have one loan in default, so I am taking a breather to learn how loans in default are handled. Obviously bad loans are the key risk point for lenders. How well a company manages risk/loss mitigation through the entire process is key. 

From a high level I can say that I continue to be very impressed with Patch of Land, and I suspect I will continue to use the platform.

Matt

Thanks for the continued updates Matt.  I've started my own spreadsheet with my crowdfunded investments as well.  I currently have 6 investments live and planning on building this up over the next year depending on how these go.

https://goo.gl/yXWwnn

2 million at 10% would be a decent annual payday.

I am in a similar position with funds to invest but have no guts to put that much into RECF.

Perhaps as I learn more about other's results!

Thanks for sharing.

Well... you could certainly argue that I am not doing great so far...

103k in interest earnings...
117k in defaulted loans...

https://docs.google.com/spreadsheets/d/1dHzmfM1l-BWSaH-yaLP1TL70lSvB8StSmeesQOBB4MU/edit?usp=sharing

Matthew, I am amazed that your largest deal paid you back the loan so soon (1.3M), from the look of the sheet that was over half your investment, so that would definitely skew the numbers (but lower your risk of course).  Did you reinvest that money?

Originally posted by @Matthew R. :

Well... you could certainly argue that I am not doing great so far...

103k in interest earnings...
117k in defaulted loans...

https://docs.google.com/spreadsheets/d/1dHzmfM1l-BWSaH-yaLP1TL70lSvB8StSmeesQOBB4MU/edit?usp=sharing

 Any hope on the default?  

Not sure what's being done. I think they ask borrower to pay. Borrower says he will pay when he sells a house. They say ok. But no proceedings are taking place. I think legal action costs the platform money, time and risk, so I don't think they want to go that route. Maybe they right... Not sure.  If the economy turned down, I am not confident that the platforms have budget and systems to handle forclosing. Loss prevention / mitigation is a concern of mine. 

I have similar concerns but the cost comes out of the recovered funds from the sale of the foreclosed property. They should be able to just wholesale it get what they can. I think the sites should start legal proceedings without delay. If borrower makes good along the way the costs of the proceeding should be charged to the borrower just like a late fee.

Hi @Bryan Mee ,

I suggested this, but they prefer to work with the borrower for quite a while before taking legal action. I am guessing it will take 6 elapsed months before they filed to foreclose.. then adding that process time you could easily have a year or more. 

Hi @Matthew R. - 

I am a PoL investor, with few problems (a couple late pays, no defaults, too many prepayments). I have made 15 investments, 5 paid off early, 3 paid off on time or < 3 months extended, 2 are late (one chronically late), the others active and paying.   I think PoL will really work to make your single defaulted deal whole.  They pride themselves on "0.00% principle loss".  It may take a while.   I have no direct experience with the default collection process of PoL, but I like their transparency, and reputation is everything in this crowded crowd funding space. 

Also, thanks for sharing the spreadsheet.  I am in two of the iFunding deals you choose, as well. 

Thanks @Jim Wagoner

Well, I am happy to report that the Patch of Land deal that has been in default for 4 months has been fully caught up. All four past due interest payments were made and a significant principal payment was made. 

Although one success story does not necessarily validate PoL's policy of working with the borrower (as opposed to focusing more on legal remedies), it certainly is a good sign that what they are doing is working. 

PoL staff really worked hard to get this default resolved. Although I wonder about how scalable this method is (especially if there is a down market), I really appreciate their efforts. 

Matt