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

166 Replies

im fairly new to the crowdfunding sphere but have folks checked out Alpha Flow? seems like it combines loans together as a means to disperse risk on any one property... I know I have used PeerStreet which does not do that... do other crowdfunding sites do any of this blended approach (almost in a way like a baby REIT sort of...)

https://www.alphaflow.com/

Thanks Matt BTW... that spreadsheet is super informative. I appreciate you taking the time and posting to BP for folks to learn more about this avenue of potential passive investing.

@Matthew R. - Great spreadsheet!!! Why haven't you done more bridge loans/transaction funding if you get 2% in 5 days?

I'm concerned that 50%+ of the crowd funded deals don't tend to pay off at the stated maturity. (Investor asks you for x money for y time but can't execute the plan).

Can you track your legal fees, if any, for foreclosure notices & filings, on a second tab? Does PoL handle the legal stuff for you? (E.x. Garfield, NJ Apts). What are your marginal accounting expenses in comparison to something like DRIP investing in S&P500?

@Natalie Vane

I would do more bridge loans if they were available. They come up rarely/sporadically.

Agreed on default rate... you need to feel good about underlying property/security.

Platforms pay for all legal fees, foreclosure costs, etc.

I do use Betterment and wealthfront for automated stock market investing. My favorite investing is in small business startups.

Very interesting spreadsheet. What I see is that a six-figure loan has an extremely high chance of default (in your very small sample size) while anything 5 figure (or, in one case, 7 figure) is almost guaranteed to be paid back. That makes sense, because 5 figure needs probably have a lot of equity in the project that provides added incentive not to default. 

@Matthew R. Impressive amount! So far so good in 2H2017? What's the net yield been? What's been your worst misses? I've invested $560,000 in RealtyShares so far (started in January 2017, and $250K in June 2017), and the income is starting to come in. I've met the management multiple times as they are in SF and I like the diversification AWAY from expensive SF real estate where I have multiple properties. 

You're living my plan Matthew! I have family and a home in Oahu, and have been eyeing buying a place to live to raise my family in a couple years. I've talked about this a lot on my site, FinancialSamurai.com. You might find it interesting. 

Sam

Maybe 12 month or so ago you posted the answers you received from PoL about several things to include what to expect in terms of taxes.

The 1099-Int received is fairly straight forward as I understand it.  Does it require you to file in each state you receive one?

And how is the foreclosure handled or have you not got that far yet?

I was wondering if that will cause you to have to file a tax return in the state of the foreclosure?

Sorry I have not checked on this site in a while and missed a few responses...

@Aaron Kaplan - Hi Aaron. I prefer to select each property. I think the most important thing to do is have a strong underlying property and a strong lien position. A few of these I must admit I just threw the money in because someone called... but most of the ones where I put 100k+ in, I made sure I would be happy owning the property. The ones that have had problems have been my best investments because the default interest rates are much higher. I never stressed about the ones where the property was solid. Los Gatos Hawaii retreat,  and Park Place are examples. I made over 20% on Park Place because it was in default. (I actually had 200k in that, not 100k... but the other 100k was in a partnership). I was fine with it as the underlying property was great. I have not put more money in for a while as I have been t with about 5 direct deals that I have done recently ...  Also, I have had some bad customer service and follow-through experiences with a few of the platforms.

@Elijah Moore Hi Elijah. Sure. I will check the messages. 

@Sam Dogen Hi Sam. Agreed. I like Realty Shares. I think they are one of the few with a solid management team.  I have not met with any of their management...

@William Morrison Hi William. Hmmm. Each state has different Nexus laws. I likely wont unless challenged. I had to file in all the states for a lot of years and the thing I miss the least about my business was dealing with all 3000+ tax jurisdictions in the US. Endless conflicting laws (conflicting with federal tax law, conflicting with other jurisdictions, applying their own rules very inconsistently and subjectively, etc. I will decline to answer this one as I am not a tax guy. 

The platforms handle the foreclosures. The platforms that are poorly managed and undercapitalized (a lot of them it seems) don't do a good job at managing this. 

@Matthew R.

i mean no disrespect but those returns are terrible and the investments high risk 

You underperformed the RE market by a large margin;

A passive investment in a random apartment building in an city such as Denver or Atlanta leveraged at 75% LTV would have yielded at least 4x what you made during the same period

@Account Closed No disrespect taken. Im sure do do much better. Im just a knucklehead experimenting with crowdfunding. I don't typically count leverage in my returns because it just increases uninvested cash, so it yields a high compartmentalized return, but not a higher overall ROC. When I have have it fully deployed I supposed I can count it. 

Thank you for posting this.

You have a much higher risk profile than I do. As a more conservative investor the these investments seems risky to me, esp if they are more than 15% of your overall portfolio.  I feel like I'd be giving up a lot of cash and putting it in a very high risk position for not so stellar returns in a similar position.  If my math is right the returns on Patch of Land on the spreadsheet are only @ 230 basis points better than a 10 Year Treasury as of Feb 2018?  

This thread was very helpful and I appreciate you posting that spreadsheet.  I am contemplating entering into a crowdsourced/syndicate type of situation but am having trouble trusting these "platforms".  Seems risky to me as i would have to hand over A TON of control. Beyond poor bookeping, poor vetting of deals, poor management, preferential treatment for good ol boy origionators, outright fraud is a valid risk as well.

At the end of the day I trust myself more and ask myself.  Why not just own the Real asset and pay a PM for better, safer returns and more control? 

The deals LOOK fantastic but what is my recourse if something goes south?