Patch of Land - Update

62 Replies

I am interested to hear how many of you have actually invested in POL and how your investments are doing. So far I have invested $105,000 in 16 of their loans with various investment sizes ranging from $5,000-$15,000 in the past year and a half. They are really good at communicating with you once you reach out to them and the CEO has reached out to me several times over my various concerns. I am 90% satisfied with their platform however the 10% dissatisfaction may increase shortly as they currently have 2 of my loans in default...actually only 1 in default/foreclosure and the other one is just very LATE! I fear that the whole process of foreclosing on a property and actually getting my money back will be a LONG process. Furthermore, I am unclear as to exactly how much I would lose of my principle given the fact that I only own a very small percentage of the entire loan amount. Here is my actual dashboard below so that you can see my actual returns. As I said, as of today, this moment...I'm 90% satisfied with their performance and have confidence in their asset management team to be able to recover most if not all of my principle should more of their loans default. They mention that each loan is "personally guaranteed" however I do not see how that is helping me as an investor. And if they default on their "personal guarantee" what does that actually mean for us investors?

Account Dashboard

$65,000.00 PRINCIPAL OUTSTANDING

$65,000.00 ACCOUNT VALUE

$9,528.35 EARNINGS

16 INVESTMENTS

12.08% BLENDED ANNUAL INTEREST RATE

$7,850.00 EST. ANNUAL INTEREST YIELD

Account Value

  • Principal Outstanding
  • Debt $65,000.00
  • Equity $0.00
  • Total Account Value $65,000.00

Lifetime Cash Activity

  • Investments ($105,000.00)
  • Cancelled $0.00
  • Principal Returned $40,000.00
  • Total Earnings $9,528.35

Foreclosure in process - Borrower negotiating to bring loan current

AUG 12, 2016

For the Berwyn, IL Fix and Flip investment:

Thank you for participating in this investment offering. While the loan underlying this investment offering remains in default, the following updates have occurred in the last 30 days. The borrower is currently negotiating with our asset management department and offering either Deed in Lieu or to bring the loan current in return for a 6 month extension. We are evaluating the options now and continuing the negotiation. We will continue foreclosure activities as long as the loan remains in default and a foreclosure attorney has been assigned. As developments related to this offering occur, we will keep you updated.

Personal guarantee in the HML scenario is just about worthless.. I know I was a HML as big as these boys ...

you can forgetta bought it. the cost of prosecuting a PG is way too much to be relevant in one off HMLs.

it really depends what state they are lending in.. If its east coast like new York PA New jersey.. the chances of loss ARE GREAT.. because the time it takes to get your collateral back..

this is, as I posted on your other thread one of the things I have seen going on in CF space just making loans all over the country with no clue or thought to the default scenarios and the time it takes to corral your collateral.. by the time you do a 1 to 3 year judicial foreclosure in these states your collateral could be totally trashed..

stick to deed of trust states with quick foreclosure times. Like west coast.. TX  , MS GA MO etc

Avoid mortgage states with 1 year plus foreclosure times. Like NY,, PA  NJ.. if your in one of those states as I said TAKE THE DEED IN LUI and forget about PG its worthless as stated.  to Prosecute a PG its a full blown trial who is going to pay for that .. Not the crowd funder you.. and if it comes to that the borrower will just BK and you will be out even more money.

I had a negative experience with POL. Tried to invest in a property and they will quick to withdraw $7K. Then a discussion about accredited investor standards whereby I said just give my money back. Took 2 weeks to get it back but they did refund the money.

PG in many ways is like a padlock - keep the honest people out. I always get them and they are sometimes of value for a borrower with ethics who runs into a rough patch. Worthwhile leverage if you are negotiating a work out.

I pursued two developers with deficiency judgments after default. Both eventually declared BK and I was out the loan and attorney fees which were substantial. As a result, I am now a small investor who looks to the value of the asset before making a loan.

The fellow above has good advice about where to invest.

Glen, I'm a PoL user as well.  I don't invest as much as you in debt, I prefer equity but your track record in PoL is excellent.  The whole point of sites like PoL and even Lending Club is to spread your risk across several deals.  This way if a few go belly up, it's not a significant impact on your overall portfolio.  Always invest the minimum amount in these deals, never put in money than necessary and you should be alright.  I think PoL is great but I was disappointed with them one time.  I had a nice investment with them and after a few months, they gave me my principal back.  I asked them what happened and they said they sold a bunch of deals in bulk to an institution investor and my deal was in that package.   This of course raised the concern that they probably offer their better deals to institutional investors and the more riskier ones to individuals.   If defaults rates at PoL start to increase, this is probably what's going on.  Question the CEO on their policies and treatment of institutions vs investors.  I'm sure they'll have you believe they treat both the same but that's BS.  Big money always gets preferential treatment.

Dan, 

Foreclosures and delinquencies have been increasing at POL. I have 4 in foreclosure and 3 delinquencies and Randy King has 10 in foreclosure I believe (see our prior posts under Patch of Land)

Im wondering at what stage of the loan cycle, borrower choose to default? So far I have over a dozen debt deals with POL mature between end of 2016 and Mid 2017; None of them is in foreclosure status

All these posts are very educational. I am a avid stock market investor and recently decided to try REI. Friends are trying to talk me into apartment buildings but I can't deal with the hassle of going down that road. So I started looking at RECF sites and I am ready to jump in but I am still not clear on some things. You all point out various defaults, but are you recouping your money? I would think if loans are secured by RE with low LTV, then you should get something back?

Originally posted by @Dave Richter :

All these posts are very educational. I am a avid stock market investor and recently decided to try REI. Friends are trying to talk me into apartment buildings but I can't deal with the hassle of going down that road. So I started looking at RECF sites and I am ready to jump in but I am still not clear on some things. You all point out various defaults, but are you recouping your money? I would think if loans are secured by RE with low LTV, then you should get something back?

That's the real question @Dave Richter. I think a low LTV should be more indicative of how much cash equity the sponsor has in the deal. If it's based on inflated market values and the sponsor has no cash equity at stake, you should stay away.

The other problem is that in a down market, the loss severities can be substantial.  We're in a stable and growing market now, so it should be less of an issue.  Right now I'd say the biggest risk is in execution, i.e. will the sponsor deliver the rehab and sale/refi in the time they say they will.  Experience is the most important factor there. 

I've invested over $100K over the last year with POL and am happy with the investments.  I will tell you though, that I'm moving over to Fund That Flip or another crowdsourcing platform. (Checking them out now.)  The problem is that I'm an accredited investor.  I've been an accredited investor for many years now, and invested in many deals, including some angel investments in startup companies.  POL insists that I prove that I'm an accredited investor EVERY THREE MONTHS.  It's insane, and it is their "policy".  They want bank statements, credit checks...it's ridiculous.  When I complained, they wanted me to prove I'm worth $2M and I would be good for a year instead of three months...Absurd.

I refuse to do that.  It's unfortunate, and I wanted to warn the group and maybe save someone lots of trouble.

@Holly Williams  I suspect this may be spurred by deals going bad and all of a sudden lawyers get into it and say hey you did not protect our investors well enough etc. etc.

REalty shares does a nice job FYI  you may want to look into their debt deals.

These are regulatory burdens, not Patch of Land's. If you want someone to blame, call your congressmen. My take is that if Patch of Land is strictly following their compliance obligations under the SEC and other State & Federal regulations, this should be taken as an extreme positive.  In my view, this demonstrates that they take their obligations and due-diligence very seriously and that such good-business practices most likely extend to all corners of their operations.

Don't forget people that these RECF firms essentially serve as de-facto custodians of your hard-earned investment and (in some cases)  retirement funds.  I would be much more worried about the RECF firm that does not  follow these practices.

If you verify your accreditation via net worth (ie: $1M excluding primary home) then that's usually 3mo across most platforms I've invested in (including startups ie: angelco). 

If however you verify accreditation via annual income (individual $200K or joint $300K for EACH of the last TWO years with reasonable expectation of repeating next year) then those are good for an entire year. 

From my understanding these are SEC rules and what most RE crowdfunding, startup crowdfunding, and third-party verification services (ex: verifyinvestor) all use. That being said some platforms "enforce" it more than others.

It is a pain, but you can use one platform to verify for another. For instance I'll sometimes use my angelco verification letter as proof for another platform. Or if I do a deal at CrowdStreet or RealCrowd both use verifyinvestor and you can use their verification letter somewhere else. 

Also instead of submitting all your statements you can also get a CPA, Financial Planner, or Lawyer to write a letter verifying your accreditation status.  

So it's not a POL thing, you'll see it across other platforms too. If anything you should feel good that the platform is complying with the rules, hopefully that also carries to their underwriting :).

My experience with POL is from a borrower standpoint.  I did my first project with POL two years ago, they provided the best rates, great communication and seamless draw request process.   Two years later I can't wait to finish the one project I currently have with them so I can bid them farewell forever!

POL has become such painful lender to deal with that I have no idea how they're even competing these days.  The last closing we did with them took 6 hours, they were pitifully unprepared and they could not seem to get out of their own way.   Their service is hurting due to high turn-over and I am now going on 13+ days waiting on a draw request.  I have $100k in outstanding in open balances that they have not settled.  That last point is the most devastating one because that's capital that we can't deploy elsewhere!

Meanwhile Iocal lenders are dropping their rates to as low as 8% and can fund draws the same day the inspections are completed.  As an experienced sponsor and borrower there is absolutely no reason for someone like me to even think about POL going forward.   

Payoff Pending - This months interest included with payoff distribution OCT 15, 2016

A small fix and flip project that was to take 6 months is finally paying off after 1 year and 2 months. The distributions of 12% interest has always been current but there were 3-4 extensions .Patch of land did improve their communication with monthly updates but that has been a recent improvement. It is very hard to vett the projects and  one failure can wipe any gains I would have to say at best they are still risky investments.

I am trying to decipher the anatomy of a PoL deal gone bad. Is anybody else in on the Noe Valley deal in SF? I [thought] I did my homework carefully; experienced Borrower in a very hot market with a low ARV. Loan has been NOD for almost 3 months now. Since it's CA, must be NOD x 90 days then 20 day notice prior to sale. We are coming up on that in mid-March. Looking back retrospectively, I notice that the Borrower also has another loan also in San Fran that mirrors what is going on here (in timeline to the month -I'm not in on this second deal):

-12 month note; 

-Loan reached maturity early summer; Borrower declared both projects "behind schedule" over the summer, after note maturity.

-Continued to make scheduled interest payments on both projects until October and then just stopped.

-Patch of Land reports that they are "trying to refinance" and "Loan will be paid soon."

-After no action, NOD filed.

Wondering what happened here. Questions: does PoL check in on progress and document each stage before disbursing subsequent monies in a multi-phase project? Wondering if it's possible this guy said he was behind schedule, but continued taking money from PoL without doing work? Does PoL have protections against this? I know that FTF documents each phase, but does PoL? 

Also wondering why this guy would default on these properties. He would surely make money on these flips given the ultra-hot location. Unless he was lining the walls with gold, don't see how he couldn't profit. Just doesn't seem like the deal to bounce on in a robust market.....

Your insight is appreciated!

@Carla Carvalho    have you done a drive by ???  your in PA prop in SF  40 minutes your there.. I would at least do that... see what you can see.

Most lenders hire 3rd parties to verify work done then draw gets released.. at least I know Realty shares does this.

And you have to when your lending to the general public like this.... these deals can go upside down easier than you think and 25 to 30% equity can get eaten up very quickly.. all those prime SF is a good place to be compared to other markets that are not as robust..

but I would certainly take a drive up.. maybe you will catch someone working on it and can walk in.

@Jay Hinrichs , yes, yes. I know. I have been waiting for someone to tell me to do this :)

Between 2 jobs and 2 kids, haven't done it yet.... SF also not super easy to get around like other cities. Going to head up in 2 weeks. The guy/gal  seems to be up to no good.

I'm bummed because really screened for 6 months before investing....

Crowd funding is a neat concept but nothing beats getting to know a developer/flipper in your area and invest with them. So many unknowns about who you are investing in. Yes they give you the property and a bio of borrower but you really don't know them and can't look them in the eye and feel confident they know what they are doing. The low investment to get in and the idea of diversifying is enticing. But I'm careful with this.

@Carla Carvalho - I am also in this investment in the same situation and agree with what you have written. Vetted the prospect thoroughly and thought it a sure bet. I have around 10 other holdings with Pol and they are paying like clockwork so far (one paid out early) . Having said that thier communication appears to be very spotty. I am a bit further away for a drive by (Just about 14 hours on a plane lol) - but would be happy if you can share any info you might dig up.

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