Rental Property Investor 路 KY 路 Member since 2013 路 1k+ posts 路 537 votes
I stumbled across the American Homeowner Preservation (AHP) Fund ad on a podcast. Upon going to their website and researching further, it appears it's a hedge fund that buys discounted mortgages and supposedly tries to let homeowner's stay in their homes (and obviously make a profit) in doing so. This is now open to non-accredited investors (as well as accredited) for as little as $100. They keep any profits above 12% and it appears they charge about a 2% fee plus a couple other nonsense items (based on my very brief skimming through some info). Anyone familiar with AHP? Thoughts?
Investor 路 Kingston, WA 路 Member since 2008 路 1k+ posts 路 1k+ votes
6y
The virus has impacted a fund like AHP mostly in administrative delays with foreclosing on properties and getting them converted to REO properties for resale. One large component of their business model is to acquire distressed mortgage debt then foreclose and resell the property as REO on the open market.
Due to moratoriums on both foreclosures and evictions, as I understand it, AHP is essentially experiencing a log jam on the back end of their exit cycle to recover investor capital and profit.
They've recently introduced a program called "pre REO" which gives them a strategy to help pull investment capital from these assets which are waiting for foreclosure and exit so that they can recover some of the investment capital from the assets to meet redemption and capitalization requirements for the fund.
It's an innovative program, but seems like an over-complicated solution rather than just waiting for the moratoriums to be lifted and proceed was foreclosures and evictions. Even when the moratoriums are lifted there's going to be a backlog for scheduling especially in judicial states so exits on these assets will be much longer than anticipated.
I suspect AHP has most of its investors capital deployed into these type of assets and now it's jumping through major hoops to meet their capital requirements. This may be why many of you are experiencing delays in redemptions and distributions.
In the fund which I co-manage, we've stopped foreclosure activity on many of the non-performing assets since it doesn't make sense to pay our legal resources for activities that are in moratorium. We've also postponed any new capital raising activities since deploying new subscriber capital into distressed assets that we cannot resolve quickly does not make sense.
This virus has definitely forced distressed-debt managers to become more creative and patient in a market that they cannot effectively control.
Investor 路 Kingston, WA 路 Member since 2008 路 1k+ posts 路 1k+ votes
9y
We have bought some loans from them from our fund. Jorge Newberry is the principal and a very good guy from my experience. I cannot comment on the performance of his fund though.
Rental Property Investor 路 KY 路 Member since 2013 路 1k+ posts 路 537 votes
9y
Thanks @Bob Malecki. Is this structure standard, though, in terms of capping investor returns at 12%? I would prefer to at least be able to share in additional upside. I've heard of the whole 2+20 (2% fee + 20% of profits) approach with hedge funds, but haven't heard of performance caps before. Seems very limiting for the investor.
Real Estate Investor 路 Amherst, VA 路 Member since 2015 路 386 posts 路 400 votes
9y
If you want to share in the upside (but also risk your capital) you can do joint ventures with small investors. Fixed rates are very common for note funds.
Investor 路 Kingston, WA 路 Member since 2008 路 1k+ posts 路 1k+ votes
9y
Hi @Mark S. each fund is different in structure, some are preferred return only, some are profit split, some are a hybrid, some are debt only, depends on the fund and the sponsor. Our recent fund was a preferred return plus a split on profit after expenses. Our next one may be preferred return only. The one following may be a profit split with some leverage, depending where the market is and our goals for that fund.
Investor 路 Kingston, WA 路 Member since 2008 路 1k+ posts 路 1k+ votes
9y
Yes, its mainly ordinary income from interest payments. On our recent fund when we sell off the performing notes in year 5, that will be a capital gain from the difference from the adjusted cost basis of the assets to the net sales income, but the income to our fund members from the loan payments up to that point will be ordinary income.
Burbank, CA 路 Member since 2016 路 39 posts 路 3 votes
9y
i was thinking about investing a hunded dollars into this. The one thing i don't like is how much power they have over you. Basically ,they have the right to reject your capital and essentially "pre-buy" you out. So, lets say they hit a huge series of grand slams and are returning 20% / year annualized. The company can buy you out and just keep their 20% / year. Basically, you are taking a lot of risk and have limited upside. I don't think its that great of an investment, but I like the concept and the ability to diversify into notes.
Rental Property Investor 路 KY 路 Member since 2013 路 1k+ posts 路 537 votes
9y
@Akash Sky, they are pretty much consistently hitting grand slams of more than that. If they have to pay 12% to investors FIRST before they make any money (other than their 2% management fee), they have to consistently be earning more in order to be able to "keep the difference" or "excessive return." I think the language you mentioned basically just means they have the right to say no, but not simply because they're hitting grand slams. Also, if you look at their past performances of other offerings, you'll see their returns are far north of 12%.
Burbank, CA 路 Member since 2016 路 39 posts 路 3 votes
9y
that may be the case, as I know very well how lucrative buying debt pennies on the dollar can be. The issue I have here is how much control they have over my position, ( they have the right to buy me out at any time). Essentially there's a conflict of interest risk with this investment in addition to the regular buying non performing debt risk. Can you show me a link to the performance of their past offerings? I am actually thinking about invest a hundred bucks into this because of how interesting I think it is. I just don't like how they legally worded their offering and the rights they have over me
Los Angeles, CA 路 Member since 2015 路 7 posts 路 2 votes
9y
Hi..I recently invested $500 with them just to see how it goes. It's been six days and the money still shows as sitting in escrow. How long did it take before your funds were invested?
Rental Property Investor 路 KY 路 Member since 2013 路 1k+ posts 路 537 votes
9y
My understanding is 12% annualized return, paid at 1% monthly, on your investment. The annual 2% management fee comes out before you get your principal back. At least that way, in the event you never get your entire principal back (targeted within 5 years, although they'll make a best efforts attempt to get you out sooner penalty-free after 12 months (slight penalties months 1-6 and 6-12)), they still got to collect their management fee along the way. Distributions are generally paid around the 10th of each month. I invested $1,000 to test it out and get $10/month in distributions. #Cashflow. LOL
Hi..I recently invested $500 with them just to see how it goes. It's been six days and the money still shows as sitting in escrow. How long did it take before your funds were invested?
I invested via my SDIRA back in late January. The site was under construction and I only recently got a login to the site. But it's now showing that my funds were invested on 2/9/17. I've received two distributions since then, and both were reinvested into the fund (as I requested). So far, so good.
Investor 路 Pope Valley, CA 路 Member since 2014 路 108 posts 路 15 votes
9y
Interested in this even though they're closed to new investors at the moment.
Questions for people that are currently investing with them:
1) Under their FAQ, it says they distribute 12% to each investor first, then "return to Investors all of their invested capital." What does the second part mean? So do they actually give higher than a 12% return, or are they just buying you out of your initial investment (after they've returned all your investment, are you still invested?). Can you give me an example of a monthly distribution you've received from them, let's say with an investment of $1000.
2) Are there any fees?
3) Is your investment secured by anything?
4) Any other opinions about this fund? Has it been working great or poorly for you? How much have you invested with them?
Rental Property Investor 路 Malvern, PA 路 Member since 2016 路 1k+ posts 路 934 votes
9y
They pay 12% interest on your principle for a term, then return your principle at the end - just like an interest only loan. Fees are built into the operation of the company. You won't see fees, just 12% if all goes as planned. The investment is secured by the notes in which AHP invests - no guarantees! In fact, they explicitly disclaim virtually everything and write you can lose your entire investment. That's not likely, but possible.
I just invested with them a couple months back and all is good so far. As I read about them, it seems like they have a solid track record so far, but it is short and during an awesome real estate market.