Equity Build Finance, LLC

Investor · Montello, WI · Member since 2012 · 8 posts · 4 votes

I was just wondering if anyone has had any dealings with this company? They promise 12-15% returns, depending on how much you invest with them. They always seem to be offering properties in bad neighborhoods, mostly in Chicago, and claim to have never had a foreclosure or default in over 600 transactions. When I asked about specifics on one of their offerings in December, I got an e-mail saying that their "finance guy" would get back to me with details. I still haven't heard from him.

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Gregory Vallenari

Investor · Denton, TX · Member since 2012 · 2 posts · 3 votes

11y

Yes, I have two investments with them that are both nail biters.

My opinions only:

My gut feel is that they're above board and not a scam. But operationally they seem to have some challenges. Communication is less than desired as projects progress and especially when they get into trouble. While it does seem like they're working on that aspect, I don't feel that they understand what good communication to their investors should look like. The folks they put in place to communicate to investors are fairly new and don't know a lot of what's going on.

One equity investment i have with them in Chicago has taken some bad turns and I may or may not see all my principal back. They had a conference call to explain what had happened and what the plan was. The explanations seemed reasonable but no communication for a couple of months after the call. Then i pushed for a status and found out that plans laid out in the conference call had fallen apart - yet with no investor update. Ongoing communication (where we are, what's next and what are the milestones) is lacking and only comes partially when i really push for details.

Another lending investment i have with them in Puerto Rico is supposed to complete in few months but has already been delayed twice. The explanations seem reasonable but communication has not been good, though they did finally have a conference call recently.

I understand from the Equity Build Finance (frequent) sales emails that none of their deals have ever lost money but i am obviously a little skeptical (but hopeful).

I would love to hear of other's experiences - successful or otherwise.

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Darrell Odum
Appraiser · Myrtle Beach, SC · Member since 2015 · 9 posts · 1 vote
10y
That's very good info. Thanks. From a real estate perspective, what concerns me is that there is no independent verification of the value, after repairs. In a previous post, someone from EquityBuild said they didn't have appraisals done when doing a deal because the properties would need so much work and it would not be relevant to the final product. Well, what should be done is a "subject-to" appraisal that determines the value after the repairs are done from a specific list provided, and the value is "subject to" completion of these items in a workmanlike manner. These repairs and improvements would be verified after completion to make sure they were done as stated. The obvious reason that appraisals, or valuations done by owners/principals in a property aren't used by lenders is they are prone to be over-valued and the potential for outright fraud. In a default the value is further reduced by the distressed financial stuation. So the lender may not be made whole. I think I will continue to invest my money in my own deals.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@?Darrell odum sub too appraisal is the back bone of this type of Scheme.. a long with that you would want an appraiser that is not picked by the sponsor.. and or if they provide you one.. spend a few hundred bucks and get a review appraisal...
Having done a lot of work in this area and asset class this is an unusual market.. were there are some very derelict buildings that can be bought for next to nothing.. I mean 10 to 15k a door. and when totally rehabbed are worth 70 100k a door. but it cost 50k to 60k a door to get that value
if you have a property that is picked up for small numbers but the loan is made at some future value then there are in many cases literally 100s of thousands of dollars being raised and ear marked for rehab.. this is when you have to have the utmost trust in a company.... and of course this is were many companies fall down when things on the rehab side don't go right and they have burned through the rehab funds and the project is still not done... :(
Its why as a HML we would send draws and inspections.
In the case of a note play were you are raising all the ARV money up front you don't have the benefit of these safeguards as we did as lenders.. but even then as lenders we got burnt.
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Alan Grobmeier
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
10y
I have been contacted by Equity Build as well. They are offering 18% to me on a property in Chicago. I told them I was interested, but after doing some research, I have decided not go with them. Despite my decision, they are attempting to 'hard sell' me. Almost to the point of despairation.
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Mark Whittlesey
Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes
10y
@Jay Hinrichs You are correct. It is a fracionalized note. Sometimes yes an investor is bought out and sometimes the deal does go to maturity and investors are paid off from a rehabbed property which is sold or refinanced (to a more "normal" note).
Still trying to get my principle back via the buyout route. Interest payments do come in but I was forced to extend a note that I did not want to. At this point I am expecting that I am stuck at least till October when the note extension ends. Hopefully I will not be forced to extend another 6 months.
And hopefully I will be fully out (of the other note) by the end of the year. Your point about the pitfalls of multiple investors/fracionalized notes is well taken. IMO, EBF is NOT doing an acceptable job as servicer. AFAIK there was never any communication directed to the investors when the note was coming due. It was just a forced extension. Sure, you could decline the extension but that just put you on a buyout list. Which for me have never come. Eventhough EB/EBF continues to send out marketing emails about all the "smart" investors who recently invested with them (in other buildings and notes obviously).
@Alan Grobmeier This is because EB/EBF make a big time windfall when a property is sold to a buyer-investor and that requires note-investors. Basically. EB/EBF buys the property for X then sells it to Joe for 3X and Joe finances the deal with hard money from people like you and me. EB/EBF also typically makes a spread on the hard money repayment, collecting 15% from Joe and paying out 12% to me and you. But they may be finding that they need to offer you and me more to get us to finance Joe.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Mark Whittlesey I have a lot of experience with fractionalized loans.. that's all we did in CA back in the day 80's and 90s when I had my HML shop there.
buying out old investors with new is possible and very under the radar as its a simple assignment.
this way you have new money coming in paying off old money that gets antsy when time lines are not hit..
from a practical standpoint to pay 15 to 18% interest on rehab buildings those payments have to come from someplace.. so they are either packed into the deal up front and your principal is being used to pay your own interest payments.. it all works if the properties are worth substantially more or can sell for big margins above your loans.. Not sure if anyone posted about a successful sale yet.. just seems like a lot of money going in.. and old investors getting bought out by new..
those are huge interest numbers to make work for the operator... and I can see why many invest as greed has a way of sucking in investors when they are looking for yield..
will be interested to see how this all goes..
Chicago as most have seen and I have personally experienced is a VERY tough place to do business and you need huge margins to allow for profitability given the challenges of permitting and construction in the areas these assets are located... its not for the feint of heart that's for sure. and if a lender ends up owning these its a wipe out generally LOL... ask me how I know.
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David Bartlett
Investor · Los Angeles, CA · Member since 2016 · 4 posts · 0 votes
10y
@Jay Hinrichs I appreciate your post, “you need huge margins to allow for profitability given the challenges of permitting and construction in the areas these assets are located”
I’m not sure what you are getting at with huge margin. I know they buy under performing assets so I expect their purchase price to be lower than their sale price. The cost of the renovations, bringing in new management and tenants must be high and the independent appraisals have validated their stabilized value. I don’t know about you, but I have not found a better value out there and when I looked at the cost of doing this on my own it was actually going to cost me more both in money and time (which for me is also money).
Thx. David
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@David Bartlett my Point in that specific market and I know it well.. is that you Need VERY LARGE spreads between acquisition price and ARV.. as the rehabs are extensive , Security is a on going issue and expensive , city is very difficult to deal with,, and as they stated they had contractor issues which of course is not unique to them... So from a lender point of view the smallest money is going out to buy the asset and the majority is in the rehab.. so if rehab is botched or not done and lender has funded in 100% of the deal this is very risky type lending if it does not go as planned.
that's my point.
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Mark Whittlesey
Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes
10y
Update on this. Apparently, my note will be force extended AGAIN.
I won't be getting my money back in October.
Last extension was for 6 months. This time is 4.. 6... months?? I am not sure exactly. But I am VERY unhappy that apparently I have no options other than to sit on this note and hope that I get bought out at some point.
I have never been invited to any kind of meeting, phone call, email blast etc with all the investors on this note. So I have no idea what their feelings are in this matter. If the property is in as good a shape as the most recent update would have us believe (and supposedly is already 1/3 occupied with more applications in hand) then maybe the investors should be reaping the benefit.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Mark Whittlesey this is one of the risks of multi beneficiary loans... as you described .. you don't know who your partners are. So you can't foreclose and have no control.
If you live in CA then by law the sponsor of this note must do this through a CA. licensed RE broker and they must give you the disclosure form that spells out who your co beneficiary's are.. this is what I know I have do if I do a multi bene loan using my CA.. Real Estate brokers license. and the investor is domiciled in CA.... . other wise what you have can be deemed selling a security.. there is much more to just getting money from folks that blasting a rate of return out on the internet and getting inexperienced note investors to invest in these deals... there are rules of the road.. you may want to check into how this affects you being a CA resident vis a vi this loan.. For instance in Oregon you may not offer multi bene loans to any Oregon resident period.. and you must be state licensed RMLO to do these.... many states there is no requirements.. Like In WA.. no license required etc. And I know IL allows multi bene loans.. so we know its OK in that state with IL investors its when you cross state lines and different jurisdictions that things change..
Anyway Mark may be worth exploring if you are inclined.
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David Bartlett
Investor · Los Angeles, CA · Member since 2016 · 4 posts · 0 votes
10y
@Jay Hinrichs Could you just go into detail about fractionalized loans in your opinion? I understand they are risky and I was recently a first time buyer of one myself. Looking for some expert advice.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@David Bartlett fractionalized DT's are very common in CA.. and in some other venues and in many states they are not legal.. Like Oregon for instance..
The reason the state of Oregon has a mandatory disclosure doc is to give the other fractionalized owners a list of who their partners are..
there is nothing worse than a fractionalized note that goes sour.. and you don't know who are partners are.. this can manifest itself into not being able to foreclose because not all the partners will agree to do that.. IE some want to the other want to give the poor borrower more rope etc etc.
the appeal to fractionalized comes at the expense of smaller investors who want to get into deals but don't have 250k to buy the whole note.. but you lose a lot of control ,,
And from what has been written above it looks like some have been forced into extensions.. Whereas if you owned the whole note you could simply say NO and foreclose..
So in CA these are usually done by TOP shelf Hard money lenders who have years of experience and track record of success... and they are servicing the NOTE and have pre written instructions that they can represent all the owners if a foreclosure needs to happen;
what I see with the EB is there is no middle man broker its investor lending to the company.. so you have ZERO control and your just hoping they are successful .
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David Bartlett
Investor · Los Angeles, CA · Member since 2016 · 4 posts · 0 votes
10y
@Jay Hinrichs
Thank you for your response. You are extremely knowledgeable. I am from CA and have some friends who have made a killing with EB. What swayed me to take the plunge was how EB is a turn-key process. I have previously invested in college rental houses, and as you may know investing in real estate, it is very time consuming to find the right property. It is also extremely time consuming stabilizing the property. With my college rentals it takes me about a 3-4 month between property search, construction, renovations etc etc. I recently closed on my first note with EB and I love how I get paid monthly on my initial investment. For me I see EB as that middle man you describe. They have a 5 phase plan they implement in properties that have a high ceiling. They do the due diligence handling all phases of the process. I personally would not be able to handle a multi-family property on my own, EB made it possible for me to have a “piece of the pie"
Thx.
Dave
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Frank Yaccarino
Homeowner · Glen Allen, VA · Member since 2014 · 33 posts · 9 votes
10y
What is EB?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Frank Yaccarino Stands for Equity Builders
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@David Bartlett if your happy that's all that matters. I was simply responding to those who wanted to know the risks of pooled mortgages and those that got their loans extended without any choice ..
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Mark Whittlesey
Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes
10y
@Jay Hinrichs
Jay, Do you have any more info on this, especially as it relates to SDIRA funds?
If you live in CA then by law the sponsor of this note must do this through a CA. licensed RE broker and they must give you the disclosure form that spells out who your co beneficiary's are.. this is what I know I have do if I do a multi bene loan using my CA.. Real Estate brokers license. and the investor is domiciled in CA
Sadly, I am assuming this is real estate attorney territory???
And I guess I have another novice question.. Which state's laws apply here anyway?? There are at least 3 and probably more involved.
Thanks in advance....
@Jay Hinrichs
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Mark Whittlesey I can only go on what I know as a CA real estate broker for 40 plus years.
if you originate in CA then you need to disclose, if your doing business with residences of the state you need to disclose ... that's my understanding.. .you can get on the state of CA real estate commissions website its pretty interactive and search around.. the disclosure forms are right there on line.. its not a huge deal but it does need to be done.. As in CA there are thousands of multi bene loans floating around and the state realized decades ago;.. that when they have problems the lenders don't know each other or how to get in touch with each other.. this disclosure cures that.
this allows CA brokers to do multi bene loans without securities filings.. I have no way of knowing if multi bene loans in IL need to be treated as non registered securities.. and IL securities lawyer would have to tell you that.. as for the CA disclosures that should be very easy call for a CA attorney who is versed in CA lending to advise on I would suspect they know that off the top of their head frankly.
although there are folks popping on here with 1 or 2 posts that all is well.. in Chicagoland.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Mark Whittlesey
Here is the form that is commonly used.. pop on to the state website they are there they are free and there is one for most situtions in mortgage lending.. there is also FAQs that should answer your questions.. Again I can only comment on what I know and do.
http://www.dre.ca.gov/files/pdf/forms/re851b.pdf
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Mark Whittlesey Even if this is NOT a requirement in your transaction read this form very very carefully and thouroughly then you will understand why the state is trying to protect investors in these transactions.
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Mark Whittlesey
Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes
10y
@Jay Hinrichs Yea, I get it,. I did see the requirement for CA miortgage brokers, Unfortunately, the agreement includes a clause stipulating Illinois law prevails. I couldnt find much online about Illinois. I may call the state tomorrow.
Thanks again
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Mark Whittlesey Totally different those are terms that relate to litigation. what you have here is selling a mortgage in a state that has rules.. makes no difference were the property is.. its were the investor reside.. at least that is my understanding and how I work and WHY I keep my CA brokers license all these years. even though I have not live in CA since 2001... but these laws are violated every day.. I am not giving legal advice as you know.. and you need to check with your legal advisore.. just make sure they are up to speed on CA loan and investor deals.
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Monique Rene Coates
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
9y
Hi James, Gary, Mark, Cliff - thanks to all of you for your information on EB / EBF. I have been looking for reviews & more information on the company for several years now, from both the buyer and lender sides.
I have also spoken to EB/EBF a few times about properties and notes, but like everyone else, the returns seem "To Good Go Be True." Reviews were mixed, but they seem much better now, as the company has grown and gone threw some "pains" it seems.
I do have a question for those of you who have been successful with EBF, if you don't mind sharing . . .
1. How much was your FIRST note investment?
2. Once successful, what % increase was your 2nd note investment?
Thank you again,
Monique Rene
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Mark Whittlesey
Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes
9y
@Monique Rene Coates I dont remember exactly what I invested with them at first.. I think maybe the min of 50K. I know I have 87K and 50K with them now. And it was around 150K that I had to move out from a soured deal last year. If you are going to invest with them, you should definitely ask what interest rate you will get if you invest $XX dollars. They have tiered interest rates based on how much you invest. I am not sure what the tiers are.
I am getting 10% now (My statement of account from them says my portfolio yield is 12%.. but Im not geting paid that). They lowered the rate I was getting because I had to move a chunk money away from them because the deal soured. (Long story but it was a borrower "requirement" so I could get my money back about a year ago.)
I did just find out this morning... because I asked.. ... that my other note will NOT pay off on time.
I currently have 2 notes with them. "In theory", they will both pay off in the spring 2017. That would make one about 12 months late, the other 3-4 months late. As far as I am concerned, this makes them both in default since I declined every note extension. (One of the problems was because of terrible mis-management over a contractor from a year ago. I am not sure exactly what the problem is on the other one; from this morning's email it sounds like a lag in lease ups.)
I have asked repeatedly for a conference call or email blast with the other investors on the note but that never happened. I have no idea what the other investors' thoughts are or what they want to do. Maybe they are just happy keeping the interest payments rolling. Because the interest has been paid so far. Late in the month. It's the 25th and I don't have October yet. September was received on the 30th.
So if you invest with EB/EBF, just understand that the maturity of the note doesn't mean that you will actually get your money back then.
Also, I don't know what your recourse is if you aren't happy with that and want your money back when the note matures. "In theory", you can get your position bought out. I have been on the buy out list for at least 6 months for the note that was due April 2016. EB/EBF suggested that I take a haircut on my loan... 8% if I recall correctly.. to make it more attractive to another investor. I declined to do so. Get an attorney I guess? Contacting EB/EBF does not seem to help.
Let me know if you have any other questions..
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Monique Rene Coates
Consultant · Providence, RI · Member since 2015 · 117 posts · 37 votes
9y
@Mark Whittlesey Thank you for all of the information on EBF. I appreciate it! It explains alot of detail I was curious about. Again, thank you.
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James Roberts
West Palm Beach, FL · Member since 2017 · 1 post · 0 votes
9y
Hello, I have enjoyed reading everyone's comments regarding EB. The comments have helped me decide to see if EB and myself are a good fit and I am hoping that some of the investors will be able to help me with this decision. I currently reside in South Florida in Palm Beach County and have managed 8 rental properties for the past 5 years for an out of country property owner. I am now looking to obtain my own rental properties and am wondering whether EB or EBF would be a good fit to help me with this process as I don't wish to waste anyone's time.
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