Wondering if any forum members have recent experience with Equity Build, equitybuild.com? They work mostly in Chicago, rehabbing multi unit properties and single family homes using multiple investors to provide capital, and advertise high rates of return.
Thanks for any feedback!
That's very interesting. They do every single thing including financing? And it looks like they only have section 8 tenants. I learn something new every day.
The builds I have followed tend to be more upscale.
It looks like Equity Build pays 8 to 10% then to pay these early investors with new ones who then receive 12 to 14% and so one until they sell the property and pay everyone.
All is well so far till the market tanks as it invariably does (it is cyclical in nature) and at that time they will probably just file for bankruptcy as they have done many years ago.
Not your typical pyramid scheme because there are real products (the real estate apartment buildings they purchase in the bad neighborhood for pennies on the dollar usually in Illinois of all places!)
The strange part in all this is not the high pay out with huge risks involved in each deal but in the structure they use which involves multiple investor/lenders all holding a portion of ONE Mortgage Note and allof them (yes all of them) are placed in a first lien position and they do this without even filing for a formal syndication with the SEC!
They claim they've never had a foreclosure. I am deep in 3 deals and the repayments are delayed on all three. At the same time they are aggressively soliciting more investors for new deals. I am getting very nervous. I have asked for status and explanations but to date have received very little information, only that projects have been delayed.
I suggest people proceed with extreme caution with Equitybuild.com.
I am not sure but I asked a closing attorney in Chicago about multi bene mortgages like we do in California and he said he does not see them often but does not think they are illegal. they are a mess though If you have to unwind these
I have a very long history with this company and would be happy to discuss my past dealings with them and the aftermath that their buyers ended up with.
I did a small investment with them on a multi-bene note back in Dec 2013. It was under their minimum as I wanted to try them out and they needed just a bit more to complete the deal. 6 month note with option of one 3 month extension. 20% APR.
Come June, they were nearly complete and chose to extend. Listed the home in Jul at only $9k above the total note! This was a big cause for concern for me and so when they asked for another extension in Sept or a chance to have another investor buy me out, I jumped at the chance to get my funds back. Took a few weeks, but I was paid back with my interest.
If Zillow is to be believed, it is still on the market and now priced $23k UNDER the note balance. Since I am not in it, though, I have no idea if they just refinanced everyone out or maybe they decided to rent it instead? I just feel I missed a bullet. But remember, my review is one property and one deal and they did allow me to exit early. I have learned much since then about lending minimums and even with their high advertised rates, those returns are not worth the risk taken.
I'm considering EquityBuild now. They had a lot of problems in the past but they sound like they have handled them and corrected course both in terms of oversight and getting out of the single family property flip business. Anyone want to comment and give me feedback to let me know whether what they're saying is true?
I was able to profit just over 24k on my 100k invested with Equity Build. It was more than the anticipated return because there was a delay. I currently have two other active investments with EB. There is risk to real estate investment and I knew that going in.
I began receiving emails from EquityBuild probably 4 years ago. Decided to take the plunge just over a year ago as a lender. Was invested in 3 properties. One has been closed out with the principle and interest paid as expected. Another is still ongoing and I'm getting paid the interest per contract monthly - no misses to date for 13 months. The last property was involved in a short sale in April. The notification about this property came as a surprise; however, Equity Build is going the extra mile to ensure I get back what is due me. Net result is that I've agreed to another deal that should close in June.
I think growing pains have occurred. Communication was minimal a year ago, much better now.
Hi Barry, I see from your thread of emails that you have a long history with Equity Build and were very nervous over the last year. You recently posted that you have profited with EB so I guess everything worked out for you. Would you recommend them now for a new investor? Thanks for your time.
I rode out a couple of complicated, delayed Equity Build deals that made me nervous. Now I'm glad I hung in. In my experience, they have shown integrity even when it cost them. It has worked out for me.
Thanks so much for letting me know. They told me there were some problems in the past but everyone got paid so I am happy to hear that it worked out for you.
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Hi Folks, just found this thread via keyword search. Seems that Equity Build uses a fractionalized deed of trust model to put multiple investors on one property. So all of the participating investor's ROI is based upon the performance of that single property outcome. There are other sponsors who use the "blind pool" model and deploy funds from multiple investor's funds into multiple assets to essentially spread the risk across multiple assets.
My company has a fund that uses the pooled model and I'm curious from any posters here why they would prefer the fractionalized model over the pooled model?
@Bob Malecki in my day of HML in CA as you probably know fractionalized is what we did as our SOP.. one reason cost.. its cheaper.. no need for anything more than an assignment..
Pooled investments need PPM of some manner and all the cost that go along with that. As its a quasi security.
However state of CA has disclosure docs that need to be signed by anyone in that state that is investing in a fractionalized note no matter were it is in the country...
Were fractionalized are weak is in a foreclosure situation and you need each bene to sign off.. if you have a hold out you have a problem
in your pooled approach you designate a Manager who has the authority to act on behalf of the minority investors.. for better or worse... I have seen those go sideways too and the minority gets riled up and kicks out the Manager for missdeeds...
In my PERSONAL opinion I kind of like ONE Note one investor route... cleanest from all angles from experience over the last 40 years of doing this.
I agree that one note/investor is ideal, but as we are buying dozens of notes in small pool acquisitions, the one2one model is difficult to facilitate. Yes a pooled fund requires more expense to create but it also requires SEC registrations/exemptions and as such is subject to both federal and state securities regs, which does provide some level of recourse for the investors.
@Jay Hinrichs from your perspective, what recourse does an investor in a fractionalized instrument have should the project go sideways? Fyi, I'm furthering this dialog both for my knowledge as well as those who have posted here so they have a good idea of the risk involved with such a model, thanks.
@Bob Malecki at the level we do mortgage pools or pooled investments.. even though there are state and fed regs.. these are UNREGISTERED securities.. and as such .. the only over sight is if you don't do it correctly and get your hand slapped or worse.. so there is no sense of protection up front for investor.. just punishment for the sponsor if they don't do it right.. that does not get the investors their money back in the case of a melt down.
In a fractionalized situation.. at least as to my experience doing them in CA.. ( many states they are not legal) like in Oregon its not legal).
The issue comes in the foreclosure process were each beneficiary needs to sign the documents to allow the trustee to prosecute the foreclosure.. if you have a hold out it can lead to a stand still.. ( never good). As it relates to investors.. being in deals with people they don't know.. this can manifest itself into all sorts of problems if the sponsor goes under or walks away.
In simple terms you don't know who the other investors are. you have a copy of their assignment ( if its recorded) if its not then you have NO way of knowing who your other partners are.
then anytime you get a group of non sophisticated investors in on one deal with no clear leadership this leads to all manner of confusion... One wants to Sue.. one wants to walk.. one thinks the property is worth double and won't sell.. etc etc.. Again why state of CA came out with a clearly defined disclosure document about this..
End of the day regardless of what method you use to invest in notes.. it comes down to the collateral.. it comes down to the owners or sponsors.. And especially when In essence your doing rehab lending which is what it appears to me from post on BP that others are doing with respect to these EB transactions.. and according to the owners they have ran into bad contractors bad real estate people. etc.. its not like our buying a NOTE on a performing rehabbed asset.. as YOU know rehab lending is the most risky you can do.. short of buying non performing seconds and paying too much for them because you did not understand the value of the collateral or all that goes into securing the collateral... Note to mention IL is a bear to foreclose in.. Very expensive and time consuming. And the city of Chicago has to be one of the top 5 toughest places to rehab.. I know this by personal experience and will never do deals there again on the rehab side... I can fully understand why projects in that city get all buggered up.. its happened to me..
Good points, thanks Jay.
Noticed this thread deals mostly with equity build finance which invests in the notes on properties. Has anyone bought the building from them outright as s turnkey multifamily apartment building? I heard from them that they offer both avenues. Personally I am looking into buying a building. Welcome others thoughts on this company as I do my research. Thanks.
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