All Forum Posts by: Dion DePaoli

Chuck,

If I am reading your example correctly then what is happening is Bob's capital account is not diminished unless or until he decides to redeem.  So at BOM Feb he has $101.  The RLD is put in place but Bob's capital account is essentially not affected.  

If Bob decides to redeem the fund keeps 10% - of what looks like the pro rata of the RLD.  In the example it was the $1.00.  That seems to be the core issue at hand.

It is not uncommon for there to be an early withdraw penalty in a fund.  In this case Bob pulling his money out before the fund can disposition the default would affect the funds NAV in theory, which in your example would be the $1,019 BOM March.  Coincidently the RLD just so happens to also equal his first month's income but that may or may not be the case, right?  The hold back structure is whatever the aggregate allocation is for the RLD being 10% of all defaulted loans, Bob is subject to his withdraw amount according to his pro-rata fund ownership which in this example so happens to be 10%.  

So it looks, walks and quacks like a early withdraw penalty.  That is at least the manner in which they are treating it.  The reserve account at any time during investment doesn't reduce the capital account of the investor until there is a redemption.  As such there is no alteration to the actual return an investor is seeing until the redemption event.  The return calculations are for the most part correct.  In BOM March the fund has a capital balance of $1,019.  Each of the 10 investors then have $101.90.  The fund had $9.00 in income which is 0.89% for the period Feb.  Year to date the fund's return is $19.00 which is 11.40% for EOM Feb/BOM March.  

If I am missing where the return calculation is misleading let me know but I don't see it until the redemption event.  

Again, not a feature that is uncommon.  For the most part it is just called an early withdrawal fee and there is no misunderstanding.  I suppose the question as an investor would be is how does one go about not being subject to that penalty.  After realizing the full investment term or perhaps there is no lockup which it should be defined in some other way then.  It seems to me calling it a RLD is only half of the story to give the investor a good understanding of what it is and how it works.  It is not - nothing.  It's not just on paper.  It is a thing that affects how much money you get back when you redeem.  That will in fact affect the return upon exiting however the math works out.  In our examples the size of RLD is made up and as you mention they do not have a 10% default issue so how meaningful that RLD is in real life is not well understood.  If the investor is losing 0.125% I don't think that is all that meaningful.  If the investor is losing 2.0% that is meaningful.  However, only relative to the investor enjoying a 100% redemption at some point and the reduction of the capital account is because the investor is leaving early which could affect the other investors.   That is the common justification, early redemptions affects a fund's performance by not being able to realize the best disposition or use of assets due to the capital crunch and the general idea is the whole lot of investors is greater than any one investor.  

Sound right?

Hey @Chuck Van Court!

Let's walk through an example for clarity.

Let's say 5 investors each pool their $100k investments together into the fund. So in initial periods we have $500k in Net Asset Value or NAV. The NAV is going to be the gross asset value minus the funds total expenses.

So when the fund makes a loan to Billy Borrower for $300k at 10% interest only (easy math) the NAV at origination is still $500k. $200k cash and $300k in UPB. No return is produced.

When the next period rolls around we have the interest only payment which comes in at $2,500. So now we have a gross value of $502,500. $200k cash. $300k UPB. $2,500 income. Let's assume minimal expenses to the fund so the NAV right now is $300k in UPB, $202,500 in cash or $502,500. If the fund compounds the $2,500 income just grew the fund 0.5% for the period or 6.0% annually adjusted.

Now let's assume the fund makes another loan for $100k at 10%. Month 3 rolls around and the $300k loan makes another payment and loan 2 is made. Then Month 4 rolls around and both loans have made payments. The $300k loan has made 3 payments each at $2,500 or $7,500. The $100k loan makes one payment at $833.34. Period 4's income is $3,333.34. So we have $400k in UPB. We $108,333.34 in cash. ($7,500 payments loan 1 and $833.34 loan 2 plus the original $100k cash balance) The fund's NAV is then $508,333.34. Period 4's income of $3,333.34 is rate of return of 0.67% per period or 8.0% annualized return.

For clarity at this point in period 4 we have 5 investors each putting in $100k. The fund's NAV has increased by $8,333.33. Each investor's capital balance is now $101,666.67. Each investor has a gain of $1,166.67. Over 4 months of the fund the investors have had a 5% rate of return.

Now in period 5 let's say loan 1 misses payment and that triggers the RLD. Loan 2 makes its payment of $833.34. So we have $400k in UPB. We have $9,1667.67 over all 5 months in income. However, our cash is reduced to $50,000 which is the $100k cash balance less the 10% of loan RLD. So total cash on hand then is $59,166.67. We now have a NAV of $459,166.67. The fund still had income of $833.34 but it lost value when it set aside the $50k.

If any one of the investors were to request redemption they would have a pro-rata share of the $459,166.67. Since we had 5 investors each putting up $100k they are 20% of the fund each. So the investor who redeems would only get $91,833.33 back.

So the investor's return for this period should reflect the loss in asset value. The fund's net income was $49,166.67. The actual income of the $833.34 minus the $50k reserve.

The investor's capital account, just like the fund NAV rises and falls every month. So in month 6 the beginning capital balance of each investor remaining is $91,833.33. That is, the RLD affected the overall capital balance, of which the investor are the parts of the sum, and each investor's capital account is reduced. Income received in month 6 would be reported against the $459,166.67 NAV. Not the capital balance of all investors. This would give the perception that month 6 return is higher than month 5 even though the actual cash received is identical.  That is how it works.

In the event loan 1 is reinstated and the RDL is removed then that cash would return back into the NAV calculation.  The capital goes from asset to liability back to asset.  So it affects the fund.  In reality it probably comes back a little less than the set aside.  

To combat against this in some sense a fund might place a "high water mark" on the investor's account. This mark on the balance is where the investor's capital account must return to prior to the manager taking any further distributions. So in our example, if the 5 investors had a high water mark of $100k, their original investment, then the manager of the fund must go make that $40,833.33 loss up before they get any distribution of profits above their management fee.

Broadmar's statement the RDL is "only a paper loss" can't be true if it affects the capital account of the investors. That is simply what he is saying to you as an investor but it is not being accounted as such by the fund administrator or through fund audit.  It is a loss of capital while it is a liability.  

Now, it is not common for an investment fund to create a default reserve account.  Banks have to do this per regulation.  Which if we remember back a couple years ago the banks were all up at arms about the reserve levels being changed which forced the banks to have to re-capitalize.  That is how reserve accounts work.  They are not - nothing.  They are liabilities.  

The true measurement of the investment is going to be the original capital balance you put in minus the ending capital balance at year end.  Not just the income on a per period basis.  In period 12 you could have a rate of return of 20% but not have any real gain if that 20% gain only returns you back to par with the original capital balance.  

Private funds are exactly that, private funds.  So at some level there is no oversight into how they are accounting and reporting.  In accounting we have GAAP and FASB which have rules around how most of this is treated.  I suppose the issue would be having one number reported all year long and then getting a completely different number on your income statement for taxes.  In general, most private funds that are serious obtain a 3rd party administrator and have 3rd party accounting and auditing.  The reporting should come from them with management overlays to peace of mind to the investors.  

While buying subject to and creating a wrap mortgage is not illegal onto itself there is a slew of created realities that are imposed onto these transactions by the practitioners.  

For instance, we have claims, which are very common, that the use of an RMLO provides compliance.  At best this is an untested theory.  In all likelihood this won't hold water and the actual company which conducts these types of transactions above the minimal allowed is also required to hold a license.  

Two very simple ideas support this train of thought.  Holding oneself out to the public as a lender or mortgage provider is a licensed activity.  Listing a property for sale in public domain which carries the idea of seller financing is doing exactly that.  Holding oneself out to the public.  Second, the generally applied idea is that the company listed in the original note as the payee is the original lender and would be subject to license law.  Otherwise RMLOs could broker loans to unlicensed lenders all over the place which is not the case.  Lenders are required to be licensed. 

To some extent, while not exact, this is pointed out in both articles with the response from the state financial department which stated the company nor the two operators are properly licensed.  In the above article we have the statement: "The Department has concluded that Mr. Schober originated more than five mortgage loans within a 12 month period without being licensed with this Department," the order states."  At face value this statement is very simple, if you exceed 5 transactions in a year you need a license.  It doesn't say, you should get an RMLO to stay compliant if you don't want to get a license.  

Additionally, a title company conducting the closing does not absolve the transaction or parties from liability.  That is not the purpose they serve.    

Last, and perhaps the big "what ifs" for this whole genre, is the perception of the parties.  It seems to me the truth in this situation is romantically delivered.  The one homebuyer talks about the repairs they made to the property.  He "thought" he owned the property.  Another talked about their belief of proper principal payment.  By and large this operation is riddled with all sorts of issues which it seems practitioners shrug off as no big deal or easy stuff.  Paying no mind to how easily and quickly the rabbit hole traps you.  

In reality this is not a case of one thing they did wrong but rather a laundry list of things that can and do go wrong.  From misconceptions to license law to improper servicing and reporting not to mention downright deceptive practices.  These guys did a couple hundred transactions and I bet had you asked them, this was all done properly.  

Needless to say, the post does nothing more than bring attention to a case that may further insight into this transaction theory.  I would keep an eye on how the TDSML responds and what the attorney general files charges on and evaluate your business if this transaction type is something you practice.  I would imagine the more news coverage this gets the more the public will look at others in similar situations.

Saw this news today and decided to share it on here.  The story is still developing but I think those who seek to do wraps, especially folks in the state of Texas, since that is where this is, should pay attention to how this is treated and the direction the state agencies take the charges.  

When stories like this make headlines other folks who maybe Sellers into wraps may sit up and pay attention then wondering about their situation.  In the follow up story the company is being charged $1.0 Million in restitution.  

There are two articles:  Link 1 and Link 2

At least 200 families in El Paso might have fallen victims to a real estate scam by an unlicensed company that is buying and selling homes without clear liens, according to Texas RioGrande Legal Aid, which is representing at least seven affected families.

Texas RioGrande Legal Aid claims that brothers Geoffrey and Thomas Schober, owners of El Paso Home Buyers, buy and sell houses fraudulently through “wraparound” mortgages, which means the original homeowner's name is never taken off the mortgage.

"In representing these clients, TRLA uncovered a practice in which the Schobers sold houses through wraparound mortgages to defraud both homeowners and homebuyers out of nearly two million dollars over the last six years," the Texas RioGrande Legal Aid said in a statement that urges prosecutors to begin a criminal investigation against the Schobers.

The Texas RioGrande Legal Aid argues that homeowners who are desperate to sell their homes, sell their property to the Schobers assuming their name will come off the mortgage loan. The Schobers then re-sell the house — with the first liens still attached to the home — to people who typically do not qualify for a bank loan and collect about $10,000 in down payment. Then the new homeowners make monthly payments to the Schobers thinking that the money is going toward the payment of the house.

However, the Texas RioGrande Legal Aid said that in many cases the Schobers do not pay the mortgages that are still under original owner's names, resulting in foreclosures and evictions.

After Texas RioGrande Legal Aid filed numerous complaints, the Texas Department of Savings and Mortgage Lending last week issued cease and desist orders to the Schobers and El Paso Home Buyers LLC. The state order prevents them from selling more houses and stops their company from making loans and collecting payments from homebuyers.

The orders state that El Paso Home Buyers LLC has never been a licensed residential mortgage loan company, nor a residential mortgage loan servicer in Texas. The Schobers have 30 days to appeal the orders.

"The Department has concluded that Mr. Schober originated more than five mortgage loans within a 12 month period without being licensed with this Department," the order states.

“When Mr. Schober failed to pay the first mortgages, the consumers learned of the wrap-around mortgages when the first lien holders began foreclosure proceedings. Several consumers have been evicted as a result of Mr. Schober failing to pay the first mortgage,” according to the order.

K-Sue Park, an attorney with Texas RioGrande Legal Aid, said the cease and desist orders were issued by the Texas Department of Savings and Mortgage Lending after learning that of more than 100 properties that the Schobers sold to homebuyers with mortgages under other people’s name, 85 percent to 90 percent were lost to foreclosure last year.

Last week, Park filed two civil lawsuits on behalf of the families.

The Schobers could not be reached for comment.

David Pineira said he purchased a home from the Schobers in July 2010, but he lost it last year after the Schobers stopped paying the mortgage.

Pineira said at the time he was 22 years old and did not have any credit history. He said he saw a yellow sign on the street that said, “Three bedroom house for sale. No credit history. $10,000 down payment.”

Pineira said he called the number on the sign and the Schobers found him a home. Pineira said he gave the Schobers a $10,000 down payment and for five years he gave $728 monthly payments to the Schobers.

Pineira said he was never late on the house payments and he invested thousands of dollars in the house thinking that it was his. He installed a new roof, a new air conditioning system, remodeled the bathrooms and added new windows and landscaping. But everything was lost last year when he received a notice of eviction, he said.

“They were not paying the original loan. All notices for foreclosure were going to the original homeowner,” he said.

Pineira said he lost his home, but somebody else lost their credit.

Adriana Murillo also responded to one of the street signs and bought her house through the Schobers in 2009. About three years ago, she received a letter in the mail addressed to the El Paso Home Buyers stating that the property was behind on payments. Murillo said she reached out to the lender and was told that she was not recognized as the owner of the house.

She then contacted Thomas Schober, who ended up paying the balance. Murillo said she now pays directly to Kaplan's Mortgage Co. in Downtown El Paso, but the account is still under El Paso Home Buyers’ name.

Murillo said the purchase of the home has given her a lot of problems, but she has decided to fight for it because it’s all she has. She said she has made the payments on time with a lot of sacrifice.

Patsy Lopez, assistant county attorney, said currently the County Attorney’s Office does not have any cases against the Schobers. The County Attorney’s Office handles deceptive business practices cases.

Lopez said people are encouraged to file a report with the Police Department or the Sheriff’s Office for the attorney’s office to be able to look into a case.

Pineira said he reached out to law enforcement to report the case, but he was turned away by El Paso Police Department and El Paso County Sheriff’s Office. He then reached out to El Paso County’s office, which did not help him either. The El Paso County Sheriff's Office on Tuesday said that because Pineira's residence was within El Paso city limits, he needed to file a report with El Paso Police Department.

Murillo said she also reached out to the Police Department, but nothing has been done.

On Tuesday, El Paso police spokesman Darrel Petry said currently the department has ongoing investigations against the Schobers and their company El Paso Home Buyers, but declined to answer any other questions or provide any specifics on the investigations.

Complaints against the Schobers and their company by other alleged victims have been featured by Channel 14-KFOX and Channel 26-KINT in the past.

[contact information removed for television station and reporter per BP rules]

How does a wraparound sale typically take place?

• Homeowners with a mortgage lien decide to sell their home or to work with another person offering to sell their home for them to buyers who cannot obtain traditional bank loans to finance the purchase.
• The person in charge of the sale will put up signs advertising the home (“For Sale” or “We Sell Houses”).
• The buyer will contact the person in charge of the sale.
• The buyer provides little or no proof of qualifying for the loan (“No Credit! No Credit Checks!”).
• The sale typically does not take place at a title company.
• The buyer typically receives a written contract and a Wraparound Warranty Deed. He or she may also receive a Deed of Trust and a Promissory Note.
• The buyer typically gets no warning that a first lien exists on the home.
• The buyer gives the seller (or the person in charge of the sale) a down payment, moves in and begins making monthly payments to the seller.

Source: Texas RioGrande Legal Aid

John Anderson...

Where in earth do you make this information up from?

Have you actually ever bought a loan?  

Frankly it doesn't seem like you have a clue of what your talking about.

So the loan has good equity and a short term but it has a conventional rate.  That is probably a core issue.  5% interest is just not exciting.  This, for no better word, mistake, seems to happen more than it should.  

You wanted the buyer to buy and he wanted you to finance.  The problem it seems is he lead the deal.  His down payment and perhaps creditworthiness dictated the rate in order for you to achieve the sale.  It does beg the question, why didn't he just go to the bank?  

There is a reason, even if it is not a conspiracy.  He just wanted easy underwriting perhaps.  Not going to a bank because it is easier at some level to get seller financing is not a bad thing.  However, as a lender/seller you have to be mindful of what the market will bare for the terms you agree to if you expect to dump in the market later.  A borrower who wants conventional rates and terms should be sent to a conventional lender.

I don't think you will be able to find a buyer that is not going to discount that loan significantly for the sake of yield. None of the other features are going to compensate for that. It doesn't matter how big his down payment is or how credit worthy he is or what he does as a day job. The return on investment to buy that loan close to UPB is not attractive. As stated above, investors are looking for yield closer to 10%. Your interest rate is pretty far from that.

There is also wisdom in the idea of not writing a loan you wouldn't want to hold until maturity. 

I suppose "customary" is going to be defined by who you ask.  I would suggest there is no customary split.  That said, I have seen other offers for 50/50 splitting.  Frankly, to me this make very little sense.  

An investor puts up all the money, takes all the risk and only gets 50% of the profit. So if the asset is an NPN and we assume a market return of 20% then the investor only makes 10%. This sort of begs the question, why not just buy a 10% performing loan and not need the co-partner for the most part at all?

To address the common rebuttals, many folks will say "education" but this is really an abused idea.  We should understand that notes are more like snowflakes and less like copies of a book.  Sure, a defaulted loan is a defaulted loan, however similarities start to diverge from there.  Since obligations are different and income and asset levels are different and balances and equity levels are different it is more likely you will have loans that are less similar to each other than more.  This sort of puts to rest the notion that the one who does something for the sake of education in loan investing is truly benefiting "more" than they otherwise would if they do it themselves.  

Let's be honest, filing foreclosure is not anything close to complicated.  Find lawyer.  Hire them.  The lawyer does all the heavy lifting there.  

Modifications and reinstatements are not going to be similar events among loans at all.  Borrower's circumstances and loan characteristics ensure disparity among any two loans.  Further, it is dangerous for folks to believe that loans are more similar than not.  That sort of implies a one size fits all loans approach to disposition and nothing could be further from the truth.  

Now, this is not to say there is not much to know or learn because there is.  Having knowledge of foreclosure, bankruptcy, regulations and compliance is important and is no single topic is a small idea to digest.  For some of those ideas the universe of information is larger due to variance among states.  In fact the path to learning through doing is long for exactly this reason.  A broad range of things to know and they are limited to some extent on a per loan basis.  Ergo, one needs many loans to gain a well rounded and more thorough knowledge of the ideas within the industry. 

Again, my point is the "education" card is a bit over played as a justification for certain acts in the industry.  I could (did?) make the argument that the education idea is played out more often to benefit a party outside of the investor.  Who really benefits from a 50/50 venture where one party is the only capital investor?  It is not the investor per my above example of reduced return.

Another angle to this dilemma is the evaluation of the part of the partnership which brings the education or "know how" segment. To some degree, if I don't know what I don't know then I can't properly evaluate another party who possess knowledge I don't know about. The guru paradox if you will. From that premise I think we can extrapolate that there is likely, to a large degree, a plethora of lesser skilled and knowledgeable folks leading less knowledgeable folks. It may perhaps also inflate lesser levels of knowledge improperly. I bought one loan so I am now an expert, type thing.

In that regard, I do believe quantifying levels of knowledge and skill within the industry is not easy. Is it a function of units or time or variety or spectrum of industry exposure? My personal answer that question is probably going to be "yes, all of those".

To steer back a bit to the core of the question, what is then the economic value of the non-capital contributing partner in a relationship working on an unfamiliar asset class? It seems it is not an even split. One party taking a risk and one party simply doing work is not an equivalent exchange. I would love for that to not be true but reality dictates otherwise. With what I know and my experience I could not bring myself to ever suggest an even split if I were the non-capital party. And I sort of know this asset class pretty well.

Mainly this is more due to approach I suppose. The investor exists in the relationship to earn a return. So the return needs to take priority. That tends to be an important mechanic in capital markets. This takes us to the next idea in the thought path, what is the investment worth to the investor or rather what return does the investor expect to earn and is therefore willing to party with a portion of the return to have another party do something to help create and manage the return?

There is not going to be an easy answer there. It seems there are investors who are willing to take the 50/50 deal. On the flip side, there are investors who think that is too rich. Investment funds have lower level shares of return such as 20% for managers while also collect a fee. There is a certain level of marketability to this notion however. For example, Steve Cohen's funds have a 3% management fee and a 50% profit share. He also returns around 30% year over year returns mitigating risk along the way. So his firms performance over time has evolve to command a high fee and split. The key here is it didn't start there.

In the end, it will boil down to what is negotiated and agreed to. How marketable the structure is will largely be influenced by the risk and the return along with the confidence or likelihood of the risk being mitigated and the return showing up. Like I said, there is no real normal for the most part. There are a variety of assets in the marketplace, there are a variety of managers and a variety of revenue sharing structures. To that extent, any one is only as good as the alternative.  Ultimately the investor will decide. That said, it is probably important to understand that a high split better produce stellar results otherwise it is not worth the relationship. 

What?

That is obviously not very common.  Are you sure the tenant didn't misunderstand the amount due on the lease?

As it stands right now you would owe the tenant a refund for the amount over the amount due on the signed lease.  I don't think you can retro a previously made payment since that contract is signed already.  To be clear, you need to refund the overage.  

If they want to move forward at a higher payment you would need a new agreement.  

The purchase of property with an existing lien is, as stated above, referred to as "subject to".  The rights and interest granted to you are inferior to any prior party's interest in title.  Those types of deals are not uncommon.  

If the mortgagee is deceased, they may have an assignee or an estate which has a right to enforce the lien.  It would be helpful to understand if any collection efforts on the debt have taken place and when the last effort was made, even in general.  A mortgage with no collect-able debt can be extinguished. In order to do such a thing you would be looking at filing for Quiet Title.  

In addition, as Rick mentions, it could a satisfied lien that didn't get recorded or was recorded in error.  I wouldn't approach it with the mindset the lien will be extinguished but rather you will have to pay for the lien to be satisfied.  Anything other than that is simply a better situation to you.

You will likely want to resolve the cloud on title before taking the property for the sake of not being able to clear it as you wish.  Better to put it in contract and condition the sale on the clearing of title to protect yourself.  

You will need legal counsel in the state of the subject property to handle this.  A mortgagee has responsibilities to make themselves available for payment on the debt.  A good real estate attorney will be able to walk you through the steps to properly clear title.

@Or Yeger

There are actually some missing details that affects the answer to your question.  There are many activities working with loans and borrowers which require a license.  There are many activities when trying to raise money that require legal disclosure or license.  The question/idea you have is far to vague and what little detail you provide are acts that would be very concerning.  

The term "JV" gets tossed around in conversation a lot on these board, more so lately. By and large they likely create regulatory and compliance issues. Most will not have proper structure to the actual Mortgagee. Third parties in mortgage lending and servicing require license. I also tend to think most JV's are not proper joint ventures and are more like two folks, albeit entities or people, trying to work on something with a very loose document tying them together. Even further, soliciting for a JV into a loan can be regarded as a violation of securities law.

For instance, as I asked, what are you planning to negotiate?  You can not work with the borrower in any manner unless you are the mortgagee or hold a license.  It doesn't seem you have a mortgage broker license nor do you have a mortgage servicing license.  Negotiating between a borrower and a mortgagee as a third party for a fee in all 50 states is a licensed activity.  

One of the other ideas you mentioned is setting up payments.  Again, what do you think this task involves?  You are not a licensed servicer so you can not manage, accept or work with a borrower's payments to the mortgagee.  As I mentioned the payments are already set in the note which is an important basic detail that you should know and understand.  So that misunderstood idea being present is a red flag in your level of knowledge working with this asset.  

When it comes to the sourcing idea, which we can group in to brokering concepts, the question that begs to be asked is what can you know of the quality of loans, risk from the counter party or general pricing if you do not have a better grasp of loans in general?  

Brokering with little to no real understanding of the asset class sounds good in discussion but in reality it is often a waste of time for all involved.  Including broker, seller and buyer.  When other occupations have brokers they are sought out because they have some basic level of expertise.  A property and casualty insurance agent doesn't simply forward over contact information of the insurer or underwriter and expect a fee.  They lead the interaction and have to be capable at some level of guiding the client.  I think that idea gets lost in those who seek to broker whole loans.  It is not just about forwarding an email.  

This all brings us to a point where, as I mentioned, you have much to learn.  That is not demeaning, it is just a fact.  You really do have a heck of a lot to learn about lots of different aspects of this asset class and business.  You do not know what you do not know.  That is the dangerous part.  In the relationship structure you imply, be it JV or formal management, the other party sounds like they are putting up the capital so logic would dictate you are supposed to put up the expertise.  Expertise you need to still acquire.  This begs the question then of what is that current minimal level of expertise worth?

Now I guess some folks may not like my brutal brand of honesty but I have no reason to not directly and bluntly address your questions and implying thoughts.  I am not one to sugarcoat things.  It doesn't do you any good if I sit back knowing what I know and have an understanding of what you are about to do wrong and not turn up the fire a little bit.  The potential outcome of improper dealings in this asset class are large fines and orange jumpsuits.  It's not all ponies, clowns and rainbows.  You can get in serious trouble here for overstepping your bounds and doing improper activities.  That can also cost the investor money and legal issues as well, not just you.

Nothing in my posts suggests you can not do well in this industry but rather you should address the things you do not yet know in order to actually do something of value.  Anything less is a disservice to you and your partners.  As I mentioned this forum has a wealth of information in it.  Start reading the threads.  Be careful whose information you digest, there are many folks at various early stages of the same venture you are on and they may not have the right  answers even though they sound nice and easy.  Such is the nature of the beast, when setting out to learn something trying to teach will accelerate your learning.  It allows you to put to test what you think you know.  That is the beauty of the forums, discussions here don't get anyone hurt or in trouble.  Participate in the discussions around the forum.  Ask questions.  You will start to learn more.  

Best of luck.