All Forum Posts by: John Teachout

The AVAF II capital call has come and gone and though we were queried multiple times, it's nope, nope, still nope. If there was any hope this thing could survive, we may have participated but with a request of an additional 19% of capital to perhaps get back 25% of the original investment (if certain favorable things took place) it seemed like a no brainer to not play along. If we get back "any" capital at all, I'll be very surprised. We've written off 100% of this as a loss and of course will never invest with this company again. (if they survive this debacle)

Yes, they want you to pay an additional 19% to perhaps get back 25% of your initial investment for class B investors. And this potential 25% return on capital requires certain favorable things to happen both with the properties and the market. Ashcroft is trying to keep kicking the can down the road on this failure because once it goes belly up, there's going to be a stain on their wonderful performance history. I don't see a scenario where there will be any return on or of capital. This one is a write off.

If the properties had been better managed, they probably wouldn't be in this situation. I realize that the interest rate debacle caused a lot of the damage but the low occupancy and collections tipped it into failure. There seems to be improvements but it's resulting in "losing less" per month. I just can't see a "realistic" scenario where they pull this out of the dive. They can expect zero additional funds from us.

Quote from @Himali Shah:

I am a first time investor in syndications and picked Ashcroft in 2022 for the reputation they had built. I spoke with them today about restarting distributions and learnt they are going to issue a capital call on avaf2. I think this is a lost cause and there is no way I am putting in more money into something that has been mismanaged to begin with. Is there a way to vote for a forced sale to hopefully recoup portion of the initial investment? 

I don't believe that AVAF2 can be saved no matter how much capital is infused. We're expecting the cash call and will not participate. We've already written our investment off as a 100% loss. A cash call will only kick the can down the road further but based on what I'm seeing in the reports, this is a hopeless cause. It will however keep Ashcroft from "exiting" at a loss and leaving a stain on their touted good record. And don't think a forced sale will get you any money back, they'll be lucky if the bank gets what's due. Either way, mentally prepare for a complete loss of principal because that's where this is going.

Not sure that would be of any benefit since it would still be a "failed deal". That's what I think they are desperately trying to avoid because it will stain their amazing performance record. I saw the ads for the notes they're selling and thinking that someone is likely to get burned on those too. They're apparently pulling every lever and turning every dial but forestalling the inevitable will be their only possible outcome.

A cash call can't save AVAF2, however, it can kick the can down the road so they won't be forced to "exit" at a loss. Many of the syndicators that are in trouble with current projects are delaying exiting so they can advertise and tout their excellent results from every property they exited. I suspect there's going to be little participation in the fund regarding the cash call and thus Ashcroft will be forced to exit. Most likely however, they will sell a property at a significant loss and use the cash to float the fund for longer. But wait, I don't see how they will even net enough to satisfy the loan so that's not a viable option. There's no possibility in my estimation that this fund will not lose 100% of our investment.

Well, it's coming. Ashcroft sent out an email advising about a capital call of 19%. They haven't made the capital call yet, just that they plan to in March that will be due in April. Anyone who participates in this is just throwing good money after bad in my opinion because I don't see a path to profitability in the future. The properties have not only suffered from the interest rate issues but have been operating at a sub standard level. They were supposed to achieve a 1.0 DSCR by the end of 2024 but are only at .84. They're still losing over a half million dollars per month. The tail has been shot off this aircraft, it just hasn't hit the ground yet. When they reach out to me regarding this, my response will be umm, no!!! (pound sand)

I've lived on rental cash flow for a number of years. We do all phases of the operation through. buy, rehab, rent, repairs, bookkeeping, tax preparation, etc. This is on an SFR portfolio of 8 to 15 properties. All paid for. It's our full time job. ie, no W2. So it can be done. From my observation, if you don't manage your own properties, there's little to no profit. (of course there's exceptions, somewhere, but none I've seen). We're currently selling off our portfolio one house at t time as they go vacant.

We have always kept inherited tenants, gradually brought up the rent. (they're almost always under market). Some we have years later, some left and some got evicted. The spread between what they're paying and what the market rate indicates is not that much. I would certainly keep that tenant. Once you close and establish a relationship with them, I would notify them of a rent increase but we do small ones. Maybe $30 and then with that increase you could do another $30 six months later. eg, If I took possession today (Jan 1st) I'd inform them the rent was going to go up $30 on the 1st of April and then again on the 1st of October. This gives them plenty of time to search the market. Normally, we don't make rent increases that soon as we want a chance to see how their payment record is. Another thing we do is check to see what items need to be addressed. Fixing a leaky toilet, replacing a broken light fixture, etc. can create good will.

The answer is maybe. Heloc interest deductibility depends on how the funds were used. You would probably get a variety of answers even from tax professionals.

Another consideration which applies only to electric is access to the load center. If it's in a shared space like a basement that's one thing but if it's in an occupied unit, that is something that may not be allowed in your jurisdiction. Unit 3 trips a breaker and wants to reset it but the breaker box is in unit 1 and they're on vacation...