Chronological Order of Events:
11/09/2016 … I invested $40,000. in a very promising Real Estate Crowdfunding project offered by RealtyShares . It was a a privately-listed REIT that invested in residential development promissory notes, offering a 13.5% interest rate (net of fees) payable on a monthly basis for a 30-month holding period, the notes would come due and original principal paid back to investors. The Fund planned on purchasing, renovating, leasing, and exiting single-family and multifamily homes located in Eastern Michigan. As risky a this sounded at first, it was actually a value investor’s dream! Detroit, MI had gone through a crash; it terms of the local economy, the jobs market, businesses and property values (the downside was and still is very limited, with huge upside.
02/28/2018 … The fund paid like clockwork from that period until February, 2018. We finally were paid but it was delayed due to a problem with the out-going wire transfer. This concerned me a little but hey; they paid and it was a one time event, they deserve the benefit of the doubt. After-all, shit happens….sometimes! HOWEVER, just because their February 1st payment on February 28th, their next monthly payment would be due on the following day, March 1st….
04/01/018 … The fund sponsor- Invest Detroit, LLC is an affiliate of JWE Equity, LLC (“JWE”) have yet to submit 2017 Q4 financials to RealtyShares AND so far no March payment has been paid. At this point I am getting pissed off and sent a lengthy, inflammatory email to Realtyshares voicing my concerns.
TODAY 04/20/2018 … Investors were notified that despite attempts to contact sponsor concerning the incomplete Q4 2017 financials and the missed payment, RealtyShares will pursue legal action AND consider this a default event. Ponzi scheme? Smells like the fund sponsor, “JWE” possibly is….
As with any investment, real estate crowdfunding is not risk free. To be fair I’m invested in several projects across various platforms with great success, though this one is the exception. What recourse do I have as an investor? None. Why? From investment offering:
The servicing by the Company of amounts owed under the Notes will be entirely dependent on payments made to the Company under the terms of its preferred equity investment in the Fund; the Company will have no other assets from which to make payments on the Notes.
I am confident that RealtyShares will place tremendous pressure on the sponsor and do everything possible to make us whole or capture as much as possible, since this a “preferred equity” investment. Frankly, RealtyShares cannot afford negative publicity. Case in point, this article.
Lesson here? Accept the risks that are explained in the investment offering documents. Get to know your platform provider as there are several quality providers:
I’ll keep my readers updated on the development of this investment. Until next time, enjoy this Spring weather we’re having. I think I’ll pour myself a Makers Mark Bourbon