More User Questions…..We Love Them!

user question

I continue to get great engagement from readers and listeners. Andy recently finished reading Alternative Financial Medicine: High Yield Investing in a Low Yield World and had a few follow up questions in this thoughtful and appreciated email he left on the site. The reason I share it is because there may be some of you with the same concerns and hopefully you can benefit from my insights to help you be a better investor.

Message: Hi Doctor Meadows,

I just finished your book and wanted to thank you for writing it! You give some great direction to those of us who have been floundering. It’s comforting to hear someone else’s views on some of the things that I’ve been considering and looking for feedback on. I invest in PPR and was glad to hear that there’s another option out there. Realtyshares has been another consideration, and I’m curious now, do you prefer it over Realty Mogul, or others? Also, I just saw a troubling article in Business Insider about Lending Club, do you still look favorably at them? Here is the link: http://www.businessinsider.com/lending-club-may-have-hit-a-dead-end-2017-5

On turn-key investing, wow, right here near me in Phoenix, there are a number of companies offering opportunities! So, now the daunting task of sorting them all out!

Are you familiar with The Note Factory? I just pulled the trigger with them and really like their business model a lot. You might want to take a look. They don’t advertise and are strictly word-of-mouth.

So, thanks again for the great book. It was very timely for me finding it when I did since the decision process was well underway.

Kind Regards,
Andy

Andy,

Tons of points you bring up!

Realtyshares is my number one crowdfunding site in terms of money and number of projects. This is due to me getting to know the CEO to a degree through multiple conversations over the past few years including meeting him in person at an industry event. They seem to be very committed to maintaining strict underwriting standards which is the real key to long term success.

If you have not seen it, I would highly recommend you check out my video interview with the CEO HERE.

Full disclosure, I have a teensy position in the company having been invited to invest in one of their equity rounds of fundraising.

I have been on Lending Club for about 3 years now and have seen everything from extreme optimism to much more pessimistic articles like the one you pointed out. Around the time of their IPO in December 2014 there was talk they could emerge as a real rival to traditional banks and then they went through some turmoil and scandal with impropriety with their CEO.

Lending Club

It seems like things have been shaky both for the company and the industry overall since then. Personally, I have maintained my account, which is only a modest portion of my overall portfolio. From the beginning I have been a relatively conservative investor preferring “A” and “B” loans with a target return of about 7% which I have been able to achieve. I have not noticed a spike in defaults sticking to these types of notes despite the occasional bad news for the industry.

On the rental property front, I haven’t found any shortcuts to vetting a turnkey rental provider. The things I used included podcasts, reading forums, calling up current investors and some on the ground site visits. I would particularly focus on talking to the investors and finding out their experience in terms of actual rents/expenses vs the always rosy numbers on the proforma. Also ask how responsive the property management aspect of things has been. In the end, it took several weeks for me to get comfortable with a provider but it has paid off significantly as I have experienced great customer service and expected financial performance on my now multiple purchases.

Can’t say that I have heard of the Note Factory. I have been pretty pleased with PPR as my exposure to the world of distressed real estate notes but I will check out Note Factory as well. I like PPR’s fund structure as it greatly diminishes the default risk associated with holding individual mortgages.

Thanks for picking up the book and if you haven’t, please leave a review on Amazon and tell your friends!

To your Wealth,

Doc

Real Estate Crowdfunding Anyone Can Participate In

real estate crowdfunding

It has become fairly obvious to me that there are a lot more people that would like to be able to participate in real estate crowdfunding if they could. The #1 inquiry I received on the heels of my episode of the bigger pockets podcast has been– What are the options available for non-accredited investors to participate in this asset class?

As previously mentioned, Groundfloor.com represented the only site that I know of and have used that from its inception has been dedicated to non-accredited investors. Because of regulatory hurdles they have to go through a time consuming state by state approval process to allow new investors to participate. At the time of this writing they only operate in 10 states despite being around since 2013.

After some more research, there are some additional options although the overall landscape remains limited. I ran across a very informative blog posts on this topic over at Lendacademy.com. This has been one of my primary learning resources as they cover the full spectrum of online lending from consumer to business to real estate. The founder, Peter Renton, has an excellent podcast where he routinely interviews thought leaders and CEOs of many of the platforms I have invested on.

The blog posts was called Peer-to-peer and Marketplace lending opportunities for nonaccredited Investors. In it he spotlights the platforms Fundrise.com and Realtymogul.com who now offer nonpublicly treated REITS for non accredited investors.. REITS or real estate investment trusts are funds you can invest in that go out and buy a portfolio of properties. If this sounds familiar that is because there are several publicly treated REITS listed on the major stockings changes. Fundamentally, the crowdfunding sites are offering the same thing with the notable exceptions that the overall size of the funds will be much smaller and not subject to the potentially large price swings that can occur with the stock market.

In reviewing one of Realtymogul’s funds, the investment minimum is $1000 and to this point they have distributed returns to shareholders averaging 8% annually. Thus far it is acquired 5 different properties.

So while these do represent alternative options, if you one a more traditional crowdfunding experience where you are choosing the specific property, developer, and geography; it looks like groundfloor.com remains you’re only option – its significant geographic restrictions notwithstanding.

I would encourage any fellow potential investors to constantly checked back as new platforms are being added to the landscape every month and seems. I predict that eventually there will be ample opportunities for the non accredited investor as the profile of real estate crowdfunding continues to grow.

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The Big Disclaimer + Reader Questions!

Let’s get this out of the way right up front. I do not offer nor should anything on the site be construed as legal, tax, business or investing advice. The only license I have currently, and plan to have, is to practice medicine.  Nonetheless I feel that I have some valuable insights and experiences that could be useful to fellow investors in their educational journey.

I have found that the most helpful blogs, youtube channels, podcasts etc., all have a component dedicated to answering user questions.  As a content creator, there is no better way to validate that your material is connecting with your audience than to get their direct feedback.  It’s for this reason I’m encouraging all of my website visitors and email subscribers to click on the Ask Dr. Meadows tab to leave a voicemail comment or question. I will do my best to give some useful educational tips and guidance, but will be sure to stop short of direct advice.

With that out of the way let go to our first question. It comes from Andrew, who is a veterinarian that currently owns 1 cash flowing rental property. He is preparing to buy his second but is wondering if he should give private mortgage lending or real estate crowdfunding a try. Let’s listen in.

Dont forget to sign up for our email list if you haven’t and pick up a copy of Alternative Financial Medicine: High Yield Investing in a Low Yield World HERE on Amazon

Three years of Real Estate Crowdfunding…..My Results

real estate crowdfunding

Podcasts have been an absolute godsend in my investing journey turning an otherwise nonproductive commute into prime learning time. In the arena of real estate, BiggerPockets.com has been the most useful as I have gleaned plenty of actionable advice and inspiration from the talented roster of guests that owners Brandon Turner and Josh Dorkin bring on. I had the honor to be a guest myself on episode 219 and gave my insights on some of the more passive investing strategies suitable for time constrained busy professionals. We focused specifically on 3 arenas including turnkey rental property, private mortgage lending, and real estate crowdfunding. The latter seemed to strike a particular cord with the audience as I received a plethora of email inquiries wanting to know more details about my experiences. They all basically boiled down to two questions:

  1. What platforms do you use?
  2. What have your results been?

There are a plethora of crowdfunding sites out there and the proliferation continues as both investors get more comfortable with the concept and the real estate entrepreneurs get past the negative stigma of raising capital online. In total I am on nine different sites but in the accompanying video, I am going to highlight just three of them that I feel have distinct profiles in terms of the types of deals they offer, and meet the following criteria:

  1. The platform has been in existence for a minimum of 3 years
  2. I have been investing on it for at least 2 years
  3. I have had at least 1 successful exit on a deal

I hope after viewing it, your interest will be piqued sufficiently to seriously explore this emerging asset class and start participating. Be sure to check out our interviews with the CEOs of 2 of the 3 platforms mentioned in the video here.

Alternative Financial Medicine Book Now on Amazon.com!

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