Author Topic: Time for some proper due diligence/ independent auditing in our communities  (Read 270135 times)

Offline chevron

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The other thing I can think of offhand is a small timer investing all their savings say 100k
In 2020 they make 50k
In 2021 they make 50k

They have a nice tax bill

In 2022 they lost 80k? Problem is, mom and pop investor may not have such a tax bill to just offset said losses and certainly not to eat the prior years tax bills

I'm just making up numbers but I've seen people get screwed like this on crypto

Offline thaber

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Flavor of the week

https://mishpacha.com/hot-deal-or-hot-air/
This should be required reading for anyone considering am investment

Offline thaber

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When TSLA was $110, I asked various investment advisor friends if I should buy a bunch.

Friend quoted Bernard Baruch "It is far more difficult… to know when to sell a stock than when to buy"

A month after, it was $210

I'm no genius. I might have sold at $120.. I might be holding now still

I found these other 2 quotes;

Always keep a good part of your capital in a cash reserve. Never invest all of your funds.
Bernard Baruch

Don’t try to be a jack of all investments. Stick to the field you know best.
Bernard Baruch

It's wishful thinking but I'm no investment advisor.. I think TSLA has both a lot going for it and nothing but that's the Hallmark of Tesla and musk.
And that's why you invest what you can afford to lose. If it's all, then great and if it's nothing, you don't lose sleep

Online knowitall

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I had previously posted this on the psa thread where these things were discussed, but seems this is the new water cooler

https://www.theyeshivaworld.com/news/general/2199063/mailbag-ponzi-schemes-and-investors-in-our-community-a-warning-to-all-involved.html

2) my two cents in the discussion above, as someone in the industry -
A. The law requires accredited investors for a reason. That is circumvented one way or another in many cases and shouldn't be.
B. Even the most honest syndicator will mess up a lot of people if they don't have proper precautions in place. Anyone who financed or refinanced with a floating IO loan in 2021 is having a major cash flow issue now in the best case scenario, or selling at a loss / foreclosure. I see those deals hitting the market every day. Forget paying returns.
C. Those who have lived through previous cycles were generally more cautious and survived BezH. At the ecore 2021 conference, (I didn't go but watched the headliners) this was the direct warning given by sternlicht and Slone and others.
D. The setups and projections in those years had the same problem, assumptions that 3% interest rates are here to stay, and instead of locking rates and paying down principal, they went for max cash flow and instant gratification.

That might have been. 04

I’ve seen hundreds of OMs in the last few years. In early 2021, When I saw folks using floating bridge debt, I knew it was high risk, but I knew some people wanted that. Projecting that rates would move up slightly was a reasonable expectation. But I saw the same in 2022, even as the Fed was starting to hike! I saw syndicators underwriting that rates would rise 100bps, while Wall St was expecting 200-300bps. (And now we got 500bps!)

I also saw many predicting 10%+ rent growth year over year, even in the face of a lot of new supply.

In summary, nobody can predict the future, but if you underwrote realistically, nobody can have complaints.

But if you underwrote egregiously, and now you are doing capital calls or giving back the keys (and screwing your unpaid vendors), you should never be taking OPM.

Offline chevron

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Rich of the chareidi publications to jump on the warning wagon now.

Who remembers only a few months ago? This article saying how anyone can be a real estate macher?!? One of the commenters here said that implying some mother can broker real estate deals at home is setting unreasonable expectations

Online Euclid

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Rich of the chareidi publications to jump on the warning wagon now.

Who remembers only a few months ago? This article saying how anyone can be a real estate macher?!? One of the commenters here said that implying some mother can broker real estate deals at home is setting unreasonable expectations
This is the same magazine that pushes "The Owners' Class"
https://theownersclass.com/

Offline jye

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This is the same magazine that pushes "The Owners' Class"
https://theownersclass.com/
Crazy. I think they have a financial stake in it as well?
They were pitching it just a short time ago as if it was the answer to every yungermans prayers.
https://mishpacha.com/from-property-to-prosperity/

Offline chevron

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Crazy. I think they have a financial stake in it as well?
They were pitching it just a short time ago as if it was the answer to every yungermans prayers.
https://mishpacha.com/from-property-to-prosperity/

This is what gets to me... Frum publications tout easy riches when economy good

Frum publications posting a educational slant about the dangers of what they promoted

Why doesn't Ami and mishpacha stand up and accept the blame for promoting this all?!?

Online knowitall

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This is what gets to me... Frum publications tout easy riches when economy good

Frum publications posting a educational slant about the dangers of what they promoted

Why doesn't Ami and mishpacha stand up and accept the blame for promoting this all?!?
I don't blame them for posting educational articles now.

I agree with you that they should not have promoted Shemin and his Real Estate, or the ads about making 75% returns from options trading.

Also, most of the money lost in the frum community was in CRE, not from a yungerman buying a single family house. I don't think Mishpacha or Ami ever promoted CRE investments.

Offline zh cohen

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Crazy. I think they have a financial stake in it as well?

Indeed. From the"About Us" section on the website -

Quote
They partnered with Mishpacha Magazine, a household name that is synonymous with the Orthodox market

Offline aygart

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They publish what they think will sell copies.
Feelings don't care about your facts

Offline Baglach

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This is the same magazine that pushes "The Owners' Class"
https://theownersclass.com/
What is this course? Just a scam?

Online knowitall

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What is this course? Just a scam?
Anyone can spend a couple hours bein hasdarim buying single family houses in Ohio, sight unseen, because RE only goes up…


Offline jye

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They publish what they think will sell copies.
I like the business model. It’s the ultimate hedge. Make money on the way up. Sell the story on the way down.

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I like the business model. It’s the ultimate hedge. Make money on the way up. Sell the story on the way down.

It's the age-old key to business success: sell low, sell high, never buy.

Offline ari3

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What is this course? Just a scam?
It is a way for the sponsors to make money without having to get their hands with actual selling and buying, dealing with tenants and busted boilers etc.


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Investment advisor may not know the ins and outs of RE. They just know that "it's riskier than other investments".
This is true. Most in the wealth management field don't know how to vet a sponsor/deal. Though there are a few who can do proper DD.

My advice is to ask/hire commercial mortgage brokers with experience to look over a deal.

Offline TBD

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To simplify let’s say a guy purchased a property for 10 mil and sold it for 13. He does a 1031and puts the 3 million in profit into a new property which defers his tax liability on the profits. He sells the next property at a 3 million profit and puts the 6 million in 1031 money into a 15 million dollar property. The building appreciates, as almost all did in the past few years, and he refis for 21 million, pulling his entire initial investment out in cash. Things are going great. Now he has a loan at 3% that comes due this year. Rates have now jumped to over 6%. If he has to do a fire sale his property will fetch maybe 20 in todays market. He will actually have to pay in cash to make the sale AND come up with a 1031 property that actually makes sense in todays market to avoid millions in tax liability. If he just turns in the keys and walks away his 6 million in 1031 is now a tax liability in the millions, money he spent long ago. To hold on to his property he  would have to come up with millions in new cash to buy a new rate cap at 3%. Unfortunately this scenario is going to become more common in the next year or two as loans come due unless rates tank.
He needs to put the whole 13 Million in the next deal?

https://www.kiplinger.com/real-estate/1031-exchange-rules-you-need-to-know

3. 1031 Exchanges Don’t Work to Downsize an Investment.
The strict rules surrounding 1031 exchanges require the new investment property to be of equal or greater value than the property being sold. Additionally, for a full tax deferral, the entire proceeds of the sale must be used to purchase the second property.

So if the first sale goes through for $250,000, you can’t reinvest $200,000 into a new property and pocket the $50,000 difference; the entire $250,000 must be included in the second transaction. If it’s not a property of equal or greater value, the capital gains tax will apply to the entire applicable capital gain.

Offline Yakov15

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This is true. Most in the wealth management field don't know how to vet a sponsor/deal. Though there are a few who can do proper DD.

My advice is to ask/hire commercial mortgage brokers with experience to look over a deal.
What do they charge for such a thing?