Workshop | 2022-2023 State of the Union for Real Estate Investors & Entrepreneurs | September 21st @ 1:00 p.m. EDT
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February 29, 2016
Guest post by Nelson Garcia:
The year 2016 has, so far, been the definition of volatility, which for many was unexpected. For some investors, switching from equities to fixed income securities (bonds) would be prudent to ensure the safety of the principal and a fixed return. Continue reading…
July 31, 2015
Guest article by Kim Lisa Taylor:
No doubt if you have a self directed IRA or substantial investment funds, you have considered investing in real estate. However, you may lack the funds to invest on your own or the desire to deal with the hassles of property management. A viable option for you may be to invest in a real estate ‘Syndication’ (i.e., a group real estate investment, also known as a Private Placement Offering) as a passive investor.
What is a Real Estate Syndication?
In a real estate Syndication, a ‘Sponsor’ or ‘Syndicator’ (which may be an individual or an entity) will typically identify a real estate asset, such as an existing commercial or multifamily property (or vacant land for development) or single family fix and flips, that will yield a sufficient return to pay themselves and their investors from cash flow during operations and/or equity on resale.
The Sponsor may obtain institutional financing for a portion of the purchase price and then pool funds from private investors to finance the down payment and closing costs, or they may raise all of the purchase money from private investors. The Sponsor’s job will consist of finding a suitable property, putting the group of investors together, and managing the asset on their behalf. For its efforts, the Sponsor will receive fees and/or a percentage of the ‘Distributable Cash’ (i.e., profits) left after all expenses and loan obligations have been paid.
What Kind of Returns Do Syndications Offer?
Typical investor returns can range from 6-12% (or more) annualized, calculated against the amount of money invested. The range varies based on the type of investment and the level of risk to which an investor may be exposed. The higher the return offered, the greater the risk.
For example, an investor or self directed IRA might take a position as a ‘debt partner’, in which case the returns will be calculated as interest on the amount invested. Such returns may be in the lower ranges, but the debt partnership position may be ‘preferred’ or ‘secured’ by a lien against the real estate, which is a lower-risk position.
Another option for investors is an ‘equity partnership’ position, where the Distributable Cash is split proportionately between the group of investors and the Sponsor, whose compensation can range from 25-50% of the Distributable Cash. In this case the investor returns may be greater, but they will be dependant on the performance of the property and the Sponsor’s ability to maximize returns by increasing income and minimizing expenses.
What Information Should I Get from the Syndicator?
Prior to accepting any investor funds, the Sponsor is required by securities laws to provide a set of offering documents that explains the terms and discloses the risks of the Offering to prospective investors. Further, Sponsors typically answer to their investors by means of periodic newsletters, financial reports, and/or teleconferences. Unlike a stock investment, investors may also have some limited voting rights regarding major decisions affecting the company or their investment.
10 Things Investors Should Know
Before investing in a real estate syndication, you should carefully review all of the offering documents provided by the Sponsor and look for (or ask) questions regarding the following things:
Seek Professional Advice
In addition to satisfying yourself with respect to all of the items listed above, you should seek advice of your own attorney, financial advisor or accountant regarding the investment.
Where Can I Meet Syndicators?
Become a member of your local real estate investment clubs and attend their meetings on a regular basis, and attend the informational seminars offered by your self directed IRA administrator.
Kim Lisa Taylor, of TROWBRIDGE & TAYLOR LLP, practices Securities Law and handles Real Estate Syndication, Private Placement Offerings, Private Lending Documents, Partnership Agreements, and Entity Formation. Kim can be reached at (904) 584-4055 or by email Kim@SyndicationLawyers.com.
February 20, 2015
Guest Article by Paul McGarigal:
When asked, “What is your number?” many people have no idea what you are talking about. The number, of course, is the amount you will need to retire. Let’s take a look at how to figure out your retirement number.
If you now live on $7,500 a month gross combined income, that’s a $90,000 per year family income. Sounds like a lot to most people, yet this income amount puts you in the top 15 percent of all families in the United States. If each person in a retiring couple receives about $1,500 a month from Social Security, then that’s only $3,000 a month toward the $7,500. Where will the other $4,500 a month come from?
Here’s one scenario: If you manage to save $300,000 in your IRA/401K by the time you retire at a 5 percent annual return (of which there may not be too many offering that return) that would be $15,000 a year or $1,250 per month, which is not enough. But how about $1,200,000 at 5 percent? That’s $60,000 a year, or $5,000 a month, which when added to your $3,000 Social Security benefit will put you closer to what you need to live the same as you did when you worked.
So if $1,200,000 is your retirement number, how are you going to get that amount in the years you have left to work? Let’s say you are 40 years old and will work 25 more years. The math is easy. $1,200,000 divided by 25 is $48,000. This is the amount needed each year to add up to $1,200,000 over 25 years.
How are you going to get $48,000 a year, you ask? Real estate. You can purchase a home for 3.5 percent – 25 percent down, depending on its use. Then, with the help of a real estate professional, you can learn how to have tenants pay your mortgage for the next 15 – 25 years, while you receive tremendous income tax advantages. This may be the only way you will ever come close to saving or accumulating a $1,200,000 nest egg for retirement.
Just three houses at $250,000 each now will double in value over the next 25 years, assuming only a 2.9 percent average rate of appreciation. So, $250,000 multiplied by three is $750,000 and multiplied by two is $1,500,000. Selling them at age 65 would fund your nest egg and help you enjoy 20 to 40 years of retirement.
Of course, this is the short version of a much more complex formula that will be different for each couple. But hopefully you are at least thinking about your retirement number and now see how real estate and a knowledgeable real estate agent can help you get closer to reaching your goal.
Paul McGarigal has been in the top 1 percent of all Realtors in Central Florida every year for the past two decades. He is also very involved in his community and volunteers with youth sports and the YMCA, among many other non-profits. This article was also featured in the April 2013 edition of Central Florida Lifestyle
December 4, 2014
Guest article by Matt Lutz:
Anyone with a self-directed retirement account will tell you adding alternative investments to the portfolio can supercharge investment returns and enables investors to participate in asset classes where they are most skilled and knowledgeable. After one learns about self-directed investing, he or she will typically make the same types of investments utilizing the self directed account that he or she would make outside of the account. A real estate investor who owns single family rental properties will use self-directed IRA (SDIRA) funds to buy single family rental properties or a tax lien investor will participate in tax lien auctions using his or her SDIRA. Assets like single family housing and tax liens are great allocations of SD funds. Individual investors with knowledge of the local real estate market have the same advantage as institutional investors. The barriers to entry are very low. Anyone with money can buy a mobile home, a single family home or attend a tax lien auction. The only restriction is the amount of money the investor has. With knowledge and capital the individual investor can continue to participate in the asset classes.
Self-directed investors it seems by nature are an inquisitive bunch and want to learn about other asset classes. Most have looked at businesses and thought “I wish I could get returns like that” or “how do I invest in something like that?” Many of those businesses or investments are often controlled by institutional investors or specialty finance companies who don’t want anyone entering their markets. One thing we know about competition is that it reduces profits. The institutions want to protect the superior yields they are able to achieve. Prior to a few years ago, if an individual investor could break into those markets, it required a tremendous amount of the investor’s time and energy to find deals and then additional time and effort to conduct due diligence. Technology has changed that.
The most recent credit crisis is a great example of how technology has affected different asset classes. Everyone knows the banks were overrun with non-performing subprime single-family mortgages. A very similar thing happened in the late 1980’s to the Savings and Loans Industry with commercial real estate mortgages. The S & L crisis had the highest number of bank failures since the Great Depression with 797 thrifts shuttered and total assets of $394 billion. The problem was so large the United States government created the Resolution Trust Corporation (RTC) to liquidate the non-performing loans and collateralized assets. The RTC became a massive government institution that existed until 1995 when its duties were transferred to the FDIC. The most recent crisis although much larger (and scarier at the time) was much different. Technology enabled non-performing loans and properties to be sold via online auctions. Not only did technology help liquidate the non-performing loans much faster than the previous crisis but investors, large and small, could participate. Mortgages and REO’s (Real Estate Owned) were sold individually or in pools. An investor with a self-directed IRA could participate in the same auction as a Greenwich hedge fund. The Greenwich hedge fund might have a capital advantage but the individual investor knows his or her local real estate market much better.
So what other asset classes are are now available to individuals because of technology?
Consumer and small business lending are experiencing tremendous changes. Peer to peer lending companies like Prosper and Lending Club allow individuals to apply for unsecured personal loans up to $35,000. Individual investors can participate by investing as little as $25. The peer to peer lenders underwrite and service the loans. The investor’s decision is whether to invest and if so, how much? An individual investor has the same opportunity and the same information as a bank or specialty finance company.
Small business funding
A very profitable business controlled by specialty finance companies is buying trade receivables or factoring. Factoring is a $3 trillion dollar industry run by companies like CIT. What is it? Factoring is the sale of accounts receivable (invoices) to finance companies (factors). The finance company discounts what it pays the seller of the invoice. Example. Let’s say Joe’s Hammer Company sells hammers to Home Depot. Home Depot is Joe’s biggest customer but it’s slow to pay which is normal practice for large companies. Home Depot might not pay Joe for 120 days. That doesn’t help Joe pay his employees or electric bill so Joe will sell Home Depot’s invoice (the legal obligation to pay him) to a factor. Joe receives a discounted amount of the the invoice immediately and the finance company will receive the entire amount in 120 days. The factor determines the discount amount and Joe has to decide to “take it or leave it.” Sometimes the discount can be as much as 30%. It is a very profitable business for the factor because businesses will continually sell receivables to meet their cash flow needs. It’s also a great business because a company like Home Depot (the obligor) has very good credit and is legally responsible to pay the invoice. The odds of not receiving payment from Home Depot are very slim.
Technology has disrupted the factoring business as well. Recently an online marketplace has launched that allows companies to sell their trade receivables to self-directed investors. Allegheny Exchange operates an auction format exchange that allows companies like Joe’s Hammer Company to sell its invoices at a discount to individual investors. The exchange provides credit ratings of the invoice sellers and invoice obligors, validates the invoices being sold and facilitates the payment process between the invoice sellers, buyers and obligors. The sales of the invoices are full recourse to the sellers which means the sellers and obligors are legally responsible for paying the invoice buyers. The exchange is a turn-key solution for investors to participate in a market previously controlled by specialty finance companies. Technology not only allows individuals to participate in the asset class but greatly reduces the time and effort normally required to make investments. The investors only responsibilities are deciding which invoices to buy and how much they will pay for them. The appeal of trade receivable investing is apparent; short-term, high yielding assets with an invoice obligor legally responsible for payment and full recourse to the invoice seller. Because most trade receivables are paid within 60-120 days, they are a superior alternative to money markets and commercial paper to park cash between longer duration investments.
Matt Lutz, a Pittsburgh entrepreneur, has been utilizing a self-directed IRA for the past ten years. He was featured in the June 6, 2012 Forbes Magazine article, ‘Go Rogue With Your IRA.’ He has used his IRA to buy real estate, trade receivables, tax liens, performing and non-performing mortgages, and floor plan loans for car dealerships. He is currently the Managing Partner of Allegheny Exchange. Matt can be reached at mlutz@tarponbaycapital.com or by phone at 412-841-5009.
September 25, 2014
Guest article by Tom Brickman:
With the stock market at all-time highs, many have forgotten that six years ago everyone’s stock portfolio lost a gut-wrenching 40 percent in eight months, and with money market rates around 0.4 percent, cash is not keeping pace with inflation. High volatility with a low yield is an unpleasant combination for anyone, and while alternatives seem scarce, investing in timberland tends to satisfy many security needs.
People are beginning to turn to timberland investments, in fact in America there are 23 million private timberland owners. Prices for stocks and bonds can go up and down dramatically over short periods of time, sometimes as short as a single day, but timberland values tend not to fluctuate. Over 50 percent of the return from timberland comes from biological growth – trees get bigger at a steady rate independent of market factors. Diversifying a portfolio by investing in timberland can reduce value swings.
What are the different types of timberland?
In the south there are a few different types of timberland: land that will grow pine trees (dryer ground), land that will only grow hardwood trees (wetter ground), and farm land.
The kind of land you buy depends on the mix of motivations you have for buying it. Those motivated purely by financial benefit will seek investment-grade pine properties. In the south, this is land that has been planted with genetically improved loblolly pine. Those more interested in hunting, which means less return, will seek properties that have more hardwood land, perhaps with a lake or river frontage too. Investors motivated by conservation may seek longleaf pine or hardwood land along major rivers. Investors motivated by a farming lifestyle or by crop and livestock markets will seek land suitable for cultivation or pasture. Returns from farmland tend to be more volatile than returns from timberland due to government involvement in the markets. Many investors have a mix of motivations and accordingly seek a mix of land types.
How do you go about investing in timberland?
In general, there are two ways to go about investing in timberland. One way is direct private investment where the investor owns the asset. The other is indirect investment where you purchase stock in a public company that owns the asset. The way you invest depends on your motivations.
Direct Investment
Direct investment gives the investor more control over the decision of when to sell timber. This can have a very beneficial impact on returns. You can purchase land to meet a variety of motivations. Disadvantages include the task of finding assets to buy, discerning fair value, finding asset managers, and finding buyers when you are ready to sell (lack of liquidity).
A key issue with direct investment (mostly affecting smaller non-institutional investors) is that markets for privately owned rural land are notoriously difficult. For example, finding assets to buy is difficult because there is no central clearing house of properties available for purchase and the for-sale-by-owner market is huge (our experience is up to 50 percent of private land sellers do not use an agent to find a buyer). Also, discerning fair pricing requires expertise in appraising land and standing timber. Consequently, most investors engage professionals to assist with finding, buying, managing and selling land.
Indirect Investment
Publicly traded forest products companies seek to maximize financial return. Buyers with this motivation find a good fit here. Advantages to indirect investment are that it simplifies the task of finding, buying, managing and selling timberland assets. The price is published every day so there is low price uncertainty. And, the companies have professionals to manage the assets (selling timber, planting trees, fixing roads, paying property taxes, etc.). A disadvantage to investing in a public company is that quarterly demand for dividends, which affects share price, forces these companies to sell timber even in poor markets.
Institutional investors (pension funds, endowments, sovereign wealth, etc.) and high net worth individuals often address these issues by investing through Timberland Investment Management Organizations (TIMO’s). These are private companies that specialize in finding, buying, selling and managing timberland assets. Although most have financial return as their mission, some specialize in conservation timberland. The best TIMO’s offer geographic diversity (US & global) and have decades of experience identifying deal flow, managing the purchase process, managing the asset on a day-to-day basis, and finding buyers when it’s time to sell.
People who don’t meet the minimum investment threshold for a TIMO (most investors) can get professional assistance from an enormous network of rural land and forestry professionals. Many of these are small, local companies or individuals with deep knowledge of the asset and long experience with local land and standing timber markets.
Is investing in timberland right for you?
This is a question only you can answer. The purpose of this article is to give you a starting spot for further investigation. Here are some thoughts to consider:
Learn More:
Located in Birmingham, Alabama, Tom Brickman has 37 years of experience in timberland investment and management businesses across the United States and Central America. He is a Registered Forester, Certified General Appraiser and Real Estate Broker, and helps people buy, sell, and care for rural land. Tom can be contacted via email at tbrick@CyprusPartners.com or by phone at 205-936-2160, and for more information on buying rural land in Alabama, you can visit Tom’s website at www.CyprusPartners.com.
September 4, 2014
Guest article by Evan Greenberg:
Over the past three decades, companies like Microsoft, Apple, Google, and Facebook have emerged, not to mention other powerhouses like Chipotle and Under Armour. They have replaced Chrysler, Woolworth’s, Data General, Digital Equipment, and many others in our dynamic economy. Many of these success stories are examples of why an alternative investment platform for accredited investors is important, as many of these companies were private investments before their IPOs, which came much later in their growth cycles. For example, one of my favorite concepts, Stratasys, a leader in 3D printing, has gone up 100-fold since 2002.
Typically, the primary way people were investing in growing companies was either through a direct investment or a venture capital fund, which could only be done inside of an IRA through an administrator like NuView. As defined by The Motley Fool, a hedge fund is described as “a pool of investment capital that a manager invests on shareholders’ behalf.” The crucial difference between a hedge fund and your run-of-the-mill mutual fund is the complete discretion it gives the fund manager to invest where and how he or she chooses. This allows hedge funds to hold any and all investment types, including alternative assets
Our economy has become more efficient, even in the last 15 years, by utilizing capital investors to quickly monetize and add value to emerging companies. Book value is no longer as important as balance sheet cash.
If I said to you that I expected mid-to-high single-digit returns for the next 10-15 years, then you would say that is a plausible idea. However, if I said that I expected the Dow Jones Industrial Average to hit 50,000 and the S&P 500 to hit 5,000 in the same time frame, you would probably call me crazy. Believe it or not, I forecast that both of those scenarios will occur before 2030.
While all good things come to an end, I’m still predicting this secular bull market will last for a long time. Dow 50,000 sounds like a spectacular number, but it is slightly above traditional market returns after 13 years of sideways action. This may not be a roaring bull to remember, but it won’t be one to forget, either.
Evan Greenberg is the Founder and Portfolio Manager for the LegendCap Opportunity Fund, which is an approved hedge fund on NuView’s platform that makes investments in emerging growth companies and allocates up to 20 percent of its assets to alternative investments such as private placements. Evan broadcasts a financial radio show in Phoenix and can be contacted at evan@legendcapfunds.com or (516) 662-0303.
July 1, 2014
Guest article by Blaire Martin:
Investors around the world are allocating a percent of their assets into early-stage companies in order to access opportunities for exceptional returns. “Angel investing is a legitimate part of an alternative asset class investment portfolio,” says David S. Rose, founder and chairman emeritus of New York Angels, in his new book, Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups. “A rational person can be an investor and not a gambler.” In the book, Rose explains that more people can and should become angel investors and that a few big wins make up for all the losses.
A study by Wiltbank and Boeker estimates that the average return on venture investing by sophisticated angel groups is 27% IRR or 2.6 times the investment in about 3.5 years. Research shows that investing in multiple seed and startup companies is a key angel strategy. Many sources agree that a portfolio of 10-12 angel deals is adequate diversification to assure a reasonable ROI and that 6 or less angel investments is too risky. Investors can create a portfolio of investments by picking deals in FAN’s pipeline or by venture investing into a cross-collateralized fund.
Joining a sophisticated angel group is very helpful for investors interested in breaking into angel investing. Benefits often include: access to quality deal flow, collaborating with diverse investors and subject-matter experts, and assistance with due diligence, investment paperwork, and post-investment monitoring and support. Angel groups also encourage venture investing best practices and promote angel education from sources like the Angel Capital Association and the Angel Resource Institute.
There are many reasons that accredited investors write checks for angel investments. The possibility of getting in early with a company like WhatsApp excites investors looking for higher returns than possible with more traditional investments. Many investors also want to be significant in the lives of entrepreneurs with high potential ventures; angel investing is a way to incite opportunities with mentorship, networking connections, and capital. It may feel like philanthropy, but when done systematically through a sophisticated channel, it is a valid way to invest while giving back in your community, with an added benefit of upside potential.
The Florida Angel Nexus (FAN) is a statewide initiative to unite Florida’s investment community. FAN’s mission is to offer a disciplined and rewarding investment approach for Florida’s accredited investors. Investors are joining existing and newly formed angel chapters and funds across the state. These investors are exposed to exciting new technologies and startups; they enjoy meeting to discuss these investment opportunities and evolving markets. Membership is very diverse, from realtors to serial entrepreneurs, doctors to accountants. All accredited investors are welcome.
The UCF Center for Innovation and Entrepreneurship provided the leadership and resources to research and launch FAN. Key supporters include: UCF, Florida High Tech Corridor, Florida Institute of Commercialization of Public Research, Gainesville Chamber of Commerce, Gray Robinson, and BioFlorida.
Blaire is the founder of Florida Angel Nexus. Interested parties can contact FAN for more information at www.FloridaAngelNexus.com or blaire@FloridaAngelNexus.com.
April 29, 2014
For those that closely follow political and financial news, one of the biggest issues to face local and state governments has been underfunded pension liabilities.
Simply stated, the employers made a promise to their employees to provide certain lifetime payments during their retirement years, yet did not adequately fund those obligations year after year. The result is a mad scramble for political cover, and necessary yet painful reductions in pension payments for many retirees.
Evidently, the pain of employer pension funding is not limited to governmental entities. A recent Orlando Sentinel article regarding Walt Disney World union negotiations said that Disney wants the union to give up pensions for new hires, who would instead be enrolled in a 401(k) investment plan. Similar negotiations and changes are becoming commonplace across all industries.
In today’s environment, the obligation to prepare oneself for retirement rests on the individual, rather than their employer. Through 401(k)s, 403(b)s, 457s, Thrift Savings Plans and other such alphabet soup, the heavy lifting of saving and investing is on the individual. Employers often simply provide a small match, if anything at all.
How healthy is your pension plan? You have the ability to rollover most any employer plan into a NuView self-directed IRA and fully self-direct, once you have left the company. Now you have the opportunity to invest in anything the IRS does not prohibit, an extremely short list at that, rather than just a handful of trustee-selected mutual funds.
It’s inspiring when NuView clients feel an 8% return in their self-directed IRA isn’t good enough, and that through their own hard work, they found investments that built their retirement much faster. A second-generation private lender recently shared that she lends out of both her IRA and her friend’s for 12-15%, plus points. Real estate rehabbers are taking advantage of the foreclosures and rising prices to profit their IRAs, while still others take advantage of what they feel are low prices on gold and silver.
Whatever your passion, your retirement may be closer than you think, and your ability to retire isn’t someone else’s responsibility – it’s yours. So fund your retirement plan until it hurts, invest wisely, and stay involved. If you need help, give us a call. Through local investor clubs and the right education and research, you might exceed your goal yet.
April 18, 2014
Guest article by Mark Mohler:
You are already accustomed to enduring TV commercials for everything from noisy car salesmen to ambulance-chasing lawyers, but are you ready for a TV advertisement prompting you to invest in a new private startup? Well get ready, because it is only a matter of time before it happens. By now, you have probably heard terms like “crowdfunding,” “peer-to-peer lending” and maybe even “general solicitation.” As more and more rules are implemented allowing different groups to solicit your money in connection with funding their own private business, it is important to understand the changing landscape. “Crowdfunding” is defined by Wikipedia as “the collection of finance to sustain an initiative from a large pool of backers—the “crowd”—usually made online by means of a web platform.” Crowdfunding as a fundraising tool is already everywhere and, through recently enacted changes to US Securities laws, crowdfunding will likely be even bigger in the future.
In its earliest iterations, crowdfunding in the US was limited to non-investment offerings in order to avoid running afoul of state and federal securities laws. That meant that you could be asked to put up the money for a business or a project, but you could not own an interest in the success of that business or project. Accordingly, the vast amount of crowdfunding to date has been requests for donations or pre-purchases of a product to be created at a later time. Crowdfunding has been very successful and billions have been raised but imagine your chagrin if you were one of the 9,500 crowd backers that provided an aggregate of $250,000 in donations to startup Oculus VR only to see the company sold for $2 billion less than two years later. We can all understand why the providers of this early capital are a bit peeved to be receiving little more than a thank you note in return for funding the meteoric company. As it turns out, some backers now feel used or even scammed by the crowdfunding project. Sensing this unfairness, the JOBS Act enacted in 2012 sought to democratize private equity by allowing companies to use existing technology tools, such as the Internet, to solicit actual investments from everyday Americans. Two years later, the Securities and Exchange Commission has still not fully created the rules for how this can happen but, little by little, you may be noticing the changes.
Some of these changes relate only to Internet-based crowdfunding and apply to all Americans–regardless of net worth. Other changes apply to solicitations through any distribution channel–including Super Bowl commercials or billboard advertisements and are applicable only to investments by certain “accredited investors.” In these cases, everyone can be solicited, but only accredited investors may actually invest. All told, these changes reflect the most dramatic changes to US securities laws since investor protections were first implemented in the early 1930s. The changes are coming to your TV screen, email and direct mail and it is important to understand what you are being asked to do with your money and what to expect in return. If you are using these new rules to find investors for your own business, you need to understand the legal requirements.
For those of us who have been supporting the updating of US securities laws, it is an exciting time but one of frustration as regulatory rules are slow in coming and, at times, overburdensome. The promise is that many ordinary Americans will for the first time have the opportunity to directly invest in private companies in ways that were never before possible. Regular people may be the early investors in the next Facebook, Google or Oculus VR–rather than exclusively institutional investors such as venture capital firms. Even more exciting to some, these laws will permit opportunities for easy and direct “impact investments” such as local investment in small “Main Street” businesses like coffee shops, bookstores and restaurants and behind passionate causes like clean energy, “Made in the USA” manufacturing or natural/organic companies.
The potential bad news is that these changes will bring a whole new category of risk for investors that may not fully appreciate the inherent risks or the illiquidity of early stage investments and may open the doors to the type of fraud that caused lawmakers to heavily regulate the sales of securities in the first place. It probably goes without saying, but “let the crowdfunder beware.”
All told, I see these as positive changes reflective of a modern era where not only wealthy people understand the fundamentals of investing. After all, it should be much harder sell snake oil at a time when you can easily “google” not just technologies but the people who are promoting them. It has also never made sense to me that people of modest means are legally permitted to lose their entire retirement savings at a casino in Las Vegas but cannot invest a small percentage in a private tech company. Which is actually riskier?
Mark Mohler is a business, tax and estate planning lawyer and founding member of Corridor Legal Partners as well as a founder of Sprigster, an online crowdfunding portal for veterans and military spouses. You can contact Mark by phone at 321-473-3337, or you can visit his website at www.corridorlegal.net for more information.
March 6, 2014
Finding and evaluating private placements, equity and bond hedge funds, and commodity based hedge funds and managed futures programs has always been a very ad hoc and inefficient process. The founding partners of FNEX faced the same challenges as every other investor in that they only saw a small number of deals from their brokers, investment advisors, and private bankers. Financial advisors from the large RIA and Broker Dealers can only recommend the offerings that have been through their internal research departments which limit them to a handful of the very largest funds. These are the same names that everyone recognizes because their CEOs are regular guests on CNBC.
It isn’t practical for an investment firm with thousands of advisors to review and approve private securities and hedge funds from mid-size and “emerging managers” because the size of the fund and the support staff managing the strategy aren’t large enough to handle the traffic those referrals would generate.
FNEX created a Private Securities Marketplace that is open to any accredited and institutional investor. On the FNEX platform, investors will find private placements being offered by a range of different sized investment banks. These are direct placements into companies raising growth capital in a wide variety of industries such as biotechnology, real estate, and clean energy, just to name a few. Fund managers with a broad array of different investment strategies in equities, bonds, forex, precious metals, stock indexes, agricultural, and energy commodities are also on the platform.
To assist in the evaluation of each offering, FNEX offers a variety of different diligence, valuation, and research partners that investors can engage on an as-needed basis. The FNEX Education Center is full of current research, white papers, and links to industry resources to help investors learn as much as possible prior to investing.
The FNEX Deal Room feature allows investors to view and download offering documents and subscription agreements as well as communicate directly with the investment banker or fund manager. As always, every self-directed investor should review the available materials with a trusted advisor or legal counselor prior to investing.
After an investor locates a deal and requests IRA funds from an administrator like NuView, the investor can upload all of the paperwork for processing and copies can be provided to the IRA administrator to make sure the documents are in good order before closing. Investors will also be able to complete a Buy Direct letter from the IRA administrator so the funds can be dispersed directly from a custodial account to the Bank or Fund Manager. It is important to note that FNEX is not a custodian and will never be in possession of funds at any part of the investment process.
Membership to FNEX is free and the registration process is very simple. Because the offerings on the site are only available to accredited investors, investors must complete a brief investor questionnaire to ensure that the current SEC guidelines for investing in private offerings are met. After investors complete the survey step, access to the site is granted. FNEX offers profiles to save personal investment criteria such as minimum investment amount, strategies, and risk profile.
FNEX offers a way to expand the alternative investment choices available to investors. If you would like more information, please visit FNEX at www.FNEX.com.
Please note, NuView IRA is also not a fiduciary and only provides services to self-directed accounts that are nondiscretionary and/or administrative in nature. The Account-holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account. NuView IRA has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein or on FNEX shall be construed as investment, legal, tax or financial advice or as a guarantee, endorsement, or certification of any investments or of FNEX itself.
