Thoughts On RealtyShares Closing Its Doors To New Investors

[Greg]

Can you just pay the interest and fees when irs send you the bill in order to avoid amending?
Thank you

[cfojim]

Can you just pay the interest and fees when irs send you the bill in order to avoid amending?
Thank you

You can pay the penalty and interest instead of filing the amendment, but why invite an audit and give the IRS any more than they are due?  That assumes the late breaking k-1 is reporting more income.  It is also possible that it goes the other way and you are due a refund.

[Greg]

 You are right about that but cpa are charging a lot of money. Its a lot more work to do k 1 than before.

[babets]

You are right about that but cpa are charging a lot of money. Its a lot more work to do k 1 than before.

Yes...for me it was 100 each!

[ramesh]

A bizarre situation with one of my debt investments -- Wytheville, VA Captain D's.  The sponsor paid off 95% of the principal, and despite repeated notices from IRM refuses to make us whole!  Here is the notification from IRM.

For the investment numbered: RSL.2017A.148 and identified as East Commonwealth Drive - Captain D's (Wytheville, VA), IRM has determined that RealtyShares has made a common clerical error as described in a letter to the Sponsor below:

"On May 13, 2019 RealtyShares Inc. sent you a payoff letter for East Commonwealth Drive - Captain D's (Wytheville, VA) – RSL.2017A.148 – for a payoff on May 16, 2019. That letter included a $66,887.34 credit for funds remaining in the Rehab Reserve and a credit for $4,736.33 in the Interest Reserve. The total credit was $71,623.67. RealtyShares received the funds for the payoff of the loan on May 16, 2019. Once the payoff funds were received, RealtyShares' fund administrator began the reconciliation process and on July 3rd, 2019, reported that the payoff was $71,623.67 short. The shortage was caused because neither the last draw from the Rehab Reserve (February 2019) nor the final payment from the Interest Reserve (March 2019) were reflected in the reserve balance ledgers that are routinely used to prepare pay off calculations."

Since then, IRM has reached out and discussed the matter with Mr. Daniel Epstein, the executive in charge on behalf of Invest Squared, a real estate firm based in New York that also includes Mr. Yonah Kaufman and Joseph Kaufman among its executives.

Despite our efforts, including legal notices sent on on July 9th, July 15th, July 26th, and August 8th of this year, Mr. Epstein has refused the pay the outstanding debt, offering a 10% settlement which IRM rejected on behalf of investors.

IRM now plans to hand over the debt to an established collection agency, including all rights to pursue Invest Squared and its executives in a court of law, on behalf of investors, and will post an update once that process is complete.

[rs_thoughts]

question. i'm also in your deal. Are we still retaining our first lien on the property? I don't think RS should relinquish rights to the property without payment. If we retain, then maybe they can't refinance. But to be fair, why does RS have so many "clerical" errors if this is supposedly a Tech company and supposedly have things automated. It's like they were holding records on a notepad.

[ramesh]

question. i'm also in your deal. Are we still retaining our first lien on the property? I don't think RS should relinquish rights to the property without payment. If we retain, then maybe they can't refinance. But to be fair, why does RS have so many "clerical" errors if this is supposedly a Tech company and supposedly have things automated. It's like they were holding records on a notepad.

A previous update stated "IRM is exploring other alternatives to induce payment – including holding off on recording the lien release and/or ..", but it is unclear if they have stuck by this.  As for your question about RS, they seem to have operated with the technical sophistication of a real-estate company, and the real-estate chops of a tech company. 

[Hindsight2020]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

[JD]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

[DigitalNomad]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

No I haven't received my principal yet.

[rs_thoughts]

hi ramesh

i know you pointed to that portion of text where they would hold the first lien rights. But their final statement about sending to a "debt collection agency" almost implies they have categorized the missing principal as just some liability on un-secured credit. Otherwise, why send it to a collection agency? Just exercise your right on the property and hold them to the fire. nothing is really clear.

[JD]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

No I haven't received my principal yet.

Thanks.

Their 15-20 business day timeline is rather dubious if they are saying it was paid off on 08-09 but maybe they mean 15-20 from the notification date.

[babets]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

no I havent received the principal back yet. To note, we should receive principal plus accrual of 4,5% yearly so more than just the principal. In the memo sent however they mentioned it takes 15/20 days to receive it so we should wait another couple of weeks. I think it is because is not a regular distribution.

However one weird thing happened to me. one of my payment marked as "failed" (not chantilly rd). when I contacted RS about it they made me set up again my bank details (which have not changed). so be on alert if you see a payment marked as failed you need to contact them and reset your bank details even if they have not changed. I guess is a glitch but wanted to let everyone know.

[JD]

Since there's so much negative information on here, allow me to add a positive. 1575 Grant Road paid off in full (the original preferred equity amount plus the accrued preferred return), and I received the proceeds in my bank account today. 1575 Grant Road was a single-family remodel that went into payment default in June. IRM worked with them to give them breathing room to re-finance the project, and it paid off.

That is great to hear, thanks for sharing.

On a similar note, has anyone in Chantilly Road (babets) or River's Edge (DigitalNomad) received their principal back yet? I received an interest payment for Chantilly yesterday but no principal yet, which seems odd.

no I havent received the principal back yet. To note, we should receive principal plus accrual of 4,5% yearly so more than just the principal. In the memo sent however they mentioned it takes 15/20 days to receive it so we should wait another couple of weeks. I think it is because is not a regular distribution.

However one weird thing happened to me. one of my payment marked as "failed" (not chantilly rd). when I contacted RS about it they made me set up again my bank details (which have not changed). so be on alert if you see a payment marked as failed you need to contact them and reset your bank details even if they have not changed. I guess is a glitch but wanted to let everyone know.

That is good to be aware of the failed payment and good point on the 4.5% accrual. I was wondering if something like the bank account instructions for me had done something similar but sounds like I should be okay.

[andyo]

Is anyone else in RS261 - 12 Inner Loop Townhomes? I actually received a couple of monthly payments today from July and August - which is interesting considering that I haven't received April through June...

[dwengca]

I have not receive a single payment this month, and last month was less than usual.  $150k in and nothing.. I honestly don't see much improvement myself.

[JD]

I have not receive a single payment this month, and last month was less than usual.  $150k in and nothing.. I honestly don't see much improvement myself.

I'm seeing a real drop off this month too, which is quite concerning.

Last month was a down month as well; I received about 60-70% of what I expect. But this month is abysmal so far, about 15% of expectations in a few tiny payments.

I'm wondering if they are messing around with their payment processor/schedule. If things don't come storming through this upcoming week, I'll certainly be contacting them.

[stingray]

@JD and @dwengca:

Here is a possible explanation.  I recently spoke with a sponsor I know after RS had still not provided us a Q2 payment or report.  They informed me that they had sent the payment and report to RS months earlier.  They even told me the exact date that RS cashed the check.  The sponsor contacted RS, and only then did RS post an update to investors.  It said that RS had been owed commissions in arrears and deducted them from the Q2 payment; this left no funds to distribute to investors.  So, if it's true with this investment, it could very well be a systemic problem that affects your investments too.

What bothers me is that they don't provide a statement of account to substantiate this, or don't voluntarily write to say that we won't receive a payment.

[JD]

@JD and @dwengca:

Here is a possible explanation.  I recently spoke with a sponsor I know after RS had still not provided us a Q2 payment or report.  They informed me that they had sent the payment and report to RS months earlier.  They even told me the exact date that RS cashed the check.  The sponsor contacted RS, and only then did RS post an update to investors.  It said that RS had been owed commissions in arrears and deducted them from the Q2 payment; this left no funds to distribute to investors.  So, if it's true with this investment, it could very well be a systemic problem that affects your investments too.

What bothers me is that they don't provide a statement of account to substantiate this, or don't voluntarily write to say that we won't receive a payment.

That's a good point as I've recently discovered it myself.

I had contacted about one holding that hadn't paid out since January even though it was supposedly current according to my dashboard. RS/IRM got back to me the same day with the explanation you gave, so it made sense in this case.

Unfortunately, I have ~20 active RS deals at the moment. Fortunately, many of them are classified as Tier 1 assets now. So the fact that only 2 of them have distributed to me so far this month is very very fishy.

[ramesh]

Just to add to the sample size here, I too have received close to none of the distributions this month.  To add some evidence to stingray's theory, the one payment I did receive was 15% of a distribution that has been regular to date.  Indeed, if IRM has a policy of deducting their fees around this time of the year, I guess one might expect this to happen.  Greater communication would be good, but responses to mails sent to Eric Sullivan are noticeably more informative and timely than those during the RS era post their bust.

BTW, some responses to my queries to Sullivan about a couple deals for the benefit of those who are in these.

1. The Wytheville VA Captain D's debt deal returned close to 95% of the principal, and per your notification of Aug 5 they are delinquent on the rest of the payment. 

An update on this situation has been sent out today. Please refer to your dashboard.

2.  I am pleased to receive updates indicating your assessment of the quality of the current investments.  NJ Multifamily Fund 2 had been classified as a Tier 2, and you were looking into their books to get a better sense.  Anxiously looking forward to hearing your conclusions. 

This is a pending matter.

3.  Would also appreciate receiving such assessments for the remaining investments, in particular, University of Toledo Stiudent Housing and Hampton Inn Colliersville, TN.

Toledo Student Housing - This investment is considered a Tier 1 investment

Hampton Inn Colliersville, TN - This investment is considered a Tier 1 investment