Thoughts On RealtyShares Closing Its Doors To New Investors

[1UnknownSubject]

Did anyone else feel as though IRM threatened investors in the FG update that just went out?  So, IRM doesn't want us talking online or pursuing legal action. What a load of cr*p!  IRM you are supposed to work for us! You better take legal action against FG and ADP or you will be sued by us.  Don't threaten your customers!

Guys...investors are not supposed to speak directly with the sponsors. So IRM is correct in saying that many of the threats that some of the investor did directly to FG are not a smart move...the contract we all signed is between us and RS at the time and sponsor have no rights to speak to investor and viceversa.
I personally have 3 investment with FG but I am not too concerns because I feel that IRS is managing the situation to the best of their abilities and has all the interest, together with the sponsor, to regain the most money out of the deal.
I am also not concern because I read carefully the statement we ALL signed which was clearly mentioning that these investments are potentially 100% at risk of losing the entire capital. Not only that but when I was in the process of investing with RS (8 investments total) the person dialoguing with me at the time was VERY clear in informing me that these were high risks investments and should be treated as such.
So, as much as I would hate it to lose a penny, I believe this is part of the game and I also dedicated a small % of my NW to this.
By reading some of the comments and posts here I believe people were a little less prudent and went in full blast and now are concerned.
If you did that, you did not informed yourself correctly, sorry, nor did enough research on crowdfunding so some self blame is fair here...
good luck to all

I certainly don't condone any threats of violence or whatever shenanigans people have been potentially aimed at FG. And I do agree from some of the posts some people really went in hard from... uneducated positions (ie: some of the big $ 2nd lien position posts I've read... scary).

That said, it's pretty hard to have a 100% loss on senior debt deal when a large portion of the value is the land itself. The sheer number of FG deals that are a complete disaster; the lack of disclosures; the huge gaps in communication from FG to RS; the apparent hiding of the ADP facts from RS; the discovered conflicts of interest; the discovery that they really had virtually no track record and outsourced everything; the signs that funds from multiple deals got mingled; etc.

You know the old saying where there is smoke there is often fire?

I had other RS investments in fast food restaurants that went mostly without a hitch, including other Captain D's locations. Yet, every single FS deal is a complete train wreck.

They clearly didn't know what they were doing, were in on it, were taken for a complete ride, or [insert whatever reasoning they may have] - at the end of the day they took millions of dollars of investments from a lot of folks and completely screwed it up. As such, they should not expect people to just roll over and take 25-75% losses while finger waiving the blame at a 3rd party they contracted and didn't do any due diligence or bare minimum follow-up on.

The failure of all these deals sits entirely, 100%, on them. The circumstances behind the failures, sure seems to have a lot of smoke behind them... investors feeling legal action is necessary IMHO is completely warranted.

Best of luck to all.

Great assessment SD Nerd. I hope for the best for all of us on the FG investments. What I detect though is that sharks are in the water, some, not all, principals saw what RS was doing and where things were going and took advantage of the situation.  I think it is good that IRM stepped in and is at least trying to help us out - at least they have experience with real estate, versus a slick website and advertising campaign. I really liked the concept of crowdfunding - I really could not find anything negative on the concept while doing research prior to investing. Maybe that was the red flag. Caveat Emptor.

[FloridaMan]

Being a relatively inexperienced investor in real estate deals, I apologize in advance for a naive question about the numbers showing on one of my K-1s: RS 368 University of Toledo Student Housing.  This sponsor hasn't ever furnished detailed income statements, but their one-pager updates have generally been upbeat, and they have made fairly regular distributions.  The K-1 shows a near 40% hit to capital by way of "rental loss".  I will ask my tax accountant to dig into the specifics -- though I am at a loss to find any specifics to dig in to here.  If anyone else here is in on this deal, or has insights into situations like this from prior experience, I would appreciate your thoughts:  is this a "real" loss, or is this some kind of tax gaming that is commonplace in real estate K-1s?

This kind of reported loss on the K-1 is typical and doesn't in and of itself signal any problem.

Now, to really know how the investment is doing you would need to see the balance sheet and income statement.

[ramesh]

Being a relatively inexperienced investor in real estate deals, I apologize in advance for a naive question about the numbers showing on one of my K-1s: RS 368 University of Toledo Student Housing.  This sponsor hasn't ever furnished detailed income statements, but their one-pager updates have generally been upbeat, and they have made fairly regular distributions.  The K-1 shows a near 40% hit to capital by way of "rental loss".  I will ask my tax accountant to dig into the specifics -- though I am at a loss to find any specifics to dig in to here.  If anyone else here is in on this deal, or has insights into situations like this from prior experience, I would appreciate your thoughts:  is this a "real" loss, or is this some kind of tax gaming that is commonplace in real estate K-1s?

This kind of reported loss on the K-1 is typical and doesn't in and of itself signal any problem.

Now, to really know how the investment is doing you would need to see the balance sheet and income statement.

Thank you.  That's what I suspected.  Unfortunately, this is one of several sponsors I am invested with that doesn't share income statements.

[barnold24]

So just got a K-1 from Realtyshares showing a net long term loss on an investment made with them even though the investment closed out and I received my original $35k back plus a $9k profit. Guess the sponsor didn't give them any information so they made it up. It is obviously wrong but at least I got it.

[FloridaMan]

So just got a K-1 from Realtyshares showing a net long term loss on an investment made with them even though the investment closed out and I received my original $35k back plus a $9k profit. Guess the sponsor didn't give them any information so they made it up. It is obviously wrong but at least I got it.

Well you may be correct that it's a mistake. Or it's possible that the timing just worked out this way.  K-1 is going to cover a given tax year. The K-1 you're getting now pertains to 2018.

If the project sold at a profit in tax year 2019, that won't reflect until you get a K-1 in 2020.

[barnold24]

So just got a K-1 from Realtyshares showing a net long term loss on an investment made with them even though the investment closed out and I received my original $35k back plus a $9k profit. Guess the sponsor didn't give them any information so they made it up. It is obviously wrong but at least I got it.

Well you may be correct that it's a mistake. Or it's possible that the timing just worked out this way.  K-1 is going to cover a given tax year. The K-1 you're getting now pertains to 2018.

If the project sold at a profit in tax year 2019, that won't reflect until you get a K-1 in 2020.

Project closed out in June of 2018 and even if it didn't close out until 2019, there would not have been a realized long term capital loss as there would have been no transaction to cause it to be recognized during that tax year. It is the accountant in me.

[dmk395]

Just received notice my debt investment into a single family home at 210 Aerie Court in Georgia is now in foreclosure as the borrower was unable to refi....

[Nosferatu_FL]

Has anyone invested in UTAH Diversified-Residential FUND?
https://www.realtyshares.com/investments/utah-diversified-residential-fund-ii
They had a call with the sponsor yesterday.  It sounds like the sponsor ran into trouble but committed to paying back
all RS $$. 

[Nosferatu_FL]

If anyone was on Best Western Hotel, Toledo Deal please contact me!!

[andyo]

I can't find the Facebook page at https://www.facebook.com/groups/362978171187445/?fref=nf - Facebook comes up with no access or availability.

Is anyone else on the Windgate apartments investment? What do we have to do to get a K1 out of these guys??

[cfojim]

So just got a K-1 from Realtyshares showing a net long term loss on an investment made with them even though the investment closed out and I received my original $35k back plus a $9k profit. Guess the sponsor didn't give them any information so they made it up. It is obviously wrong but at least I got it.

Well you may be correct that it's a mistake. Or it's possible that the timing just worked out this way.  K-1 is going to cover a given tax year. The K-1 you're getting now pertains to 2018.

If the project sold at a profit in tax year 2019, that won't reflect until you get a K-1 in 2020.

Project closed out in June of 2018 and even if it didn't close out until 2019, there would not have been a realized long term capital loss as there would have been no transaction to cause it to be recognized during that tax year. It is the accountant in me.

I've been following this thread, but this is first time I've posted.  Listen to the accountant in you.

I've only received 5 RS K-1's out of  the 10 needed to file my taxes.  Out of these 5, 4 still have obvious problems.  The most recent is RS188, LTD Family Trust Fund I, which was fully paid off in 2018.  Instead of showing the return of principal as a distribution, it is showing it as a capital loss.  Also, none of the investment income for 2018 is reflected in block 1 as had been done in 2017.  Also included in the package is a NY K-1, even though I'm a Florida resident and this was a Florida investment.  If the NY K-1 is not removed but is filed, I'll either have to file a NY state tax return or ignore it and hope I don't waste time later responding to NY state tax correspondence.  Look closely at your K-1's and compare to previous year to check for inconsistencies.  Look at your dashboard for each investment and make sure the principal and cash yield distributions on the dashboard agree to block 19. Let RS know immediately of any discrepancies you see so they can be corrected. 

[andyo]

Look at your dashboard for each investment and make sure the principal and cash yield distributions on the dashboard agree to block 19. Let RS know immediately of any discrepancies you see so they can be corrected.
[/quote]


How does one let RS know about anything?? The help board no longer exists.

[ramesh]

How does one let RS know about anything?? The help board no longer exists.

I generally write to contact@realtyshares.com.  They respond when the spirit moves them.

[barnold24]

Cfojim - you and I are referring to the same investment. After doing some research, I am going to show the loss on the K-1 along with a capital gains of $44k on Schedule D so the net effect is $9k on my taxes. I am also missing RS116 but there was no capital transaction in 2018 so I am just going to report the 2017 numbers and call it a day. Can't wait any more to file.

[cfojim]

Cfojim - you and I are referring to the same investment. After doing some research, I am going to show the loss on the K-1 along with a capital gains of $44k on Schedule D so the net effect is $9k on my taxes. I am also missing RS116 but there was no capital transaction in 2018 so I am just going to report the 2017 numbers and call it a day. Can't wait any more to file.

I did not have a capital gain while I held RS188 - only ordinary income which is taxed at a different rate.

[cfojim]

How does one let RS know about anything?? The help board no longer exists.
[/quote]

andyo, I have been sending emails to priority@iirrms.com and copying eric.sullivan@realtyshares.com.  There is also a cover letter with the K-1 that lists the address and phone number of Assure Services, who RealtyShares contracted to prepare the K-1's.  I've tried talking with them a couple of times, but did not get good vibes dealing with them.  For example, they asked my why am I calling them instead of RealtyShares.  I said because the cover letter with my K-1 package invited me to do so.  And so on...  Their number is 801-419-0677.

[Sdb]

I also received two K1's with a N.Y. K1 included. Both investments are located in NC. I've sent a message to clarify but no response yet.

[Sdb]

Received a reply to ignore the N.Y. K1's. Looks to be an error.

[barnold24]

Cfojim - you and I are referring to the same investment. After doing some research, I am going to show the loss on the K-1 along with a capital gains of $44k on Schedule D so the net effect is $9k on my taxes. I am also missing RS116 but there was no capital transaction in 2018 so I am just going to report the 2017 numbers and call it a day. Can't wait any more to file.

I did not have a capital gain while I held RS188 - only ordinary income which is taxed at a different rate.

Given you didn't get a correct K-1 how do you know what you have for it? Just curious

[cfojim]

Cfojim - you and I are referring to the same investment. After doing some research, I am going to show the loss on the K-1 along with a capital gains of $44k on Schedule D so the net effect is $9k on my taxes. I am also missing RS116 but there was no capital transaction in 2018 so I am just going to report the 2017 numbers and call it a day. Can't wait any more to file.

I did not have a capital gain while I held RS188 - only ordinary income which is taxed at a different rate.

Given you didn't get a correct K-1 how do you know what you have for it? Just curious

From my bank account and the investor dashboard, I know how much principal I invested and I know how much principal was returned.  Since all my principal was returned, there was no capital loss.  From my bank account and dashboard, i know how much in "cash yields" was received - this is investment income.  I know from the previous year's K-1 (I'm assuming it was correct), what type of investment income it was - block 1 ordinary income.  My assumption is that the character of the 2018 investment income was the same as for 2017.