Equity Crowdfunding Investment Results 2014 - Realty Mogul

I’ve talked to many investors that are on the fence about equity crowdfunding. Many have read about equity and debt crowdfunding and even joined a crowdfunding platform or two.  However, most are reluctant to pull the trigger on investing in this new and fledgling industry. I have made over 50 crowdfunding investments over the past 15 months and I plan on sharing unbiased real world results on those investments.  Some investments were made in the second half of 2014 and their results may not be meaningful.

The crowdfunding platforms have issued K1’s on my investments for 2014, so I can share not only the actual returns, but the tax ramifications of my real estate crowdfunding investments. Over the next few weeks I will show results from Realty Mogul, Realtyshares, RealCrowd, Fundrise, Patch of Land, ifunding, Sliced Investing, Bolstr and investments direct with sponsors.

My first report will be about my investments with Realty Mogul.  I made 4 investments in 2014 on their platform.  One exceeded projections, two meet expectations and one is lagging expectations.

Note - Distributions are paid quarterly, 4-8 weeks after each quarter.  All my investments were made in 2014, so I did not receive 4 distributions  in calender year 2014 for each investment. 

INVESTMENT 1 San Antonio Plaza

The first investment from February of 2014 performed the best, in San Antonio, Texas. The retail center was 86% occupied and was projected to have an average 11.78% cash on cash return and a 17.14% IRR after 5 years. The plan was to refinance in year 3 and return 80% of investor’s equity and sale the asset in year 5.

Results – Cash distributions meet the pro-forma cash on cash return of 4% for 2014. They were able to refinance the property in year 1 and in November of 2014 returned 100% of invested capital back to investors. We still maintain our ownership percentage. Realty Mogul investors now the Plaza risk free as limited partners and can reinvest this capital into other projects while still participating in cash flow and asset appreciation.  I can only wish crowdfunding investments performed this well.

Tax consequences –For every $10,000 invested $284 was paid out in distributions (in addition to the $10,000 returned).  The K1 (after depreciation etc.) reports a loss of $2,850 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $284 is tax deferred “dividends” and $1,140 decrease in is taxes owed from the reported “loss”.

 

Investment 2 - Mobile Home Park Fund IV

This investment from February of 2014 has performed as projected. This 5-10 year hold of a portfolio of Mobil home parks was estimated to have a cash on cash yield starting at 8% and increasing to 14% with an IRR of 18%.

Results – Cash distributions meet the pro-forma cash on cash return of 8% for 2014. All reports are they are meeting or exceeding expectations on the parks purchased.

Tax consequences - For every $10,000 invested $463 was paid out in distributions during 2014. The K1 (after depreciation etc.) reports a loss of $187 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $463 is tax deferred “dividends” and $75 decrease in is taxes owed from the reported “loss”.

 

Investment 3 – AZ Mini Storage

This investment from May of 2014 is not going according to plan. The 61% occupied self-storage facility in Tuscan, AZ was projected to have a 5% cash on cash return in year one and an average cash on cash return of 10.24%.  The projected IRR for the 5 year hold is 21.45%. The plan is to increase occupancy to 80% by year 3.

Results – No distributions have been made to date and occupancy has remained flat.  They recently fired the management group that ran the facility. The bad news is their plans to date have not succeeded.  On the positive side, highway construction is causing their closest competitor to close by midyear. This should result in a bump in occupancy. A new management company will hopefully help as well.

Tax consequences - For every $10,000 invested $0 was paid out in distributions during 2014. The K1 (after depreciation etc.) reports a loss of $880 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $0 is tax deferred “dividends” and $352 decrease in is taxes owed from the reported “loss”.

Investment 4 – Melbourne Self Storage

This investment from July of 2014 has performed as projected. The 94% occupied self-storage facility in Melbourne, FL was projected to have a 9% cash on cash return in year one and an average cash on cash return of 11.74%.  The projected IRR for the 6 year hold is 22.11%. The sponsor plan is to raise the facility from a class B to a class A facility.

Results – Distribution were paid as projected 2 months ahead of expected distribution date (payment made in 2015) and results have exceeded projections so far.

Tax consequences - For every $10,000 invested $0 was paid out in distributions during 2014. (as expected) The K1 (after depreciation etc.) reports a loss of $67 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $0 is tax deferred “dividends” and $27 decrease in is taxes owed from the reported “loss”.

Overall, these Realty Mogul investments have exceeded my expectations.

 

Mark Robertson

Member Since: 2017

Mar 27,2015@03;12 AM

 

I am not a cpa or lawyer, so I advise all to research these issues with your own attorney or tax accountant. Saying that, every equity investment showed a loss and from what I have read, you do not need to file a non resident state tax return if you do not have income in the other state. I did get a few K1's for other states, but they showed losses. My debt investments did not issue K'1s...just 1099 int .... Patch of issued one 1099 INT statement for 9 investments. Next year may be a different story. I assume i had only partial year income, but full year depreciation in year one. If I had to file multipleout of state returns, it would be a ppain in the a@@

Arati Patankar

Member Since: 2015

Mar 26,2015@08;51 PM

 

Great information! Can you elaborate on the expenses related to non resident state taxes on your investments.

Gary Kesinger

Member Since: 2014

Mar 25,2015@06;29 PM

 

This is very helpful, Mark. Thanks so much for posting it. I look forward to your upcoming reports.


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