Equity Crowdfunding Investment Results 2014 - RealCrowd

This is the second in a series of blog post about returns and tax implications from my crowdfunding investments from 2014.  The first post was about my four investments from Realty Mogul.  Today’s post is about my five investments with Real Crowd.  All of Real Crowd’s projects have meet or exceeded expectations and pro-formas.

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 - Office/Retail Center Washington, DC

This was my first ever real estate crowdfunding investment.  I dipped my toes into crowdfunding in December of 2013. This investment is an office/retail center located in Washington DC. The project has an 8% preferred return with a 65/35 split thereafter. It was projected to have an average 12% cash on cash return and an 18% IRR.

Results – Cash distributions were slightly less than projected cash on cash return of 10.5% for 2014.  However, they exceeded their underwritten projections each quarter. Several new leases were signed over the year as well. New lease rates were projected in the mid $20’s and they were able to achieve rental rates in the mid $30’s

Tax consequences –For every $10,000 invested $843 was paid out in 2014.  The K1 (after depreciation etc.) reports a loss of $1121 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $843 is tax deferred “dividends” and $448 decrease in is taxes owed from the reported “loss”.

 

Investment 2 –  Apartments Durango CO

This investment from January of 2014 has performed better than projected. This 3-5 year hold of a 112 unit apartment community was estimated to have a cash on cash yield starting at 8-10% with an IRR of 14-17%.

Results – Cash distributions rose form 8% to 9.2% during the year. Operating income beat projections by over 15% by the end of the year.

Tax consequences - For every $10,000 invested $650 was paid out in distributions during 2014. The K1 (after depreciation etc.) reports a gain of $2 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $650 is tax deferred “dividends” and $1 increase in is taxes owed from the reported “gain”.

 

Investment 3 – Wisconsin Fund

This investment from February of 2014 is going according to plan. The Wisconsin diversified real estate fund was projected to have a7-10% 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 15%.

Results – Distributions during 2014 were at 7% which are at the low end of projections. However, they did announce the sale of an asset in the first quarter of 2015. The return on equity from this sale was over 100%. They plan on returning over 30% of our capital while we still maintain our ownership percentage in the fund’s assets.  100% return (on a portion of the investment) in less than a year is my definition of a good return.

Tax consequences - For every $10,000 invested $472 was paid out in distributions during 2014. The K1 (after depreciation etc.) reports a loss of $203 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $472 is tax deferred “dividends” and $82 decrease in is taxes owed from the reported “loss”.

Investment 4 – Industrial Development Los Angeles

This investment from May of 2014 has performed as projected. The opportunistic ground up development had a projected IRR of 18-20%.  The 2 year project is for an industrial building in Los Angeles

Results – There were no distribution planed or made during 2014.  They state that the project is on budget and on time.

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 $0 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $0 is tax deferred “dividends” and $0 decrease in is taxes owed from the reported “loss”.

Investment 5 –  Apartments Jacksonville, FL

This investment from Sept of 2014 has performed in line with projections. This 3-5 year hold of a 112 unit apartment community was estimated to have a cash on cash yield starting at 10.75% and an IRR of 15%.

Results - There were no cash distributions because of the timing of the investment. They have meet or beat there operating income projections each month.

Tax consequences - For every $10,000 invested $0 was paid out in distributions during 2014. The K1 (after depreciation etc.) reports a gain of $145 for each $10,000 invested. The net effect for investor in a combined 40% tax bracket is $145 is taxable “dividends” and $58 increase in is taxes owed from the reported “gain”.

 

Mark Kelly

Member Since: 2014

Apr 09,2015@08;33 PM

 

Just want to comment on the state tax implications. My latest check from a CF deal in Indiana had state tax withheld. I inquired about it and was told that this is state law in IN and in many other states. All I can say is be prepared for cash flow numbers to be drastically reduced because of this and then file your return so you can get this money back. For me, this puts a damper on the idea of investing small amounts into CF deals, unless focus is on a few states.

Randy King

Member Since: 2015

Mar 29,2015@03;32 PM

 

Thanks. These results are very informative.

Mark Robertson

Member Since: 2017

Mar 28,2015@06;19 PM

 

In some states, if the sponsor issues a K1 for your non resident state and there is income, I think you may have to file in that state. This is what I posted in response to a similar question: 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 multiple out of state returns, it would be a pain in the a@@

Randy King

Member Since: 2015

Mar 27,2015@07;15 PM

 

Have you determined what the state tax implications are yet?


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