to good to be true? [Investing in Real Estate Company]

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tolerable2323
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to good to be true? [Investing in Real Estate Company]

Post by tolerable2323 » Wed Oct 04, 2017 2:14 am

One of my closes friends has some money invested in a company. We have over ten years of working relationship together and he has always be honorable. He told me about this company http://www.racdevelopment.com/rac-1/. how its good opportunity to let my emergency fund grow much faster then ally 1.2 percent interest rate.

Read that even if I don't invest any money they would still provide me with 5% interest rate which is really appealing to me but it also sounds to good to be true.

just wanted to get people thoughts on this.

AlohaJoe
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Re: to good to be true?

Post by AlohaJoe » Wed Oct 04, 2017 2:23 am

tolerable2323 wrote:
Wed Oct 04, 2017 2:14 am
its good opportunity to let my emergency fund grow much faster then ally 1.2 percent interest rate.
You want to put your emergency fund in an illiquid fund for a company that flips foreclosed houses?

Do you really need strangers on the internet to tell you whether that's a good idea or not?

Minty
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Re: to good to be true?

Post by Minty » Wed Oct 04, 2017 3:29 am

Do not do this.
Core Four with nominal bonds and TIPS.

CurlyDave
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Re: to good to be true?

Post by CurlyDave » Wed Oct 04, 2017 3:35 am

When the music stops, someone will not get their money back. But I bet it won't be the guys selling this idea.

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oldcomputerguy
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Re: to good to be true?

Post by oldcomputerguy » Wed Oct 04, 2017 5:20 am

tolerable2323 wrote:
Wed Oct 04, 2017 2:14 am
Read that even if I don't invest any money they would still provide me with 5% interest rate which is really appealing to me but it also sounds to good to be true.
That's not at all the way I read it.
After the sale of a project, clients will get their payout as following:

1. Principle
2. 5% APR from the date the investors deposits the funds with us (even if the money not yet invested in a specific property)
So the way this reads, you don't get the 5% APR unless and until whatever project your money was tied up in gets sold.

It particularly scares me that their promotion material explicitly says they'll accept "retirement" money. This throws a huge, screaming red flag for me.

Reading further, their literature makes it pretty plain that they don't actually do any work, they instead "hold your hand" to get you started on the auction bidding process, the eviction process, the renovation process, and the sale process. In other words, you're doing all the actual work of flipping the property, with them holding your money in the meantime.

Run away.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

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TomatoTomahto
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Re: to good to be true?

Post by TomatoTomahto » Wed Oct 04, 2017 5:57 am

oldcomputerguy wrote:
Wed Oct 04, 2017 5:20 am
tolerable2323 wrote:
Wed Oct 04, 2017 2:14 am
Read that even if I don't invest any money they would still provide me with 5% interest rate which is really appealing to me but it also sounds to good to be true.
That's not at all the way I read it.
After the sale of a project, clients will get their payout as following:

1. Principle
2. 5% APR from the date the investors deposits the funds with us (even if the money not yet invested in a specific property)
So the way this reads, you don't get the 5% APR unless and until whatever project your money was tied up in gets sold.

It particularly scares me that their promotion material explicitly says they'll accept "retirement" money. This throws a huge, screaming red flag for me.

Reading further, their literature makes it pretty plain that they don't actually do any work, they instead "hold your hand" to get you started on the auction bidding process, the eviction process, the renovation process, and the sale process. In other words, you're doing all the actual work of flipping the property, with them holding your money in the meantime.

Run away.
In the context of borrowing, principal refers to the initial size of a loan; it can also mean the amount still owed on a loan.
Stand up for proper use of terms; run away.

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oldcomputerguy
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Re: to good to be true?

Post by oldcomputerguy » Wed Oct 04, 2017 6:19 am

TomatoTomahto wrote:
Wed Oct 04, 2017 5:57 am
Stand up for proper use of terms; run away.
Not sure what you mean by "stand up for proper use of terms"... if you're referring to the use of "principle" rather than "principal", I can't take the blame for that one, that was a cut-and-paste from their web site.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

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TomatoTomahto
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Re: to good to be true?

Post by TomatoTomahto » Wed Oct 04, 2017 6:28 am

oldcomputerguy wrote:
Wed Oct 04, 2017 6:19 am
TomatoTomahto wrote:
Wed Oct 04, 2017 5:57 am
Stand up for proper use of terms; run away.
Not sure what you mean by "stand up for proper use of terms"... if you're referring to the use of "principle" rather than "principal", I can't take the blame for that one, that was a cut-and-paste from their web site.
I wasn't putting the misuse on you, that's why I suggested running away from the offer, not from your advice. :sharebeer

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DaftInvestor
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Re: to good to be true?

Post by DaftInvestor » Wed Oct 04, 2017 6:31 am

Did you take a look at who is the running the company? Read the bio's and decide if they are folks you would trust with your money. There is someone with a medical degree - and then a bunch of folks who don't have enough experience to list what they did before forming this company. You can forgive the all poor English on their website since English is obviously not their first nor primary language but I'm sure when you read the actually terms that you will sign when they take their money you will find out that returning your money is not at all guaranteed.
The 5% is likely a number you will see on paper - and will only be given to you provided you eventually invest in a project. So you will see your 10,000 go up a bit before it takes a nose-dive into a project.

Jags4186
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Re: to good to be true?

Post by Jags4186 » Wed Oct 04, 2017 7:14 am

You and, if you have one, your spouse can each open checking accounts at Consumers Credit Union and by jumping through a few hoops can each earn 4.59% on up to $20k/yr.

My wife and I both do this. It pays out every month like clockwork.

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oldcomputerguy
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Re: to good to be true?

Post by oldcomputerguy » Wed Oct 04, 2017 7:16 am

TomatoTomahto wrote:
Wed Oct 04, 2017 6:28 am
oldcomputerguy wrote:
Wed Oct 04, 2017 6:19 am
TomatoTomahto wrote:
Wed Oct 04, 2017 5:57 am
Stand up for proper use of terms; run away.
Not sure what you mean by "stand up for proper use of terms"... if you're referring to the use of "principle" rather than "principal", I can't take the blame for that one, that was a cut-and-paste from their web site.
I wasn't putting the misuse on you, that's why I suggested running away from the offer, not from your advice. :sharebeer
:beer
Anybody know why there's a 20-pound frozen turkey up in the light grid?

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TomatoTomahto
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Re: to good to be true?

Post by TomatoTomahto » Wed Oct 04, 2017 7:22 am

DaftInvestor wrote:
Wed Oct 04, 2017 6:31 am
You can forgive the all poor English on their website since English is obviously not their first nor primary language but I'm sure when you read the actually terms that you will sign when they take their money you will find out that returning your money is not at all guaranteed.
I probably should apologize for my calling them on their misuse of a term. As a non-native English speaker, I'm usually more sensitive to the challenges. But, I found the web site to be slick, and engineered to separate people from their money, so I indulged myself.

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climber2020
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Re: to good to be true?

Post by climber2020 » Wed Oct 04, 2017 7:24 am

AlohaJoe wrote:
Wed Oct 04, 2017 2:23 am
tolerable2323 wrote:
Wed Oct 04, 2017 2:14 am
its good opportunity to let my emergency fund grow much faster then ally 1.2 percent interest rate.
You want to put your emergency fund in an illiquid fund for a company that flips foreclosed houses?

Do you really need strangers on the internet to tell you whether that's a good idea or not?
I agree with AlohaJoe. Absolutely terrible idea.

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DaftInvestor
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Re: to good to be true?

Post by DaftInvestor » Wed Oct 04, 2017 7:28 am

TomatoTomahto wrote:
Wed Oct 04, 2017 7:22 am
DaftInvestor wrote:
Wed Oct 04, 2017 6:31 am
You can forgive the all poor English on their website since English is obviously not their first nor primary language but I'm sure when you read the actually terms that you will sign when they take their money you will find out that returning your money is not at all guaranteed.
I probably should apologize for my calling them on their misuse of a term. As a non-native English speaker, I'm usually more sensitive to the challenges. But, I found the web site to be slick, and engineered to separate people from their money, so I indulged myself.
I don't think you need to apologize actually - to me - it shows they are somewhat of a fly-by-night outfit. If it was a truly legitimate business - they would take the time to hire someone who had English-as-a-first-language to correct all the poor spelling and grammar.

Grt2bOutdoors
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Re: to good to be true?

Post by Grt2bOutdoors » Wed Oct 04, 2017 7:33 am

Ever drive through your neighborhood and see a placard tacked to a telephone pole or attached to a fence with the following "Sell Your House - We Pay Cash!!! No Broker, Sell Direct!!!?? I just took a look at some of their notable acquisitions - purchased a condominium for $168K and then on the listing state that market value at Purchase Date was $240K!! A rational person doesn't sell their highly valued property for such a large discount, so either this entity is predatory (which would not surprise me) or something else is going on. 1.2% of safe money vs. "am I going to get my money back" - what sounds better to you OP? Placing your money here is a speculative bet, you'd likely do better with a 60/40 diversified fund where you can click sell at any time, this alternative investment is ILLIQUID.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Kenkat
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Re: to good to be true?

Post by Kenkat » Wed Oct 04, 2017 7:35 am

I went and read the full payout schedule on the website:

After the sale of a project, clients will get their payout as following:

1. Principle
2. 5% APR from the date the investors deposits the funds with us (even if the money not yet invested in a specific property)
3. Expenses RAC fronted will be recovered from the remaining profit
4. With the remaining net-profit, 50% will be split amongst the investors based on percentage


So basically they are borrowing money at 5% to flip houses and you get a 50% split of the profits. The 5% is probably a below market rate for them compared to conventional lending and you get to participate in the house flipping business without doing any work on the actual houses.

It’s risky, so not appropriate for your emergency fund. If the economy were to go into the tank, those houses will not sell and your money will be unavailable when you might really need it.

As a speculative investment? That would all depend on the return they can make on the houses they flip. If it’s 20%, it could work. But how do you figure out what the historical returns would be? Does the firm provide any audited financials? Does your friend have any numbers he can share? This is highly risky, so at a minimum, you’d want an expectation of high returns and also be willing to take a big loss if things don’t work out.

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TomatoTomahto
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Re: to good to be true?

Post by TomatoTomahto » Wed Oct 04, 2017 7:39 am

A question I often ask myself, in addition to "is it too good to be true?" is, "why me?" What am I to them that they offer me this extraordinary opportunity? Am I related? Are we intimate? Do I bring some idea or skill to the table that they're rewarding? If they're doing so well, why would they accept a small amount of money from me, that is probably not worth the bookkeeping involved?

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oldcomputerguy
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Re: to good to be true?

Post by oldcomputerguy » Wed Oct 04, 2017 7:42 am

DaftInvestor wrote:
Wed Oct 04, 2017 7:28 am
I don't think you need to apologize actually - to me - it shows they are somewhat of a fly-by-night outfit.
I do have to wonder about the following:

(From the RAC Investments page)

Office Adress: 150 N Santa Anita Ave, Suite 645, Arcadia, CA
Tin-Jon Syiau
Founder & CEO
Tin-Jon aka TJ, graduated from UCLA School of Medicine specializing in Nephrology and currently operates Dr. TJ Syiau’s Med Corp.
Looking up Dr. TJ Syiau's Med Corp., we see the address listed as:

150 N Santa Anita Ave Ste 645, Arcadia CA.


Hmmm.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

aristotelian
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Re: to good to be true?

Post by aristotelian » Wed Oct 04, 2017 7:46 am

DaftInvestor wrote:
Wed Oct 04, 2017 6:31 am
Did you take a look at who is the running the company? Read the bio's and decide if they are folks you would trust with your money. There is someone with a medical degree - and then a bunch of folks who don't have enough experience to list what they did before forming this company. You can forgive the all poor English on their website since English is obviously not their first nor primary language but I'm sure when you read the actually terms that you will sign when they take their money you will find out that returning your money is not at all guaranteed.
The 5% is likely a number you will see on paper - and will only be given to you provided you eventually invest in a project. So you will see your 10,000 go up a bit before it takes a nose-dive into a project.
They also all appear to be under the age of 25. Smells like pyramid scheme and they are looking for dollars to "invest".

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stemikger
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Re: to good to be true?

Post by stemikger » Wed Oct 04, 2017 7:53 am

Unless you want to be on Nightline as a victim of a scam. Stay far away.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

barnaclebob
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Re: to good to be true?

Post by barnaclebob » Wed Oct 04, 2017 8:42 am

Its probably not an outright scam but it for sure is an extremely risky investment without the proper reward for such risk. However outright scams usually start out with good intentions but turn into scams when the money starts to run out.

David Scubadiver
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Re: to good to be true?

Post by David Scubadiver » Wed Oct 04, 2017 8:51 am

Because your closest friend invested in something is probably the worst reason for you doing the same. He can be as honorable as the sea is deep, but if he is a fool soon parted from his money, it does you little good to follow his lead.

tolerable2323
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Re: to good to be true?

Post by tolerable2323 » Wed Oct 04, 2017 9:39 am

Kenkat wrote:
Wed Oct 04, 2017 7:35 am
I went and read the full payout schedule on the website:

After the sale of a project, clients will get their payout as following:

1. Principle
2. 5% APR from the date the investors deposits the funds with us (even if the money not yet invested in a specific property)
3. Expenses RAC fronted will be recovered from the remaining profit
4. With the remaining net-profit, 50% will be split amongst the investors based on percentage


So basically they are borrowing money at 5% to flip houses and you get a 50% split of the profits. The 5% is probably a below market rate for them compared to conventional lending and you get to participate in the house flipping business without doing any work on the actual houses.

It’s risky, so not appropriate for your emergency fund. If the economy were to go into the tank, those houses will not sell and your money will be unavailable when you might really need it.

As a speculative investment? That would all depend on the return they can make on the houses they flip. If it’s 20%, it could work. But how do you figure out what the historical returns would be? Does the firm provide any audited financials? Does your friend have any numbers he can share? This is highly risky, so at a minimum, you’d want an expectation of high returns and also be willing to take a big loss if things don’t work out.
Thank you, I have a lot to think about.

tolerable2323
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Re: to good to be true?

Post by tolerable2323 » Wed Oct 04, 2017 9:40 am

David Scubadiver wrote:
Wed Oct 04, 2017 8:51 am
Because your closest friend invested in something is probably the worst reason for you doing the same. He can be as honorable as the sea is deep, but if he is a fool soon parted from his money, it does you little good to follow his lead.
True, didn't look at it in that angle.

tolerable2323
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Re: to good to be true?

Post by tolerable2323 » Wed Oct 04, 2017 9:51 am

Kenkat wrote:
Wed Oct 04, 2017 7:35 am
I went and read the full payout schedule on the website:

After the sale of a project, clients will get their payout as following:

1. Principle
2. 5% APR from the date the investors deposits the funds with us (even if the money not yet invested in a specific property)
3. Expenses RAC fronted will be recovered from the remaining profit
4. With the remaining net-profit, 50% will be split amongst the investors based on percentage


So basically they are borrowing money at 5% to flip houses and you get a 50% split of the profits. The 5% is probably a below market rate for them compared to conventional lending and you get to participate in the house flipping business without doing any work on the actual houses.

It’s risky, so not appropriate for your emergency fund. If the economy were to go into the tank, those houses will not sell and your money will be unavailable when you might really need it.

As a speculative investment? That would all depend on the return they can make on the houses they flip. If it’s 20%, it could work. But how do you figure out what the historical returns would be? Does the firm provide any audited financials? Does your friend have any numbers he can share? This is highly risky, so at a minimum, you’d want an expectation of high returns and also be willing to take a big loss if things don’t work out.
Sometimes hearing the truth hurts. Thank you tho

pkcrafter
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Re: to good to be true?

Post by pkcrafter » Wed Oct 04, 2017 10:28 am

Sounds like you would be taking on a lot of risk for a return capped at 5%. No way you can compare this to Ally.

But, it appears there is no downside risk, or is there?
Reason why this payout sequence is so important is because it drastically lowers the risks involved in the investment.

For example, if we purchased a property for 300k and sells it for 330k, it would look as if we had a 30k margin on the property.

What if the expenses were 40k? Then it would mean that we lost money on the project right? And that’s where the benefits of our payout sequence come in:

RAC will first return the total principle of 300k back to investors at the close of escrow, which will leave 30k on the table.

Out of the 30k, RAC will then pay out the 5% APR to all of the investors, which let’s just say is about 5k hypothetically.

There will then be only 25k left on the table even though RAC needs to recuperate 40k worth of expenses. In which case RAC will take the loss on the expenses. So in this case, the investors will be able to keep their principle as well as gain the 5% APR on their investment while the company takes a loss.

In another word, this assures our investors that the company is motivated to sell the property for as much margin as possible to avoid losing money on our end.
And what about tax-efficiency?


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Sandtrap
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Re: to good to be true?

Post by Sandtrap » Wed Oct 04, 2017 10:38 am

No such thing as "easy" money.
If it sounds to good to be true, it isn't.
Shared experiences to benefit all -- not an exspurt -- per forum guidelines :) Golf score allocation 50/50 swings vs putts.

tolerable2323
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Re: to good to be true?

Post by tolerable2323 » Wed Oct 04, 2017 11:29 am

Thank you everyone who contributed to my question. I just informed My friend that am going to pass.

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