Crowdfunding vs. REITs for Real Estate Investment

January 23, 2014

Guest article by Jilliene Helman:

The recent trend toward online “crowdfunding” has begun to make some private real estate investment opportunities more accessible to investors at relatively small minimum investment amounts. Diversification remains a key concern however, and the real estate investment trusts (REITs) that would seem to solve that problem for “average” investors continue to be given short shrift by the larger financial institutions. What gives?

REITs operate pools of many different properties and their shares offer at least a degree of liquidity. Yet recent surveys estimate that institutional investors continue to place between 80% to 95% of their real estate allocations into private real estate investments, rather than publicly traded REITs. Crowdfunding sites tend to similarly focus on private opportunities.

Many market participants insist that there are simply some things that private real estate investments can do better than public REITs. Some of these purported advantages are:

  • Public REITs are driven partly by underlying market sentiment, rather than real values
  • REITs are limited by asset class or geography; but cycles don’t always track either of those groups, so private opportunistic buying makes more sense
  • Private equity is better managed and investor-aligned because sponsors are highly invested, and so focused on achieving high returns
  • Private equity is disciplined by its focus on achieving a successful exit
  • The liquidity of public REITs is illusory (only the biggest REITs are liquid)
  • Private equity can be nimble, with more ability to buy at the bottom of the market and sell at the top
  • Private transactions use a bit more leverage, so should be able to outperform public funds

It seems that part of the issue with REITs is essentially their nature. A creation of the Internal Revenue Code, a REIT is a real estate company or trust that has elected to qualify under certain tax provisions to become a pass-through entity that distributes to its shareholders substantially all of its taxable earnings in addition to any capital gains generated from the sale or disposition of its properties. To qualify for this tax treatment, a REIT must follow several legal requirements, probably the most significant of which is that distributions to shareholders must equal or exceed 90% of the REIT’s taxable income.

This requirement would seem to be beneficial to investors, but it can prove to be a handicap. Because they must distribute nearly all of their income, both mortgage and property REITs must regularly sell equity in order to grow, i.e. acquire more assets. Institutional investors holding REIT shares are continually being approached to increase their existing positions, a circumstance that can worsen liquidity issues at smaller REITs whose shares are already largely held by just a few institutional holders.

Refinancing risk includes not only the risk associated with the cost of debt, but also that relating to the availability of capital. In 2008, the subprime mortgage crisis resulted in a very severe credit crunch in which many REITs were unable to refinance corporate or property-level debt when it came due, regardless of operating performance. The focus of discussion became “survivability,” and there was a massive sell-off in REIT shares. One very high-profile REIT, General Growth Properties, which had been one of the largest REITs in existence, sought bankruptcy protection.

REITs also face other issues that tend to reduce their attractiveness to some investors. They tend to focus only on the highest “Class A” assets, and are often unable to take advantage of “core-plus” or “value-added” properties needing some remodeling or more extensive renovation to get their cash flows up to desired levels, but which also offer greater potential returns. Another drawback is that the value of REIT shares can fluctuate constantly, just like any other stock. If one purpose of real estate is to provide true asset class diversification, some people argue that REITs fail that test simply by being publicly traded. Private real estate investments are somewhat insulated from – or at least not closely correlated with – the equity markets.

The debate over whether private real estate investments or publicly-traded REITs are better overall investments will surely rage on for some time. REITs suffered greatly during the recent recession but have come back strongly recently, with many institutional investors taking a greater stake in them than in previous years. Nevertheless, most large institutions – and crowdfunding sites – remain focused on private investments for reasons of reduced volatility, exposure to a broader range of opportunities, and true asset class diversification.


Jilliene is the CEO and co-founder of Realty Mogul is crowdfunding for real estate – a marketplace for accredited investors to pool money online and buy shares of pre-vetted real estate investments.

Real Property vs. Market Investments

January 9, 2014

Guest article by David Hoyle:

After spending more than 20 years on Wall Street as a partner in a major investment firm, I now focus on providing a cost effective way for others to invest in the real property market through self-directed investment programs. I believe there is no better way to diversify capital market risks, better-known as stock market risks, than through the introduction of tax-deferred investments in income-producing assets into an individual investor’s portfolio.

I hope that as you and I look into our collective crystal balls of the future, we recognize the following:

  1. Stocks are making new highs, despite an expectation on the part of a majority of investors, but that growth will remain low and fragile in the coming year.
  2. Bonds, which have been made expensive through the Federal Reserve Bank’s “Quantitative Easing” program, will now become a source of increasing volatility and risk as the FED scales back its buying program.

At a time when equity and bond portfolios are becoming more correlated (i.e. they tend to behave the same and are therefore less diversifying and more risky), real estate investments represent a true source of diversification and a source of very attractive returns. While individual stocks may offer double digit returns in the future, seldom do general index linked assets offer multiple consecutive years of double-digit returns.

As uncertainty creeps into the financial assets marketplace, an increasing number of investors will look to real property investments. Problematically, they will see opportunities, but will be confronted with increasing liquidity issues. Banks will not lend.

This is where a great opportunity for self-directed IRAs exists. Direct portfolio investment, joint ventures, equity participation lending, and other transactions within a self-directed investment framework all look likely to be on the upswing for 2014 and beyond.

Together with NuView, we at Old Florida Properties look forward to helping you find profitable opportunities.

David is the founder and managing broker of Old Florida Properties LLC, a licensed real estate brokerage firm located in downtown Orlando. You can contact David by phone at 407-529-4621, or you can visit his website at for more information.

What’s different in 2014 for self-directed IRAs?

The public stock market exchanges have had a remarkable year – with the Dow Jones Industrial average up 22% and the Nasdaq up an amazing 33%. Yet, interestingly enough, the growth of self-directed IRAs continues unabated. Why? Many investors would prefer to invest in what they know and understand, and in many instances believe that by making their own decisions they will have a better long term result.

Quite frankly, the best news is that Congress and the IRS have pretty much left IRAs alone, although rumors are swirling about potential curtailments on conversions to Roth IRAs. The good news is there have been no changes to the contribution limits for any of the IRA vehicles this year. The only change in this arena is largely around income limits for eligibility to contribute or tax deductions for those contributions.

For those of you interested in solo 401(k) plans, the defined contribution limit has increased to $52,000. Educational Savings Account contributions are still at $2,000. And Health Savings Account contributions have been raised to $3,300 for individuals and $6,550 for families.

So, to those of you who haven’t started self-directing, get going. And to the rest of you, congratulations and continue to build your wealth. The success our clients experience with us are inspiring, and we are grateful that we can help keep client investments sheltered from the taxes that can eat away at returns. Investing through an IRA with NuView, your dream of retirement may be closer than you think.

Giving Back Through Your Self-Directed IRA Investments

November 27, 2013

Feeling good about your investments? For many, that question goes far beyond assessing risk, returns, or strictly financial measurements. For them, it’s not just what their money is doing for them, but also what is it doing for others, how it is giving back to the community at large. The growth of socially conscious investing has created hundreds of specialty mutual funds – from those that avoid purveyors of tobacco and alcohol to others that promote sustainable environmental solutions. According to Forbes, $1 of every $9 invested is directed into these types of funds, and these funds have grown by 22% just in the last two years.

At NuView IRA, many of our clients share a similar concern about the use of their funds. They use their IRAs and rollover 401Ks to restore neighborhoods, start businesses in their communities, lend money to entrepreneurs, and otherwise redistribute Wall Street funds by giving back into their home town. Whether the local benefits are by design, or are accidental, the effects are equally impressive.

The great thing about a self-directed IRA is you don’t necessarily have to sacrifice your returns when your IRA is doing good for others. A close friend called me last week about putting an IRA to work in an unusual way. Through a loan, and its process, his IRA has fundamentally changed the life of the borrower. Though I’ll change the names a bit, the facts are completely true:

Jose is a 57-year-old experienced tractor trailer driver who recently lost his job in the San Francisco Bay area. His wife is dealing with the difficulties of living with Polio and is unable to work. Needless to say, it didn’t take long for Jose to get behind on his mortgage, and he was facing eminent foreclosure action.

After scanning the wanted ads, he was able to find an opportunity for a short-haul driving contract nearby, but during the interview he learned that the cold storage warehouse required him to own or lease a truck. Because Jose was a few months behind in his mortgage, and despite the promise of new work, the banks would not finance his purchase.

Fortunately, the owner of the warehouse company was aware that an IRA could lend funds to an individual, secured by a lien on the vehicle. It only took one phone call to his friend that had an IRA to draw up a note listing the terms of the agreement, and the collateral was secured. Within a few days, NuView IRA was directed by the client to wire his IRA funds to complete the purchase of the truck for Jose.

Jose and the IRA lender decided on the terms: a 9% interest rate amortized over 48 months. Also, all of the insurance and maintenance reports on the vehicle were to be maintained in order for the loan to be in good standing. Furthermore, the note called for the payments to be made directly from the warehouse, before Jose was paid for his contracted work.

What has this meant to Jose? Everything. He is undergoing a loan modification to keep his home, and his wife is now able to receive the medical care that she needs. They can both enjoy the security of not just his job, but also the increasing equity in the equipment that can ensure his continued employment.

What did this mean to the IRA holder? A 9% return secured by a tangible asset – and the sense that he made a difference, not just in his own future, but in someone else’s as well.

This holiday season, there are many ways we can give back. What is your self-directed IRA doing?

Begin with the End in Mind

November 5, 2013

Guest article by Jerry Ross:

In Steven Covey’s book “The 7 Habits of Highly Effective People,” chapter two is entitled, “Begin with the End in Mind.” Since reading the book, I’ve tried to apply that principle in my business and investment decisions, but also in many simple ways too. I might picture a successful trip to the grocery store or the hardware store envisioning what I need to return home carrying. I may even begin a home repair endeavor by first imagining the beautiful result that will emerge from the project at hand. Unfortunately, many times these simple tasks don’t turn out how I envisioned them, even when I began with the end in mind! Most times, I encounter obstacles, challenges, or distractions that I didn’t see when I began. There are distractions along the way to the grocery store, like a super garage sale, or maybe it is wallpaper that just will not come un-stuck from the wall that I am trying to paint. It seems there is always something unexpected even in the simplest of tasks. You envision how you would like things to turn out, but you can’t predict what you will encounter that directly affects how you end up… especially at the beginning. It seems so simple, but things are not always as simple as they seem.

Running a business and investing are much more complex than running simple errands or taking on a home repair project. The consequences of an unanticipated obstacle can be devastating to a business or an investment portfolio. While it is good practice to always “begin with the end in mind,” every business decision (or investment decision) will require monitoring and adjustments along the way. Identifying your destination prior to setting sail is a critical first step, however it is essential that you constantly adjust your sails to accommodate changes in the wind along the way, rather than trying to predict or overpower the wind.

Monitoring progress and making adjustments in pursuit of your goal is good common sense, but it is a critical business and investment practice. Those who can anticipate potential challenges in advance and include flexibility in their plans can quickly adjust to opportunities along the way, and don’t become overwhelmed by unforeseen obstacles. When I project a realistic time frame, allow adequate time for decision making, and seek knowledgeable input along the way, my “end result” is usually closer to my original vision of success…which brings me back to chapter two of Mr. Covey’s book…the action part of achieving your goals.

Visualizing your result and setting a goal is just the initial part of the equation. Action is required to achieve any goal you set. True success in investing, managing a business or even going to the hardware store won’t happen unless you take action, and adjust your course as needed along the way. Being successful in any endeavor will require an investment of your time and attention. Goals and plans without taking action are merely wishes, yet action without planning is just activity, which will very seldom lead you to the success you desire. So, as we approach the end of 2013, now is a great time to re-assess your goals, make adjustments as needed, develop your plans, and then take action to make 2014 a great year…but remember to begin with the end in mind!


Jerry is a life-long entrepreneur and currently holds the position of Executive Director at the National Entrepreneur Center located in Central Florida. He is also on the advisory board of NuView IRA, helping to guide best practices for the self-directed IRA administrator as well as enhance its customer experience. You can follow Jerry on Twitter at @JerryRossOnline.

6 Steps to Turn a $12,000 Investment into a $30,000 Profit

October 17, 2013

Guest article by Sandra Edmond:

Is your money sitting at the bank making less than 2%? Meanwhile people are making 18-50% in government backed Tax Certificates. Certificates represent a first position lien on real estate for delinquent taxes. If those taxes are not paid the property can go to a tax deed auction. The tax deed sale is my favorite, and it’s what I’ve been doing since 2004. Both are great investment vehicles for your self-directed IRA. Here are some steps that helped me net a FANTASTIC return on my very first tax deed:

STEP 1: Are you in a Tax Deed or Tax Lien State? Tax Deed states auction off the real estate when property owners become delinquent. A Tax Lien state sells tax certificates to investors when homeowners become delinquent. Once the homeowner pays the taxes the investor is paid off their investment plus interest. Florida is a Tax Deed and a Tax Lien state. I purchased my first Tax Deed in Florida on a vacant commercial lot valued at $60,000 for $12,000. The money came from my mother’s 401k account.

STEP 2: Contact the person in charge of Tax Deed sales. In Florida, it’s the County’s Clerk or Comptroller. Ask how they conduct their tax sales and what happens if nobody bids on the tax deed. That’s what happened to my first tax deed. It then went on a list of properties you can buy over the counter for the back taxes. You should always do your due diligence before purchasing.

STEP 3: Study the property’s file. You will sometimes find a title search in the tax deed file where you may also find information on any other outstanding liens. A mortgage would get wiped out at the auction, but liens, like code enforcement, can stick to the property. You should always visit the property as well.

STEP 4: Once you feel comfortable with the information you have, you can move forward. The county will give you a final payoff amount to purchase it. Often times you are buying at 20-50% of market value. Let’s say you’d also like to go to the auction as well as buy from the list.

Step 5: Find out when the next auction is, get a list of properties being auctioned and do the same due diligence as above. You should find out the auction rules. Most auctions require payment within 24 hours in certified funds.

Step 6: Market your property. If you want to get title insurance, you’ll have to go through a legal process called a quiet title. We waited until we had a buyer before we started our quiet title. We sold the lot for $49,000 making about $30,000 in profit.

Now that you’ve learned a little more about one of the alternative assets you can invest in through a self-directed IRA, you’re one step closer to making a better return on your money.


Sandra, aka the “Queen of Tax Deeds,” has been recognized in the Orlando Business Journal as a tax deed expert. She is a licensed real estate agent, graduated from the University of Central Florida and is currently President of Central Florida Realty Investors. Her website has links to her very informative YouTube channel. You can reach her at or 407-310-4007.

Webinar – Intro to Real Estate in IRAs

September 24, 2013

This introductory course will walk you through what a self-directed IRA is, what role NuView IRA serves, and, most importantly, how to hold real estate in your retirement account. While NuView IRA is based in Orlando, Florida, the self-directed IRA specialists help their clients scattered across the nation by serving education as frequently as possible in the form of webinars. Real estate offers clients the ability to diversify in real property. NuView is not a fiduciary and does not give clients investment advice or products. Instead, clients make their own choices to invest in almost anything. Learn more about IRS rules from the webinar, or you can read about it here.

Saving Versus Doing in Retirement

September 17, 2013

At some point or another your mind will wander and dream about the future. Where will I live? Where will I vacation? What will my career look like in 5, 10, 15 years? Eventually, you will reach the end – retirement – and you will consider the lifestyle you want to live once there. But how will you get there?

“Ideally, you’d start saving in your 20s, when you first leave school and begin earning paychecks,” says CNN Money’s Ultimate Guide to Retirement.

Thinking about saving for your retirement is one thing, actually socking the money away each week, month, etc., is another. Even if you make it into the savings finals, where you’re able to put aside a regular enough amount of money, you still have to figure out how to make it grow. Like most of the population, you will consider the most popular options: stocks, bonds, and mutual funds. But there is an entirely different approach that allows you to take that savings and invest it in something you can actually learn about or are already an expert in. You can self-direct your retirement account into any investment not prohibited by IRS code (which is, in fact, a very short list that basically just says “Collectibles”).

A self-directed IRA allows you to manage your retirement account and invest where you see fit instead of having someone, or just your employer, do it for you. Are you a self-proclaimed real estate mogul? A thoroughbred racehorse breeder? An agriculture enthusiast? All of those investments are options within a self-directed IRA. Self-direction allows you the peace of mind to know where your money is going and how it is growing at all times. Don’t trust the stock market? Don’t worry, just trust yourself.

With a self-directed IRA through NuView, your investment options are virtually limitless: You will have the freedom to get creative with your investment choices. A self-directed IRA opens up a whole range of alternative assets that can be purchased inside an IRA. Call 407-367-3472 today to learn more! And, check out our upcoming educational seminars and webinars to expand your knowledge.

Getting a Rest from the News

September 5, 2013

Article by Glen Mather, President of NuView IRA:

My family and I are off the grid. Well, partially. Just the entertainment part. That means no football, American Idol, Disney, cartoon, and cable news.

It was a combination of the monthly bill and the mountain of unfinished homework that flipped the switch for me. Goodbye, Direct TV.

I expected my four children to march with pickets, to pout and to otherwise act out – but nothing happened. It has been a few weeks, and some very unusual activity has been brewing: books have appeared and a family game night is in the works.

Another unexpected side effect has occurred: I’m no longer plugged into the seemingly clueless news corporation slavishly covering all the mindless goings-on and petty bickering in Washington. I’ve always considered myself a bit of news junkie, so now I have to read to be informed, which seems to be working out much better. Now my wife is talking to me more than ever, which is good most of the time, and the dogs are even benefiting with longer walks.

Based on the last few weeks, I would heartily recommend detaching from your satellite or cable provider. Besides, you will likely have a friend to visit when a really good show is on, but the rest of the time will be yours.

A Difference of Opinions – JOBS Act Updates

August 7, 2013

In this edition of A Difference of Opinions, two attorneys sound off about the SEC adoption of a mandate in the JOBS Act of 2012 that permits general solicitation in private securities offerings. We reached out to two attorneys with different backgrounds just to get a better idea of what this update might hold for the future of promotional activities among investors and those wishing to raise money.

And You Thought Law Firm Advertising Was Bad?
By: Wayne Patton, Esq, an asset protection, business, finance and estate planning attorney. Wayne’s firm is based in Miami, Florida, and he can be contacted through his website.

In March of 2012 the Jumpstart Our Business Startups Act (the “JOBS Act”) became law. The purpose of the legislation simplifies the process of business fundraising. The law specifically touches investment firms like hedge funds and private equity funds, which have traditionally struggled to “get the word out” under the previous stifling rules that prohibit “general solicitation” under the Securities Act of 1933.

Though it took more than a year for the SEC to approve rules implementing the JOBS Act, we now officially have a framework on which to rely. There are a few things you should know before you start urging clients to advertise openly.

First, while general advertising and solicitation is permitted under the new rules, the “accredited investor” rules regarding unregistered security offerings are still in place.

Also, with the permission to generally solicit comes more responsibility. Specifically, the burden of proving “accredited investor” status has shifted. Under the new rules, investment firms need to ensure that investors are actually accredited.

The next logical question is “Just how inundated will we be with fund advertising?” You thought lawyers were bad. Just wait…

Adoption of New Rule 506(c): General Solicitation in Regulation D Offerings
By: Sara Hanks, co-founder and CEO of CrowdCheck, is an attorney with over 30 years of experience in the corporate and securities field.

On July 10 the SEC complied with a mandate in the JOBS Act of 2012 to permit “general solicitation” in private securities offerings. In doing so, the SEC created an entirely new type of securities offering not required to be registered under the Securities Act of 1933.

The SEC adopted amendments to Regulation D under the Securities Act to add new Rule 506(c). Rule 506(c) offerings are technically private placements, made only to “accredited” (rich) investors. In the past this has meant not just that accredited investors only could buy the securities, but also that the issuer could offer them to accredited investors only.

Under the new rule, small companies and private investment funds and their intermediaries will be able to use “general solicitation” to reach accredited investors, which means they may advertise or publicize an offering on television, in newspapers, and most importantly over the internet. They may talk about the offering on talk shows and webinars, and they may promote the offering on social media.

This is a big change. But companies planning to take advantage of the ability to make public solicitations (and their advisers) should bear in mind that something that hasn’t changed is the application of the securities anti-fraud laws to all statements made in connection with the sale of securities. And for that reason, this new type of offering might not be as game-changing as some think.

Proponents of the new rule believe that it will increase transparency, make it easier for small companies to raise capital and decrease companies’ administrative costs. Opponents worry that, in the words of SEC Commissioner Aguilar, removal of the prohibition on general solicitation would be “a boon to boiler room operators, Ponzi schemers, bucket shops, and garden variety fraudsters, by enabling them to cast a wider net, and making securities law enforcement much more difficult.”

Awareness of fraudulent promotional activities means that prospective issuers and their advisers will have to be very careful about the accuracy and completeness of any statements they make. Will the rule change mean that we see hedge funds advertising on late-night TV or Twitter campaigns for investments in startups? The impact of the new rule is likely to be more limited in that respect than some have predicted. Public registered mutual funds do advertise, but those advertisements tend to be staid and contain lots of “fine print” disclaimers prescribed by law; private funds will likely be just as constrained. Broker-dealers putting together Regulation D deals are already subject to FINRA rules with respect to their advertising and social media use, and these requirements have not changed. The anti-fraud laws discussed above should have a tempering effect on any overly-exuberant publicity attempts in either paid or social media.

And the SEC will be watching. The SEC has established a “Rule 506(c) Work Plan” involving staff from all across the SEC, who will monitor the new Rule 506(c) market for fraud and compliance and to coordinate with state regulators.

The effective date for the new rule is September 23, 2013. Rule 506(c) offerings will only be legal after that effective date.