Ashcroft capital: Additional 20% capital call

[Jon Zhou]

After many of the Ashcroft capital syndications paused distributions, I get this surprise email this morning saying all LP investors need to pay additional 19.7% of invested capital call  

anyone have experience with capital calls and syndications? Is there ever a position outcome to these or are we putting more money into a failing syndication?

“Thank you for your patience as we continue to navigate our way through this current economic cycle and unprecedented time in the capital markets. We recognize that this email contains a substantial amount of information, which is why a member of our Investor Relations team will be contacting you shortly to address any questions.

We need to solve for three major factors as it pertains to Elliot Roswell:

1. Allow the multifamily market time to stabilize.
   
2. Meet liquidity needs for the rate cap, capital expenditures and unexpectedly high debt payments.
   
3. Resume renovations which have been temporarily paused.
   

How do we achieve this?

Based on feedback from our existing lender, other potential partners, and the significant capital requirements to potentially buy down the loan to refinance, we determined the best path forward is a successful LP capital call of 19.7%. This will allow us to maintain flexibility to potentially sell the property within 24 months.

This is Ashcroft’s first capital call, and while it’s regrettable to take this step, our primary focus remains safeguarding your investment. Therefore, all LPs must participate 

Elliot Roswell is a strong asset that is poised for a strong rebound in value as markets improve. This is due to the property’s institutional quality and the continued growth within the Atlanta market. Moreover, demand and absorption rates are currently at 25-year highs and are continuing to trend in that direction with a 70% reduction in new construction permits and drop off in deliveries in early 2025.

We will maintain flexibility to sell Elliot Roswell as markets improve and anticipate doing so within the next 24 months. In the meantime, we need to cover rate caps costs and resume renovations so that we are best positioned to maximize your potential return.

Why is a capital call necessary?

• Preserving Capital: If this capital call is not successful, we will have to sell Elliot Roswell in an inopportune market. This would result in selling the asset below our basis and incurring a significant loss of LP-invested equity. Specifically, if forced to sell now it would be a total loss of capital for both Class A and Class B.
  
• Replacing Rate Caps: Our rate cap is expiring this year, and the projected replacement cost is $736k.
  
• Resuming Renovations: Given rising inflation and labor costs, our capital expenditure exceeded initial underwriting. This prompted a temporary pause to renovations. However, resuming renovations is essential to increasing revenue, and a capital infusion allows us to resume both interior and exterior renovations. We will consistently evaluate the cost vs. benefit, adjusting the renovation scope as necessary.
  
• Maintaining Lender Requirements & Loan Covenants: We (Joe & Frank) will consistently support you and our other investors through both favorable and challenging times. We’ve already extended a $2.9M interest-free short-term loan to cover various unexpected expenses, including the replacement rate cap over the past 12 months. While this was meant as a temporary solution, it must be repaid promptly to maintain compliance with loan agreements and ens

[Aman S.]

What happens if someone does not participate in a capital call? I have invested in Ashcroft, but haven't received any capital call yet. 

[John Sangl]

Following as I received the same email today.  I have no experience with capital calls either. 

[Chris Seveney]

Quote from @Aman S.:

What happens if someone does not participate in a capital call? I have invested in Ashcroft, but haven't received any capital call yet. 

 Read your PPM and operating agreement. you may want to understand that now as if fund 1 is doing a call, many are thinking subsequent funds will

I am curious, someone mentioned at best ever conference that a large MF syndicator was talking about how they would continue to buy assets using variable rate loans - I am curious if it was this sponsor? 

[Paul Azad]

i suspect your position will be diluted by about 20% if you don't contribute to the capital call, You don't lose your investment though, unless the property gets sold below debt basis or gets foreclosed on and then sold by lender at below debt basis, but if only a few investors contribute then that may happen

The question for the limited partners remains, is this a good investment today?, not yesterday which is a Sunk Cost

Given macro-environment, rising unemployment, rising 10yr interest rate which equals Cap rates, prolonged 23month inverted yield curve (longest since 1978), increasing supply of Multi-family in Atlanta area over next 2 years, falling post pandemic stimulus in people's bank accounts, now below 1 trillion from 5 Trillion 3 yrs ago, etc.

Would that extra 19.7% capital be better invested somewhere else?

Sorry for the difficult situation, but many Multi-family syndicates dangerously used bridge-loans with very short term Maturity walls which are forcing the capital infusions to re-finance, as opposed to variable 10yr Agency debt or even safer but less lucrative, 10 yr Fixed agency or CMBS

only the limited partners know the details and the performance of the property and the managers to make this decision - good luck

[Lisa Jones]

I received the same email. 

[Jon Zhou]

Quote from @Paul Azad:

i suspect your position will be diluted by about 20% if you don't contribute to the capital call, You don't lose your investment though, unless the property gets sold below debt basis or gets foreclosed on and then sold by lender at below debt basis, but if only a few investors contribute then that may happen

The question for the limited partners remains, is this a good investment today?, not yesterday which is a Sunk Cost

Given macro-environment, rising unemployment, rising 10yr interest rate which equals Cap rates, prolonged 23month inverted yield curve (longest since 1978), increasing supply of Multi-family in Atlanta area over next 2 years, falling post pandemic stimulus in people's bank accounts, now below 1 trillion from 5 Trillion 3 yrs ago, etc.

Would that extra 19.7% capital be better invested somewhere else?

Sorry for the difficult situation, but many Multi-family syndicates dangerously used bridge-loans with very short term Maturity walls which are forcing the capital infusions to re-finance, as opposed to variable 10yr Agency debt or even safer but less lucrative, 10 yr Fixed agency or CMBS

only the limited partners know the details and the performance of the property and the managers to make this decision - good luck

 Based on this, then it would not be a wise investment if I think of this as a brand new deal. 

[Scott Trench]

Is this asset underwater? Call a commercial broker in the area and ask what cap rate similar properties are being sold at. Multiply the NOI of the property over TTM, ignoring all "adjustments" from sponsor. That's what your property is worth. Hopefully this comps with sponsor.

Now, let’s make up numbers in two cases:

Case 1:
assume a fictional asset was bought at $100M with $65M in debt. Let's say it is now worth $50M, because NOI has plummeted and cap rates have risen im a brutal 1-2 punch. a $7-8M capital call leaves you underwater by several million dollars.

I’d personally be tempted to Just hand the keys back in this case and bow out of the capital call. Sponsor diluted my equity,.. so what? My equity is negative $8M…. AFTER capital call.

Case 2:

Sponsor purchases asset for $100M using $65M in debt. Asset has plummeted to $80M in value.

Sponsor needs to raise $7M (20% capital call) to save the other $8M.

Time to participate in the capital call as an LP in this case.

Now I have no idea what the situation with this deal or fund is, this is just my framework for evaluating a situation like this. I’ll take “dilution” of nothing. But I don’t  want dilution of something reasonable.

[Brian Burke]

@Jon Zhou I don’t know anything about this deal so my comments here are intended to be general because I have a feeling that a significant percentage of passive investors will be faced with a capital call in the near future from a large array of operators, and maybe this will be helpful to them, too. I’m not an attorney, just a syndication sponsor who has survived 34 years in the investment arena, so this is not intended to be legal advice, either.

The first question you face is whether you “have to” meet this capital call. I doubt you have to, despite the language in the letter you shared stating that “all LPs must participate.” Letters to investors are not governing documents—whether you are required to fulfill this capital call depends on the language in the operating agreement, so I’d start there. It should say whether capital calls in excess of your capital commitment are voluntary or mandatory, and if they are mandatory, it should state what the penalties are for failing to fulfill it. By that, I mean the contractual penalties, not the practical penalty such as loss of principal due to foreclosure of the property, dilution, and so on.

Then, you must decide whether you “want to” meet this capital call. There is a lot to consider here.

The letter you posted states that the sponsor has extended a $2.9 million loan to the entity to cover expenses, which “must be repaid promptly.” On one hand, it’s a good sign that the operator stood behind the deal to keep expenses funded with their own cash as long as they could. On the other hand, it could be a sign that they waited too long to issue the call, or that getting their cash back from the proceeds of the call plays a role in their decision to now issue it. Maybe it’s not a factor for this sponsor, but it could be with others…just something to consider.

To address your concern of whether you “are putting more money into a failing syndication,” your mission is to analyze whether there could potentially be a positive outcome, and if you can earn a return on the additional money.

The decision is actually a bit easier in a scenario such as this where a total loss of principal is on the table. In the case of a partial loss of principal, you also have to factor in the return you could make on the principal you got back from an immediate sale. That calculation doesn’t apply here.

If a sale today would result in a 100% loss, but a sale in the future resulted in only getting all your money back (original plus the additional call), but zero profit, you are getting a 5X return on the called capital (putting in $20K to get $120K back, for example). If it took 5 years, that’s a 20% return on the 20K (in the simplest terms). Probably a decent investment. If you got half of your original investment back plus the additional, that’s a 2.5X return on the called capital, or 10% over 5 years. Still not terrible.

But the question is, can such an outcome be achieved? Only hindsight will reveal the true answer, but I have personal experience that it is possible. I was there in the great recession of 2009 and had a deal where we were totally underwater and bleeding cash but 6 years later sold and returned all capital plus a profit.

But you have to weigh all the factors to gauge your odds. You need two things for this to work: 1. you can’t run out of time, and 2. you can’t run out of money. So is a 20% capital call going to get the job done, and provide enough money to go the distance? And if it will, is there enough term left on the loan (and if not, what’s the plan to fix that)?

Here are some things to consider in your decision (i.e. questions you might want to ask):

1. When does the loan mature? (perhaps the most important question of all)
2. What was the loan-to-purchase-price ratio when the property was bought?
3. How much is the property worth today?
4. What is the loan amount?
5. When does the rate cap expire?
6. What is the monthly cash burn, including reserves to purchase replacement rate caps?
7. Is income/occupancy holding up?
8. What are the market rent growth and occupancy forecasts for the next few years?
9. Are renovation bumps supported by the market?
10. What happens if some investors fulfill the call but others don’t? i.e. if the sponsor doesn’t get enough money to solve the problem, what will they do with the capital that was just contributed?
11. What place am I in the capital stack? Is there preferred equity or Mezz Debt at a higher priority than me?
12. What are the uses of the new funds?
13. And a question for you: If you are invested in multiple syndications, do you have enough reserves to fulfill capital calls from all or many of them? And if not, you need to prioritize the ones that have the most likely positive outcome.

You also want to think about the market and subsequent recovery. If you zoom out, real estate goes up in value. Maybe not year to year, but certainly decade to decade. I remember people saying in 2010 that prices would never get back to the 2006 peak. But by 2014 prices had not only reached the 2006 peak but exceeded it. How long will it take for the next recovery cycle to bring you back to right-side up? I’d guess five to seven years, but I could be way off base. I’m a bit of a market pessimist lately which is why I’m not invited to a lot of parties.

BP is doing a podcast on the topic of capital calls and I’m one of the two panelists. Maybe listen to that when it comes out in a couple weeks and see if any other nuggets of info come up in the discussion.

[JD Martin]

Quote from @Brian Burke:

@Jon Zhou I don’t know anything about this deal so my comments here are intended to be general because I have a feeling that a significant percentage of passive investors will be faced with a capital call in the near future from a large array of operators, and maybe this will be helpful to them, too. I’m not an attorney, just a syndication sponsor who has survived 34 years in the investment arena, so this is not intended to be legal advice, either.

The first question you face is whether you “have to” meet this capital call. I doubt you have to, despite the language in the letter you shared stating that “all LPs must participate.” Letters to investors are not governing documents—whether you are required to fulfill this capital call depends on the language in the operating agreement, so I’d start there. It should say whether capital calls in excess of your capital commitment are voluntary or mandatory, and if they are mandatory, it should state what the penalties are for failing to fulfill it. By that, I mean the contractual penalties, not the practical penalty such as loss of principal due to foreclosure of the property, dilution, and so on.

Then, you must decide whether you “want to” meet this capital call. There is a lot to consider here.

The letter you posted states that the sponsor has extended a $2.9 million loan to the entity to cover expenses, which “must be repaid promptly.” On one hand, it’s a good sign that the operator stood behind the deal to keep expenses funded with their own cash as long as they could. On the other hand, it could be a sign that they waited too long to issue the call, or that getting their cash back from the proceeds of the call plays a role in their decision to now issue it. Maybe it’s not a factor for this sponsor, but it could be with others…just something to consider.

To address your concern of whether you “are putting more money into a failing syndication,” your mission is to analyze whether there could potentially be a positive outcome, and if you can earn a return on the additional money.

The decision is actually a bit easier in a scenario such as this where a total loss of principal is on the table. In the case of a partial loss of principal, you also have to factor in the return you could make on the principal you got back from an immediate sale. That calculation doesn’t apply here.

If a sale today would result in a 100% loss, but a sale in the future resulted in only getting all your money back (original plus the additional call), but zero profit, you are getting a 5X return on the called capital (putting in $20K to get $120K back, for example). If it took 5 years, that’s a 20% return on the 20K (in the simplest terms). Probably a decent investment. If you got half of your original investment back plus the additional, that’s a 2.5X return on the called capital, or 10% over 5 years. Still not terrible.

But the question is, can such an outcome be achieved? Only hindsight will reveal the true answer, but I have personal experience that it is possible. I was there in the great recession of 2009 and had a deal where we were totally underwater and bleeding cash but 6 years later sold and returned all capital plus a profit.

But you have to weigh all the factors to gauge your odds. You need two things for this to work: 1. you can’t run out of time, and 2. you can’t run out of money. So is a 20% capital call going to get the job done, and provide enough money to go the distance? And if it will, is there enough term left on the loan (and if not, what’s the plan to fix that)?

Here are some things to consider in your decision (i.e. questions you might want to ask):

1. When does the loan mature? (perhaps the most important question of all)
2. What was the loan-to-purchase-price ratio when the property was bought?
3. How much is the property worth today?
4. What is the loan amount?
5. When does the rate cap expire?
6. What is the monthly cash burn, including reserves to purchase replacement rate caps?
7. Is income/occupancy holding up?
8. What are the market rent growth and occupancy forecasts for the next few years?
9. Are renovation bumps supported by the market?
10. What happens if some investors fulfill the call but others don’t? i.e. if the sponsor doesn’t get enough money to solve the problem, what will they do with the capital that was just contributed?
11. What place am I in the capital stack? Is there preferred equity or Mezz Debt at a higher priority than me?
12. What are the uses of the new funds?
13. And a question for you: If you are invested in multiple syndications, do you have enough reserves to fulfill capital calls from all or many of them? And if not, you need to prioritize the ones that have the most likely positive outcome.

You also want to think about the market and subsequent recovery. If you zoom out, real estate goes up in value. Maybe not year to year, but certainly decade to decade. I remember people saying in 2010 that prices would never get back to the 2006 peak. But by 2014 prices had not only reached the 2006 peak but exceeded it. How long will it take for the next recovery cycle to bring you back to right-side up? I’d guess five to seven years, but I could be way off base. I’m a bit of a market pessimist lately which is why I’m not invited to a lot of parties.

BP is doing a podcast on the topic of capital calls and I’m one of the two panelists. Maybe listen to that when it comes out in a couple weeks and see if any other nuggets of info come up in the discussion.

 Man alive, this is one of the best posts I've read on the forum in a very long time. I am not involved in any REITs but if I were I would have this post printed and hanging on the side of my refrigerator :)

[Carlos Ptriawan]

Quote from @JD Martin:

Quote from @Brian Burke:

@Jon Zhou I don’t know anything about this deal so my comments here are intended to be general because I have a feeling that a significant percentage of passive investors will be faced with a capital call in the near future from a large array of operators, and maybe this will be helpful to them, too. I’m not an attorney, just a syndication sponsor who has survived 34 years in the investment arena, so this is not intended to be legal advice, either.

The first question you face is whether you “have to” meet this capital call. I doubt you have to, despite the language in the letter you shared stating that “all LPs must participate.” Letters to investors are not governing documents—whether you are required to fulfill this capital call depends on the language in the operating agreement, so I’d start there. It should say whether capital calls in excess of your capital commitment are voluntary or mandatory, and if they are mandatory, it should state what the penalties are for failing to fulfill it. By that, I mean the contractual penalties, not the practical penalty such as loss of principal due to foreclosure of the property, dilution, and so on.

Then, you must decide whether you “want to” meet this capital call. There is a lot to consider here.

The letter you posted states that the sponsor has extended a $2.9 million loan to the entity to cover expenses, which “must be repaid promptly.” On one hand, it’s a good sign that the operator stood behind the deal to keep expenses funded with their own cash as long as they could. On the other hand, it could be a sign that they waited too long to issue the call, or that getting their cash back from the proceeds of the call plays a role in their decision to now issue it. Maybe it’s not a factor for this sponsor, but it could be with others…just something to consider.

To address your concern of whether you “are putting more money into a failing syndication,” your mission is to analyze whether there could potentially be a positive outcome, and if you can earn a return on the additional money.

The decision is actually a bit easier in a scenario such as this where a total loss of principal is on the table. In the case of a partial loss of principal, you also have to factor in the return you could make on the principal you got back from an immediate sale. That calculation doesn’t apply here.

If a sale today would result in a 100% loss, but a sale in the future resulted in only getting all your money back (original plus the additional call), but zero profit, you are getting a 5X return on the called capital (putting in $20K to get $120K back, for example). If it took 5 years, that’s a 20% return on the 20K (in the simplest terms). Probably a decent investment. If you got half of your original investment back plus the additional, that’s a 2.5X return on the called capital, or 10% over 5 years. Still not terrible.

But the question is, can such an outcome be achieved? Only hindsight will reveal the true answer, but I have personal experience that it is possible. I was there in the great recession of 2009 and had a deal where we were totally underwater and bleeding cash but 6 years later sold and returned all capital plus a profit.

But you have to weigh all the factors to gauge your odds. You need two things for this to work: 1. you can’t run out of time, and 2. you can’t run out of money. So is a 20% capital call going to get the job done, and provide enough money to go the distance? And if it will, is there enough term left on the loan (and if not, what’s the plan to fix that)?

Here are some things to consider in your decision (i.e. questions you might want to ask):

1. When does the loan mature? (perhaps the most important question of all)
2. What was the loan-to-purchase-price ratio when the property was bought?
3. How much is the property worth today?
4. What is the loan amount?
5. When does the rate cap expire?
6. What is the monthly cash burn, including reserves to purchase replacement rate caps?
7. Is income/occupancy holding up?
8. What are the market rent growth and occupancy forecasts for the next few years?
9. Are renovation bumps supported by the market?
10. What happens if some investors fulfill the call but others don’t? i.e. if the sponsor doesn’t get enough money to solve the problem, what will they do with the capital that was just contributed?
11. What place am I in the capital stack? Is there preferred equity or Mezz Debt at a higher priority than me?
12. What are the uses of the new funds?
13. And a question for you: If you are invested in multiple syndications, do you have enough reserves to fulfill capital calls from all or many of them? And if not, you need to prioritize the ones that have the most likely positive outcome.

You also want to think about the market and subsequent recovery. If you zoom out, real estate goes up in value. Maybe not year to year, but certainly decade to decade. I remember people saying in 2010 that prices would never get back to the 2006 peak. But by 2014 prices had not only reached the 2006 peak but exceeded it. How long will it take for the next recovery cycle to bring you back to right-side up? I’d guess five to seven years, but I could be way off base. I’m a bit of a market pessimist lately which is why I’m not invited to a lot of parties.

BP is doing a podcast on the topic of capital calls and I’m one of the two panelists. Maybe listen to that when it comes out in a couple weeks and see if any other nuggets of info come up in the discussion.

 Man alive, this is one of the best posts I've read on the forum in a very long time. I am not involved in any REITs but if I were I would have this post printed and hanging on the side of my refrigerator :)

 dude is asking for t12, but every dude gp in each of their investment has their own problem.

there's additional question :
- is the actual GP also reduce their salary and/or compensation from managing this property ?
- what's their true/realized DSCR.
- what's the gap between the sales pitch and actual condition ?

If their DSCR is 0.8 forget about it, if it's 0.94 maybe there're still some hope.

you may also want to compare the vacancy rate of these properties.

[Carlos Ptriawan]

it's very common these days for gp syndicator to take asset as hostage ; but in mathmatical probability, is that the chance you would be wiped out this year is 97% ; if you send 20% , your chance of being wiped out two years from now on is like 80%. Two years from now I bet they would say 

"I am sorry my LP friend, the situation is still not improved and all your investment is going to go zero for this asset; but please get excited, because, we have new investment offering for 15% IRR and 7% COC, this is the best location on earth"

[Darrion Phelps]

That "Know Like & Trust" factor is heavy here! @Brian Burke provides a good blueprint of what should be considered. Especially the "all LP's must participate" language.

Best Wishes to LP's involved. 

[Todd Goedeke]

@Jon Zhou talk to the non affiliated person who advised you on your investing in this syndication. Read what the partnership agreement says regarding capital calls. What amount will the general partners be contributing to capital call?

Why the cost overrun? What company is doing the renovation, are they affiliated with the general partner? Is the general contractor or subcontractors affiliated with the general partners of the partnership?

What % of the units are currently occupied?

[Francesco Santoni]

See BP Forum on " Capital Calls, what investors should do "

in: similar posts 

https://www.biggerpockets.com/forums/432/topics/1168000-capi...

[Francesco Santoni]

Possibly the better approach would be to study the problem, without letting dark pessimism take hold 

https://www.crowdstreet.com/resources/investment-fundamental...

[Carlos Ptriawan]

Quote from @Francesco Santoni:

Possibly the better approach would be to study the problem, without letting dark pessimism take hold 

https://www.crowdstreet.com/resources/investment-fundamental...

While crowdstreet in the middle of lawsuit and their ex ceo is running with investor funds

[Steve Vaughan]

Quote from @Jon Zhou:

1. all LPs must participate 
   

If this capital call is not successful, it would be a total loss of capital for both Class A and Class B.

• (Joe & Frank) already extended a $2.9M interest-free short-term loan (that) must be repaid promptly to maintain compliance with loan agreements and ens
  

Basically, you will be bailing out Joe and Frank. 

Seems they could recharacterize their $2.9M from a loan to a capital injection to meet lender requirements, but instead they are 'asking' (threatening complete loss of your investment) for you to repay them. 

I'd want to hear how the bail-ees have reduced/refunded their fees in good faith as contributions to the haircut you are all facing in these messes.  I'd ask the same of any sponsor/deal facing similar.  

[Todd Goedeke]

@jd 

@JD MartinIn addition,what should be asked is how much of the original amount raised went to syndicator fees; RE commissions, underwriting, syndication expenses. If there were 12% front end expenses only 88% went into the property/s.

Have any distributions been made and we’re they from operations or capital raised?

[Carlos Ptriawan]

Quote from @Steve Vaughan:

Quote from @Jon Zhou:

1. all LPs must participate 
   

If this capital call is not successful, it would be a total loss of capital for both Class A and Class B.

• (Joe & Frank) already extended a $2.9M interest-free short-term loan (that) must be repaid promptly to maintain compliance with loan agreements and ens
  

Basically, you will be bailing out Joe and Frank. 

Seems they could recharacterize their $2.9M from a loan to a capital injection to meet lender requirements, but instead they are 'asking' (threatening complete loss of your investment) for you to repay them. 

I'd want to hear how the bail-ees have reduced/refunded their fees in good faith as contributions to the haircut you are all facing in these messes.  I'd ask the same of any sponsor/deal facing similar.  

 lol , some of these guys could even add "liquidation fee" to the final transaction , say you are expected to lost only 50%, with liquidation fee there's additional 3% pay to those guys (sometimes though, not every syndicator is like that) so total would be 53%.

Good faith ? they can close down their syndication name  and create a new name and offering something new. Delete the prev. name. Re-advertise in facebook. It's still legal and allowed to do that, because these are just "private" business lol

[Todd Goedeke]

@Jon Zhou have you res arched the situation with Ashcroft online. Back in October of 2023 there are posts about the company and it’s syndications bring in trouble. Check wether you are a class A,B or C investor.

[Todd Goedeke]

@Carlos Ptriawan an additional question is why Bigger Pockets does not print more posts about how to analyze syndications and the red flags involved.

[Carlos Ptriawan]

Quote from @Todd Goedeke:

@Carlos Ptriawan an additional question is why Bigger Pockets does not print more posts about how to analyze syndications and the red flags involved.

 Biggerpocket CEO Scott has wrote very nice article addressing that multifamily mess.
Maybe he's following my reply lol.

But for me personally, this is more like math problem rather than syndication problem. Interest rate higher than 5% would wipe out business for sure, it's not really the fault of GP 100%, it is just the nature of these business but investor doesn't aware of that inherent risk.

[Chris Seveney]

Quote from @Todd Goedeke:

@Carlos Ptriawan an additional question is why Bigger Pockets does not print more posts about how to analyze syndications and the red flags involved.

 honestly I do not think that is their responsibility on the forums. They are starting passive pockets which appears geared toward passive investments. Most of the posts are from members, which there are a lot of posts about there how to analyze them, the issue is most people IGNORE them. 

Now when you want to talk about BPCON or other events and books, podcasts etc. They are a business, and not knocking them, but what sells? Someone getting rich quick in real estate and sharing their story or the guy who builds a $25M portfolio over 10-20 years?  It is the former because people want it now.

[Scott Trench]

Quote from @Todd Goedeke:

@Carlos Ptriawan an additional question is why Bigger Pockets does not print more posts about how to analyze syndications and the red flags involved.

 I address this in an earlier post on this thread. We have posted, but we can and will do way more. We have a responsibility to shine a light on this industry and hold people who publicly try to raise capital on and adjacent to our platform accountable for their behavior and outcomes. 

Feedback taken and internalized. We will launch a platform called “PassivePockets” in june with the sole mission of doing exactly what you describe.

[Scott Trench]

Quote from @Chris Seveney:

Quote from @Todd Goedeke:

@Carlos Ptriawan an additional question is why Bigger Pockets does not print more posts about how to analyze syndications and the red flags involved.

 honestly I do not think that is their responsibility on the forums. They are starting passive pockets which appears geared toward passive investments. Most of the posts are from members, which there are a lot of posts about there how to analyze them, the issue is most people IGNORE them. 

Now when you want to talk about BPCON or other events and books, podcasts etc. They are a business, and not knocking them, but what sells? Someone getting rich quick in real estate and sharing their story or the guy who builds a $25M portfolio over 10-20 years?  It is the former because people want it now.

 This comment is a shame, because the vast majority of our content discussed long term success in real estate grounded in fundamentals. But the stuff that gets the most attention is exactly what you describe - the 10% that is flashy and promises quick wealth. Check out any YouTube channel or blog, and you will see this is true. You have to look for insane success stories in less than 3 years. But they are there and have huge views.

People want to get rich quick, not sacrifice by living way below their means, working hard, and putting in the many hours of physical sweat to manage and maintain property, or the many hours of due diligence and hard awkward work of truly vetting operators as a “passive” LP.

I stay consistent with my personal approach and what I talk about year in and year out. And while BiggerPockets is a platform, not “Scott Trench’s boring old school approach to wealth with good old fashioned personal sacrifice to let personal wealth steadily compound” I often regret allow certain opposing viewpoints into our space. 

Frankly, I’m growing increasingly of the opinion that if people think they can get rich without time and sacrifice, they can learn elsewhere. There are many gurus and syndicators who will happily promise this, take your money, and 80% of them will have disappeared or moved on in 3 years.

We’ve already made subtle but big shifts to reflect this in 2024. Expect that trajectory to continue. And for me to increasingly and publicly call out any content that promises to be the next Warren Buffet