In direct contrast to other commercial real estate (“CRE”) crowd funding platforms (“CFP”), Mike knows YH and the principals well (since 1994) and has seen YH multi-family operations in every aspect from acquisition to disposition. Other CRE CFP’s require extensive qualification for the sponsors raising equity on their sites and some CFP’s claim only 10% of the offerings are approved.
This is great from a vetting standpoint but at the end of the day these CFP’s only have a gut feel on the principals’ day to day dealings. This is hugely important as most equity investors/ partners are not aware how the debt on larger CRE investments are structured.
When a sponsor signs a guarantee with a lender it refers to “carve outs”. The sponsor is personally liable for only a few items; no fraud, no liens on the property, agrees to pay the real estate taxes, keeps GL insurance (and other mandated insurance) on the property at all times, and won’t store hazardous waste on site to name most of the carve outs. The principal anytime can enact a “deed in lieu of foreclosure” and return the property back to the lender with no personal liability on the loan.
A deed in lieu is a black mark on a principal but does not inherently prevent obtaining future loans for other CRE investments. A deed in lieu wipes out all investor equity in the property.
Also these CFP’s are promoting every type of CRE offerings with different sponsors in different submarkets across the US. This is a lot of moving parts and variables for these CFP’s to master. YH specializes in multi-family only located in Texas.