Investors

                                                                       

Why Invest in a Crowdfunded Real Estate Syndication?    

  

 

  • At Open Source Capital we are focused on working with successful developers with long track records that want to expand their cadre of repeat investors.

 

  • If you are a real estate investor and want to enter the crowdfunding syndication market, you need serious insider connections and Open Source Capital can be your answer.

            

We help you  structured deals in accordance with SEC Regulations CF and Reg D.  

 

Regardless of your investment experience, we recommend that you consult with your Accountant or Lawyer to determine if Crowdfunding is right for you.

 

We help Sponsors acquire both Equity and Debt.  These investments together, have the potential to improve an investor’s portfolio overall performance while reducing volatility.

We support Sponsors with investor-centric projects and review projects on the merits of the deal, the probability of success, and their fit within our strategy.  We have the ability to provide initial feedback to sponsors quickly and can help them structure their deal to meet our criteria for risk mitigation, a fair waterfall and a clear picture of an investment’s economic potential.

Typically, qualifying investments will have quarterly income streams, substantial profit participation and priority returns to investors. We work with only experienced management teams that provide deals to sophisticated investors.  Our Clients offer a broad range of real estate investments ranging from new construction to triple net leased income producing properties.

About Private Offerings

Funds invest directly with an array of sponsors, using technology to automate the  process

 

Memorandum must be made available to you in connection with the offering. This advertising material must be read in conjunction with the Private Offering Memorandum in order to understand fully all of the implications and risks of the offering of securities to which it relates.

Private offerings are NOT certificates of deposit or similar obligations guaranteed by any depository institution and are NOT insured by the Federal Deposit Insurance Corporation (FDIC) or any governmental or private insurance fund, or any other entity.

To understand a private offering fully, you should read the entire Private Offering Memorandum carefully, including the “Risk Factors” sections, before making a decision to invest. Some of the more significant risks include the following: servicing of the Investment depends upon the Sponsors ability to manage the business and generate adequate cash flows; the Investments are risky speculative investments; there will not be any market for the Investments; there is no assurance that any Investments will be sold; you will not have the benefit of an independent review of the final terms of the Investments; payment on the Investment is dependent on the Sponsor.  If the Sponsor loses or is unable to retain key personnel, he or she we may be delayed or unable to implement the business plan; and will have a limited operating history and limited experience operating as a company and our business is not diversified.

It is important to note that Private Offerings are complex and best intended for sophisticated investors, and may have high costs of ownership, such as origination and brokerage fees. Private Investments carry certain unique risks which should be carefully considered and fully understood by individual investors before investing.

Online Real Estate Investments are offered via a Registered Investment Portals.   Carefully review these documents prior to making an investment decision.  Risks may include loss of principal or the possibility that at expiration the investor will own the reference asset at a depressed price.  Securities discussed in this material are not registered with the SEC but are issued pursuant to an exemption from registration. Before Investors make any investment, they should read the prospectus and preliminary pricing supplement and all relevant offering documents for complete information about such issuer and the securities being offered. Investors should understand the characteristics, risks, and rewards of each Investment as well as those of the reference asset before making a decision to invest in the security. Investors should contact their own accounting, tax or legal advisors to review the suitability of any investment.  Investment are issued as non-registered securities. Non-registered securities are exempt from SEC registration and are issued under the JOBS ACT.

 View Offerings

RISK FACTORS

General 

 There are significant risk factors associated with a purchase of a private security.  The following are some of the more common:

  • Your ability to sell or transfer your Security is limited; no market currently exists, nor is one expected to develop. Securities laws restrictions apply to private Securities.  Proposed transferees of Private Securities must be Accredited Investors.  Consent of the Management to a transfer is required and may be withheld at the Manager’s discretion.
  • You must place total reliance on the Manager for operating the Company.
  • The Manager is subject to Conflicts of Interest with the Company.
  • Investments in a business loan carry risks; for example, defaults can occur in payments to be made by the Equity Entity.
  • The Borrower may be involved in a small real estate construction and development project. Small construction and development projects are higher risks than other secured transactions.
  • In almost all cases, the Equity Entity uses leverage (borrowed funds) that are senior to the Equity, which increases the Company’s risk in the event of payment default by the Equity Entity. In addition, the rights of the Company and therefore the Participants are subordinate to the rights of the Equity Entity’s senior lenders.

Risks of Small Real Estate Construction and Development Investments

Therefore, it is subject to the risks usually associated with real estate investing, such as the following:

  • Return of your investment generally is dependent upon the ability of the property to produce cash flow and the ability of the Entity to repay its senior lender.
  • Some of the factors that may affect the net operating income or value of a property can develop after the Company makes an investment and therefore could not be included in the factors considered in selecting the investment for the Company.
  • Net operating income of the financed project can be volatile and may be insufficient to cover debt service on the Equity Entity at any given time.
  • Net operating income of the Equity Entity and book value of the property may be affected adversely by a large number of factors, such as:
  • design and quality of the property;
  • the attractiveness of the property;
  • adequacy of the Equity Entity management;
  • demand for the Equity Entity product or service;
  • general market conditions; or
  • interest rates.

Participating Loans “Dequity” (those which the Company generally makes) are substantially riskier than first mortgage loans because of:

  • Their subordinate position in the event of default;
  • The potential default of a senior loan, which, if not satisfied, could cause the Company to lose its entire Membership Interest investment.

Risks of Default by Equity Entity

 Since a Participant is participating in only a single specific equity investment, defaults by the Equity Entity on its senior financing can have adverse consequences to the Participants, who have no recourse to either the Equity Entity, the Company, or the Manager.  Some examples of things that can cause a loss include the following:
  • The proceeds from sales of foreclosed collateral may be less than the Company’s initial Membership Interest investment;
  • Adverse general and local market conditions;
  • High operating costs and high costs of complying with changes in laws and regulations pertaining to taxes, use, zoning and environmental protection, in each case for indeterminate periods; and
  • Possible liability for injury to persons and property.

Investing in construction transactions is riskier than investing in transactions secured by operating properties or with companies with a long operating history.

Risks of Incorrect Original Valuation

 Appraisals are obtained from certified third-party appraisers on all transactions.  However, there is a risk that the appraisals prepared by these third parties are incorrect, which could result in defaults and/or losses related to construction/development loans if the amount realized upon a sale of the underlying property turns out to be insufficient to cover the outstanding loan balance.

Because values can quickly decline below their appraised values during the term of the associated Company’s Equity Investment, there is no assurance that the LTV ratios used by the Company will be adequate to protect the Company’s Equity Investment.  Material declines in values could result in the Company’s Equity Investment being under-valued and lost.

Risks Related to Short-Term Investments

The Manager intends that the equity will generally be returned within twelve to forty-eight months.  For that reason, absent special circumstances, the Manager does not expect to regularly examine the Equity Entity to see if the original appraised values are being maintained.  Instead, it will review an Equity Entity if there is a delinquency on a debt or indication of a possible decline in the market value of the investment property. Because the investment may not be monitored as frequently as a longer-term investment would be, the Company may not necessarily be aware of changes in the following factors relating to its investment, which could materially and adversely affect the Company’s results of operations:

  • Physical evaluation of the investment property and area where it is located; and
  • Financial stability of the Equity Entity.

Risks Related to Change in Market Interest Rates

  • It is expected that at least for the foreseeable future the return on equity Note will be structured based on a rate of return. Market interest rates on investments comparable to the Company’s Equity Investments could materially increase above the general level of the Company’s fixed rate base return rate.
  • Risk related to interest rate shifts increases as the length of maturity of a Company Equity Investment increases.

Risks of Uninsured Losses

  • The Equity Entity will normally carry adequate hazard and liability insurance for the benefit of the Membership Interest of the Equity Entity. Some events are, however, either uninsurable or insurance coverage is economically not practicable.
  • If an Equity Entity allows insurance to lapse, an event of loss could occur before the Company and other Members know of the lapse and have time to obtain insurance to protect their collective interests.
  • Insurance coverage may be inadequate to cover property losses, even though the Equity Entity purchases insurance that it believes is adequate.

Risks of Lack of Control of Company

Management consequently has the sole power to:

  • Control the Company and its operations;
  • Control the allocation of revenue related to loan pricing and operating expenses;
  • Dissolve the Company;
  • Change the nature of the Company’s business;
  • Amend the Operating Agreement of the Company;
  • Remove and replace the Managers; or
  • Approve a merger or sale of all or substantially all of the assets of the Company.

Risks of Default by Equity Entity and Real Estate Ownership after Foreclosures

A default by an Equity Entity can have adverse consequences to the asset value and expected income.  Examples of these are the following:

  • Operation of foreclosed properties may require the investors to spend substantial funds for an extended period;
  • Subsequent income and capital appreciation from the foreclosed properties may be insufficient to meet any remaining expenses or surviving debt service;
  • The proceeds from sales of foreclosed properties may be less than the Company’s initial Membership Interest investment in the Equity Entity;
  • Adverse general and local market conditions;
  • High operating costs and high costs of complying with changes in laws and regulations pertaining to taxes, use, zoning and environmental protection, in each case for indeterminate periods; and
  • Possible liability for injury to persons and property.

Hazardous or Toxic Substance Risks

Various federal, state and local laws can impose liability on owners, operators, and sometimes lenders for the cost of removal or remediation of certain hazardous or toxic substances on the property.  Such laws often impose liability whether or not the person knew of, or was responsible for, the presence of the substances.

When the Company obtains a Membership Interest in the Equity Entity, it becomes an owner of the Equity Entity property.  As an owner, the Members, under some circumstances, could become liable for remediating any hazardous or toxic contamination, which costs could exceed the value of the property and Membership investment.  Other costs or liabilities that could result include the following:

  • Damages to third parties or a subsequent purchaser of the property;
  • Loss of revenues during remediation;
  • Loss of tenants and rental revenues;
  • Payment for clean up;
  • Substantial reduction in value of the property;
  • Inability to sell the property; or
  • Default by a borrower if it must pay for remediation.

Any of these could create a material adverse effect on a foreclosed asset and/or transaction profitability.

THE INVESTMENTS ARE TIED TO THE PERFORMANCE OF A SPECIFIC INVESTMENT IN AN EQUITY ENTITY. THE COMPANY WILL SELL EQUITY PARTICIPATION INTERESTS FOR EACH MEMBERSHIP INTEREST IN AN EQUITY ENTITY THAT IS BEING ACQUIRED. THE RETURN OF EACH MEMBERSHIP INTEREST INVESTMENT IS DEPENDENT FOR PAYMENT ON PERFORMANCE OF THE CORRESPONDING EQUITY ENTITY. THESE MEMBERSHIP INTERESTS ARE UNSECURED INVESTMENTS. INVESTING IN EQUITY SHOULD ONLY BE CONSIDERED BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.