A buddy of mine took me to a presentation about an investment opportunity that promised a 289% return on your investment, annualized. I was leery of it, of course. Still am. That's why I'm posting this here. I'm not a seasoned investor. Please tell me what's wrong and why this is a bad idea, or by the same token, please tell me if I'm being too cautious and it's perfectly acceptable to get into something like this. It will take quite a bit of your time to read through the attached documents, so I will offer my thanks in advance for taking a look at them. The whole investment process is explained.
Let me offer some details as well that are not explained on the attached documents., and a few bullet points for those who don't want to take the time or can't read the attached documents:
The whole concept revolves around NPN (non-performing notes)purchased from banks at pennies on the dollar. Mostly second liens on homes, etc. The company renegotiates the note and collects the debt They take a 30% service fee out of all of the collected debt for performing this debt collection service Then they take 50% of the gains AFTER principal investment is returned as their gains Then the sponsor takes 50% of what's left of the gains After that, the investor (me, you, whomever invests) starts seeing gains
The whole thing is played like they are allowing small-time investors (less than 100k) to get into this huge opportunity, but it seems that they take such a big cut of the gains, the small time investor is hardly going to see any of them.
By the time you take out 30% for service fees, 50% to the partnership with the company, and split again (50%) with the sponsor guy, there's not much left for Joe Blow who puts his money in the pool for this thing.
Am I spot on, or am I missing something? Any opinions would be greatly appreciated.
Reading through the above, I feel the need to provide some clarification, so here's a quick model:
$10,000 initial investment from me They put this $10k into a pool of funds with other investors, essentially creating an LLC company for this investment pool Let's say they have $500k in total funds from multiple investors. With that $500k, they go out and buy all these NPN debts from banks at $0.02 - $0.05 per dollar (which equates to $25 Million in actual debt if we use the $0.02 number) They then re-negotiate this debt with the debtor at a higher rate than it was purchased, but a lower rate than the original, averaging $0.15 on the dollar The first thing they do in the process is return the initial investment to the investor, so I'd get my $10k back before anything else happens They say this initial investment return is averaging about 90 days, which is rather comforting, but also a little unrealistic in my opinion After the initial investment is returned to the investor, they start taking percentages out of the gains from there on out. 30% is taken out immediately as the service fee for the debt collection service, the actual people making the calls, private investigators to find these people with debt, etc. The company (Heritage Pacific) takes a cut for being the administrator of the whole situation (50%) The guy that presented this to us takes a "management fee" of up to 50% after that, based on the performance/percentage of the gains. Then we (the investor) get our cut of the gains after all of the above is taken out.
I think that's a better, more thorough explanation.
Banks are not selling these for pennies on a dollar. The best recent deals that I have seen were around 48c on a dollar. No one, i repeat, absolutely no one should be paying "service" fee to participate in a deal like this because to do a deal like that you will -still- have to pay money ( attorneys and accountants ).
tazzy531
Senior Member - 4K
posted: Jul. 2, 2009 @ 3:45p
Meh! Too much risk. I have my money invested in Agape World. It's been returning 15% every 2-3 months and 99% guaranteed.
Thing is though... I haven't been able to get in touch with Nick Cosmo for a couple of months now. I'm sure he's been busy making money for me. I trust that guy.
So if I were you, I'd invest in Agape World before I'd put one penny in your unsafe investment.
Edit: Also see you at the Golf event. We are still having one this year right? I haven't gotten the invitation yet.
Unbelieevable
Addicted Member
posted: Jul. 2, 2009 @ 3:46p
This is not something I really intend to do...not after I went and did all the math on it. Just thought I'd get the opinion of those here on FWF on if there would be any benefit to reconsider it.
Also - I added a more detailed description of the process to the OP.
staci86
Senior Member
posted: Jul. 2, 2009 @ 3:50p
EvilCapitalist said: Banks are not selling these for pennies on a dollar. The best recent deals that I have seen were around 48c on a dollar. No one, i repeat, absolutely no one should be paying "service" fee to participate in a deal like this because to do a deal like that you will -still- have to pay money ( attorneys and accountants ). Banks are selling these for pennies on the dollar.
The only problem is that they're completely underwater, and behind a first mortgage already in foreclosure and with a greater balance than what the property is worth.
The only way to make these notes pay is if the deadbeat can be fraudulently refinanced into a new mortgage after the credit has been scrubbed and the appraisal boosted, or if the deadbeat can be talked into having a family member bail them out.
Neither of those exit strategies is something worth risking money for.
This friend would be better off buying charged off credit card debt at pennies on the dollar, and verbally harassing the deadbeats into paying an amount they can actually afford.
Unbelieevable said: A buddy of mine took me to a presentation about an investment opportunity that promised a 289% return on your investment, annualized.
brettdoyle said: A buddy of mine took me to a presentation about an investment opportunity that promised a 289% return on your investment
I can promise you a 589% annual return if you send me all of your savings to my paypal account.
Your money will be securitized into a cash flow producing asset that will ultimately be invested in hookers and blow.
I'll go as far as to make a 3 page presentation regarding your "investment".
I'll believe it when I see this "so-called" 3 page presentation. In the mean time, I'll be earning a sweet 289% from the OP.
chimeer
Cranky Member
posted: Jul. 2, 2009 @ 4:17p
With returns claimed to be 289% all I can think is scam scam scam. Something is not right and my advice would be to run away as fast as possible.
I don't have a problem making risky investments into things I understand, I do it every day, but the idea of "investing" money into something that I don't have any real understanding of or experience dealing would scare the crap out of me, and should scare you too. If this is such a great "investment opportunity" why are you getting cut in on the deal? People don't share legitimate 300% return investments or rather educated gambles.
If you can't spot the sucker at the table.. It is probably you!
I think to be safe you should do this for maybe 3 years max at 289% then put all the money into a variable gold deferred annuity for long-term preservation.
staci86 said: EvilCapitalist said: Banks are not selling these for pennies on a dollar. The best recent deals that I have seen were around 48c on a dollar. No one, i repeat, absolutely no one should be paying "service" fee to participate in a deal like this because to do a deal like that you will -still- have to pay money ( attorneys and accountants ). Banks are selling these for pennies on the dollar.
No they are not. Please do not spread this fun/crock/rubbish. The best -ever- deal that was done in these was a sale from ML to Lonestar(?) a year ago and change. It was a VERY complex deal where Lonestar had the maximum exposure of 6c on a dollar. The securities in question were super smelly ubber nasty stinky shit of 2006 vintage. That vintage by now is done. Deal required Lonestar to put up 6c on a dollar with ML investing the rest of the money for sale at over 20c on a dollar.
The only problem is that they're completely underwater, and behind a first mortgage already in foreclosure and with a greater balance than what the property is worth.
The only way to make these notes pay is if the deadbeat can be fraudulently refinanced into a new mortgage after the credit has been scrubbed and the appraisal boosted, or if the deadbeat can be talked into having a family member bail them out.
Sorry, this is not how it works outside the classroom.
chimeer said: With returns claimed to be 289% all I can think is scam scam scam. Something is not right and my advice would be to run away as fast as possible.
If you have a few hundred million dollars I'm sure you can achieve a 300% return on some 2005 vintage issues. No one that allows non-qualified investors to play is likely to be able to raise the needed amount of money.
WalStMonky
Happy Member
posted: Jul. 2, 2009 @ 5:57p
I like the way they picked 289%, instead of giving a potential range of return. For some reason people perceive numbers that aren't rounded as much more authoritative. Lots of people will pay more attention to the weatherman that notes a 68% chance of rain over the weatherman who says the chance is 70% based on nothing other than the number used.
Oh, another reason for the precise return rate is because this is being marketed to people that are used to 'investing' in bank CDs. I guess I think that alone tells me something.
Unbelieevable
Addicted Member
posted: Jul. 2, 2009 @ 6:04p
Well, I won't say I was expecting something different, as I had sniffed out the scam in this before I had even posted it. I was just curious to see what you fine FWF folks had to say. It's just not a good thing for the bottom-feeding investor. If you can get in at the top level without all of the additional cuts being taken out before you see any gains, there's probably a potential for a nice return. For the average middle-class investor with $10k or $50k to invest, too many people take too much off the top before you get yours.
staci86
Senior Member
posted: Jul. 2, 2009 @ 6:15p
EvilCapitalist said: No they are not. Please do not spread this fun/crock/rubbish. The best -ever- deal that was done in these was a sale from ML to Lonestar(?) a year ago and change. It was a VERY complex deal where Lonestar had the maximum exposure of 6c on a dollar. The securities in question were super smelly ubber nasty stinky shit of 2006 vintage. That vintage by now is done. Deal required Lonestar to put up 6c on a dollar with ML investing the rest of the money for sale at over 20c on a dollar.
They are in circulation, but we may be splitting definitions. My boss showed me a proposal from some fund out of a midwestern state holding a pool of them. That company was looking for lenders to refi the people out of the firsts and the seconds together. He decided to have nothing to do with it because these people were giving off extremely bad vibrations about what had to be done to get the borrowers refinanced. He suspected these people were trolling for lenders willing to play fast and loose with the rules with no prodding from the current holder.
This batch of HELs were several years old and were exclusively FL, CA, and NV.
I may have misspoke. I do not know that the bank sold that garbage for pennies on the dollar, only that the loans had been acquired by a fund for pennies on the dollar. Someone else could have taken the loss in between.
EvilCapitalist said: Sorry, this is not how it works outside the classroom. You're going to have to explain that, because it is precisely what people have tried to do with these.
The real trashy seconds were either CO at the peak or behind an 80% PM first at the peak. Declining values have left these loans with zero security.
As the OP shows, people are trying to get these things refinanced, but it can't be done legitimately on almost all of them.
staci86 said: EvilCapitalist said: No they are not. Please do not spread this fun/crock/rubbish. The best -ever- deal that was done in these was a sale from ML to Lonestar(?) a year ago and change. It was a VERY complex deal where Lonestar had the maximum exposure of 6c on a dollar. The securities in question were super smelly ubber nasty stinky shit of 2006 vintage. That vintage by now is done. Deal required Lonestar to put up 6c on a dollar with ML investing the rest of the money for sale at over 20c on a dollar.
They are in circulation, but we may be splitting definitions. My boss showed me a proposal from some fund out of a midwestern state holding a pool of them. That company was looking for lenders to refi the people out of the firsts and the seconds together. He decided to have nothing to do with it because these people were giving off extremely bad vibrations about what had to be done to get the borrowers refinanced. He suspected these people were trolling for lenders willing to play fast and loose with the rules with no prodding from the current holder.
This batch of HELs were several years old and were exclusively FL, CA, and NV.
I may have misspoke. I do not know that the bank sold that garbage for pennies on the dollar, only that the loans had been acquired by a fund for pennies on the dollar. Someone else could have taken the loss in between.
OK, if that's what you are talking about I'm withdrawing my comments. My impression was that the idea was to aquire some of the instruments based on the set of mortgage notes for pennies on a dollar and either sit on them allowing a large pecentage of them to default but recovering tons of money from the remaining ones -or- after acquiring entire set the instruments for pennies on a dollar cut the deals with the homeowner to change the terms of the loans to make a very large number of them performing (i.e. make the current holder eat the loss)
EvilCapitalist said: Sorry, this is not how it works outside the classroom. You're going to have to explain that, because it is precisely what people have tried to do with these. The issue is that the loans were not securitized individually so the portion of the same loan was held by too many different parties. Until the loan is re-assembled, there's no way for the holder of the security or the homeowner to negotiate with each other.
Unbelieevable said: 289%you are the weakest link, goodbye.
skrangeo
Member
posted: Jul. 2, 2009 @ 8:07p
skip the 289%....and move on to the "unsecured" point
you need to understand what "unsecured" debt is. basically, it is debt with no collateral backing.
let's say a person wants to make widgets. they need the capital to both make AND market the widgets.
the widget maker is $1 million. the capital needed for marketing and G&A = $1 million.
The company would probably get a secured note that is backed by the widget maker (widget maker = tangible equipment which can be re-sold). They'd probably get an unsecured note for the marketing/G&A needs.
So, on day 1 they are $2 million in the hole. after 6 months, they have zero cash flow and have burned through their $1 million marketing/G&A money. They file chapter 11.
In the bankruptcy proceedings, the court finds a buyer for the widget maker ($800,000). The $800,000 goes to the owner of the secured note (getting back $.80 per $1.00 loaned). The money left over (read: $0) goes to the holder of the unsecured $1 million note. So, they get $.00 for each $1.00 loaned.
buying unsecured debt is about as good as lighting money on fire.
WalStMonky
Happy Member
posted: Jul. 2, 2009 @ 8:09p
horizon6 said: Were any of the presenters named Bernie?
Didn't you hear Bernie got 150 year sentence in the pen? At first I thought, 150 years for a 70 year old man is retarded. Then I thought maybe the judge is very wise. After all, if anyone can cheat the grim reaper it would be Madoff.
Xnarg
Senior Member - 5K
posted: Jul. 2, 2009 @ 8:19p
I'm glad this thread is here.
I miss the updates about Agape, especially in the days when people were still defending the scam.
iLoveTahoe
Senior Member
posted: Jul. 2, 2009 @ 8:25p
Xnarg, that's your worst avatar yet! I was just about to eat dinner, but now....
Xnarg
Senior Member - 5K
posted: Jul. 2, 2009 @ 8:58p
iLoveTahoe said: Xnarg, that's your worst avatar yet! I was just about to eat dinner, but now....What, how dare you speak against Hugo Chavez, one of the Glorious Leaders of The People?
Xnarg said: iLoveTahoe said: Xnarg, that's your worst avatar yet! I was just about to eat dinner, but now....What, how dare you speak against Hugo Chavez, one of the Glorious Leaders of The People?
WTF Xnarg? I made the Honduran Presidente as my avatar last week and you had to copy my idea >.<
Sure. I was able to buy metro vouchers on the secondary market at significant discounts (15-50%) and then legally recycle them through a few channels back to the transit authority at full face value. The purchase through reimbursement cycle took about six weeks, netting me between 17% to 100% nominal return during that short window. I had a good six-figure run for about 18-months.
The opportunity ended when the transit authority moved to an all-electronic system, practically shutting down the secondary market.
[ETA] A few other entrepreneurs setup shop on the same sourcing channels I used, which also put pressure on the negotiable discount. At the end, I was regularly paying 85% to 90% of face value.
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