Apartment Complex Competition Risks

Competition in the Property’s local market area is significant and may affect the Property’s occupancy levels, rental rates and operating expenses.  The Property will compete with other residential alternatives to attract tenants, including other apartment units that are available for rent, as well as new and existing apartment residences. If development of apartment complexes by other operators were to increase, due to increases in availability of funds for investment or other reasons, then competition with the Property could intensify.  Competitive apartment residences in a particular area could adversely affect the ability of Sponsor to sell the property, rent its units as necessary to maintain occupancy, and/or to increase or maintain unit rental rates.

Renovation Risk

The Sponsor intends to renovate the Property in order to be able to demand the significantly higher rents it is projecting to receive at the Property following such renovations. Such renovations are expected to cost approximately $10,096 per unit and are projected to take around 30 months to complete.  There can be no assurance that such renovations will be consummated on a timely basis or that such work will not materially adversely affect other aspects of the operation of the Property.  Any delays or adverse effects of such renovation work could adversely affect the Property’s financial results or business operations and thus the value of the Realty Mogul 34, LLC's investment.  

Following the renovations, the sponsor expects to be able to rent the apartment units at average rates that would represent an approximate 14% increase over the existing average rental rates.  Although the Sponsor believes that comparable properties are currently achieving rental rates that are greater than the future rental rates expected from the Property, there can be no assurance that such increased rental rates will be achieved.  Failure to realize such increased rental rates could adversely affect the Property’s financial results or business operations and thus the value of the Realty Mogul 34, LLC’s investment.

Lease-Up Risks

The Property currently has approximately a 93% occupancy level, and the Sponsor intends to implement a capital improvement plan involving the renovations of certain units and a leasing program in its effort to maintain that occupancy level.  There can be no assurance that such renovations will be consummated on a timely basis, that such work will not materially adversely affect other aspects of the operation of the Property, or that the planned lease-up program will result in the Property maintaining its occupancy level at rental rates in line with those projected.  Any delays or adverse effects of such renovation work or lease-up efforts could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment.

Although the Sponsor believes that comparable properties are currently achieving rental rates that are in line with those expected from the Property, there can be no assurance that such increased occupancy levels or rental rates will be achieved.  Failure to realize such increased rental rates could adversely affect the Property’s financial results or business operations and thus the value of the Company’s investment.

Vacancies and Tenant Defaults May Reduce the Property's Revenues

A vacancy or default of a tenant on its rent will cause Sponsor Entity to lose the revenue from that unit and, if enough effective vacancies occur, it could cause Sponsor Entity to have to find an alternative source of revenue to meet any loan payments and other operating expenses for a particular property and it may not be possible to have to find a viable alternative source of revenue.  If the company managing the investment property does not employ sufficiently aggressive marketing campaigns and/or lease incentive programs, vacancies may increase and an investment in the Company may be adversely affected.

Bridge Loan

The loan used to acquire the Property is a bridge loan.  The Sponsor is in the process of obtaining HUD refinancing.    Financing risk is inherent in the mortgage lending industry, and there can be no assurance that the lender will complete financing on the rates and terms including in the underwriting being presented in the model for this investment opportunity.  Should the terms of the debt financing change materially and adversely, investors will be notified.

Interest-Only Loan

The bridge loan being used to acquire the Property is expected to have an interest-only period during the first year of the term, which means that there will be no reduction in the principal balance during that interest-only period.

Rising Interest Rates

The Federal Reserve has methodically reduced the amount of stimulus it was earlier injecting into the U.S. economy, and has signaled that increases in the federal funds rate may be forthcoming.  This could potentially lead to rising interest rates offered by other lenders and could have an effect on the future value of the Property (since higher loan interest rates might mean that potential buyers would face proportionately higher debt service expenses).

The Company is Subscribing for an Interest in a Pre-Existing Entity

The Company’s investment in the Company will effectively recapitalize that entity, which has been in existence (and held title to the property) for a short period.  The Company expects to receive assurances from the Sponsor as to any prior acts or omissions concerning the Property, but there can be no certainty that any such assurances will sufficiently reduce the risk of any pre-existing liabilities connected with the Property.

Equity Invested

The manager of the Sponsor Entity (“Sponsor Manager”) is expected to invest certain equity in the Sponsor Entity.   However, the principals of the Sponsor Manager may have raised some of this equity from third parties and the principals of the Sponsor Manager may be permitted to sell a portion of their equity interest at a later time.  Thus, either at closing or at a later time, the principals of the Sponsor Manager may not have a significant portion of their own personal funds invested in this transaction.

No Operating Agreement Changes

Although the Company may prefer to have certain provisions inserted in the existing operating agreement of the Sponsor Entity, the operating agreement for the Sponsor Entity is likely to remain unchanged (except to reflect a change in ownership).  All potential investors should review the operating agreement of the Sponsor Entity to determine if it is acceptable to them.

Sponsor's Agreements with Affiliates

The Company’s operating agreement does not prohibit, nor require member consent for, agreements between the Sponsor and its affiliates.  This could result in such agreements having non-market terms, which may negatively impact the investment’s performance and the returns to investors.

Tornado Risk

Indianapolis lies in the central part of the state of Indiana, in an area which can be subject to frequent and sometimes destructive tornadoes.  There is no guarantee that the Sponsor Entity will obtain tornado insurance. If no insurance is obtained, a tornado could have a material adverse impact on the Sponsor Entity, and thus the Company.  Further, even if tornado insurance is obtained, there can be no assurance that a tornado will not cause significant damage to the Property or otherwise interrupt its operations in a manner not covered by the Property’s insurance, in which case the business and financial condition of the Sponsor Entity.

Percentage of Depreciation and Tax Losses

Depreciation and tax losses are generally passed through to the members of an entity on a pro rata basis.  For this transaction, Realty Mogul 34, LLC and the Sponsor have agreed that the depreciation and tax losses shall be allocated on the following basis: (i) seventy (70%) percent to the members, which includes Realty Mogul 34, LLC, and (ii) Thirty (30%) percent to those entities and/or individuals who are entitled to any promote, which currently includes RM Manager, LLC.  Any deprecation and/or tax losses that are passed through to RM Manager, LLC will not be passed along to investors.   

Forward-Looking Statements

Investors should not rely on any forward-looking statements made regarding this opportunity, because such statements are inherently uncertain and involve risks. We use words such as “anticipated”, “projected”, “forecasted”, “estimated”, “prospective”, “believes”, “expects”, “plans”, “future”, “intends”, “should”, “can”, “could”, “might”, “potential”, “continue”, “may”, “will” and similar expressions to identify these forward-looking statements

Illiquid Investment - Transfer Restrictions & No Public Market

The transferability of membership interests in Realty Mogul 34, LLC are restricted both by the operating agreement for that entity and by U.S. federal and state securities laws. In general, investors will not be able to sell or transfer their interests. There is also no public market for the investment interests and none is expected to be available in the future. Persons should not invest if they require any of their investment to be liquid. This is particularly important for persons of retirement age, who should plan carefully to assure that their assets last throughout retirement.

Uncertainty Surrounding Future Sales Price

There is risk associated with the Sponsor being unable to sell the Property as projected.

Management Risk

Investors will be relying solely on the Sponsor for the execution of its business plan. The Sponsor may in turn rely on other key personnel with relevant experience and knowledge, including contractors and consultants. Members of BH Trails at Lakeside, LLC (including Realty Mogul 34, LLC) will agree to indemnify the manager in certain circumstances, which may result in a financial burden if any litigation results from the execution of the business plan. While the Sponsor has significant operating experience, BH Trails at Lakeside, LLC is a newly formed company and has no operating history or record of performance.  Realty Mogul 34, LLC is pursuing a venture capital strategy through its investment in BH Trails at Lakeside, LLC, and the manager of Realty Mogul 34, LLC is expected to be treated as an investment adviser exempt from federal or state registration under this strategy.

Manager of Realty Mogul 34, LLC Will Participate in Sponsors' Promote Interest

The manager of Realty Mogul 34, LLC will be entitled to a participation in the value of any excess distributable cash flow and any appreciation of the Property realized upon its sale. This could lead to a potential conflict of interest between the manager and Realty Mogul 34, LLC. Investors must recognize and agree to waive and bear the risk of this conflict of interest.

Uncertain Distributions

The Sponsor cannot offer any assurances that there will be sufficient cash available to make distributions to its members (including Realty Mogul 34, LLC) from either net cash from operations or proceeds from the sale or refinancing of the asset. Sponsor, in its discretion, may retain any portion of such funds for tenant improvements, tenant refurbishments and other lease-up costs or for working capital reserves. Sponsor has chosen to make distributions semi-annually.

Risk of Interest Charges for Sponsor Capital Calls

The amount of capital that may be required by BH Trails at Lakeside, LLC from Realty Mogul 34, LLC is unknown, and although BH Trails at Lakeside, LLC does not require that its members contribute additional capital to it, it may from time to time request additional funds in the form of loans or additional capital. Realty Mogul 34, LLC does not intend to participate in a capital call if one is requested by BH Trails at Lakeside, LLC, and in such event the manager of BH Trails at Lakeside, LLC may accept additional contributions from other members of BH Trails at Lakeside, LLC.  Any member may make a loan to BH Trails at Lakeside, LLC under such terms and conditions as may be agreed to by the member and BH Trails at Lakeside, LLC.  Such loans will not be considered capital contributions and shall not have an interest rate of higher than 10%.  Amounts (other than member loans) that are contributed by existing or new members will be deemed to be additional capital contributions, in which case Realty Mogul 34, LLC's interest in BH Trails at Lakeside, LLC will suffer a proportionate amount of dilution.

Uncertain Exit Timing

Although it is anticipated that the Property will be sold at the end of the expected seven (7) year hold period, Realty Mogul 34, LLC will not have full control over the timing of the sale of the Property, and therefore we cannot offer assurances of when the exit will occur.  Sponsor’s decision to hold the Property for longer than seven (7) years will require a vote of a majority of the then current members of BH Trails at Lakeside, LLC.  

General Economic and Market Risks

While the Sponsor has conducted significant research to justify the intended rental rates and sales price relative to comparable properties in the market, its best efforts to forecast economic conditions cannot state for certain whether or not rental rates will be achieved or investor sentiment and the capital markets will be favorable to the Property at the intended disposition date. The real estate market is affected by many factors, such as general economic conditions, the availability of financing, interest rates and other factors, including supply and demand for real estate investments, all of which are beyond the control of the Sponsor​​.

The above is not intended to be a full discussion of all the risks of this investment. Please see the Risk Factors in the Issuer Document Package for a discussion of additional risks.

The above presentation is based upon information supplied by the Sponsor and others. Realty Mogul, Co., RM Manager, LLC, and Realty Mogul 34, LLC, along with their respective affiliates, officers, directors or representatives (the "RM Parties") hereby advise you that none of them has independently confirmed or verified any of the information contained herein. The RM Parties further make no representations as to the accuracy or completeness of any such information and undertake no obligation now or in the future to update or correct this presentation or any information contained herein.