FORMALIZED DUE DILIGENCE PROCESS 
Sponsors

The team at our affiliated broker-dealer, RM Securities, conducts diligence on of the issuer, including detailed background checks, criminal checks, bad actor checks, and reference checks on sponsors. In addition to screening for any criminal background, we may also turn down sponsors due to poor reference checks, even if the background and criminal checks are satisfactory.

Escrow accounts

We require unaffiliated sponsors to use an unaffiliated third-party escrow agent.* When an investor makes an investment with such sponsors using the RealtyMogul platform, the investor’s money is transferred directly into a third-party escrow account. All closing conditions in connection with a sponsor’s contingency offering need to be met before the third-party escrow agent will approve releasing investor funds to the issuer or general partner. For example, if an issuer or general partner plans to use funds for a real estate acquisition that does not ultimately transact, the third-party escrow agent will not transfer investor funds to the issuer or general partner, and funds will be returned to investors.

Unless otherwise disclosed, escrow accounts are not required for some investments that accommodate 1031 investments where the property is already acquired.

Boots on the ground

Our processes typically includes visiting certain properties (or a subset of properties if it's a fund) to confirm the real estate is what and where the real estate is supposed to be. For certain properties that accommodate 1031 exchange investments, the team will review third-party prepared due diligence reports in lieu of a site visit.

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We have formalized processes and checklists for every private placement deal listed on the platform.

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Estimated Hold Period 24 months
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Investment Returns: Discerning investors don't rely on a single projected return metric as a basis to invest. Rather, when assessing a potential investment, we encourage you to evaluate all information provided by a sponsor including the business plan, assumptions, and risk factors which can be found in the relevant offering documents. This approach is consistent with our requirements as a broker-dealer, which prohibit us from communicating projected returns.
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Whispering Oaks Apartments
Offered By
Borrower Whispering Oaks
Investment Type Debt
Overview
Management

Borrower Whispering Oaks

Summary

At A Glance

Property Type: Multifamily
Investment Type: Loan Purchase
Estimated Rate of Return: 8% annualized
Loan Term: 24 months
Location: Houston, TX
   
Purchase Price: $2,300,000
Loan Amount*: $2,000,000
Est. Value After Repair: $2,975,000
Est. LTV After Repair: 67%
Protective Equity: $975,000

*A portion of the borrower's loan funds are disbursed through a fund controlled account serviced by the loan servicer. As the borrower completes property improvements, the corresponding loan amounts will be funded to them. This process is in place to prevent misuse of funds and maintenance of a lien free project. 

Summary

Realty Mogul investors have the opportunity to invest in a loan.  The loan is tied to payments from an underlying borrower loan that is secured by the property.  Realty Mogul intends to fund $300,000 out of the $2,000,000 total loan amount. 

The borrower is investing $600,000 of cash to purchase the property. Proceeds from the loan will go towards the purchase price and fund control money to finance a portion of the property improvements. The borrower intends to stabilize and lease-up the property once the renovation has been completed.  In addition to these expenditures, the borrower has committed in the loan documents to spend another $400,000 within one year of closing, equating to a total of $900,000 that will be spent on purchasing and improving the property.  

The loan servicer will be withholding $250,000 cash at closing. These funds will be released as improvements are completed at the subject property. For each dollar spent the borrower spends, the servicer will reimburse $0.50, so by the time the $250,000 reserve has been exhausted, $500,000 of improvements have been made. 

The underlying borrower loan will be secured by a first position lien on the 180-unit apartment complex, commonly known as Whispering Oaks, which is being purchased by the borrower for $2.3 million. The underlying borrower loan will be further secured by a second lien on a 195-unit apartment building known as the Courtyard Apartments. The Courtyard Apartments has been owned by the borrower since 1999 and has had $1.8 million in improvements completed since 2009. The property was recently refinanced by a conventional CMBS lender. The recent appraised value is $6.3 million (attached above), with current debt of $4.1 million, which equates to a remaining equity value of $2.2 million. The excess cash flow after debt service is $350,000 per year.   The underlying borrower loan has an assignment of rents for the Courtyard Apartments which allows an appointed receiver to collect this cash flow in the event of a default on the borrower loan. 

The borrower plans to obtain conventional financing for Whispering Oaks after the renovation is completed and operations have stabilized. The intention is that conventional financing will be used to repay this loan.

Investors will receive interest payments of 8% annually, paid monthly, with a final balloon payment at the end of the loan term.  The underlying security interests for the borrower loan are a deed of trust secured by Whispering Oaks in first position and a deed of trust secured by Courtyard Apartments in second position.

Risk Mitigation**

  • There is a personal guarantee on the underlying borrower loan.***
  • The borrower is a real estate investor with a history and a track record of success.
  • The underlying security interest is a deed of trust in first position and a deed of trust in second position.***
  • The borrower loan is protected by title insurance.***
  • Investor returns are not contingent on the appreciation of the property value and investor returns do not increase based on any resale price. The borrower is still obligated to repay the corresponding borrower loan.
  • In a worst case scenario, a foreclose is possible.  Proceeds would be distributed to investors according to the percentage of the total investment opportunity initially funded.

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

***An investment in this loan will be made through a borrower dependent payment note issued by Realty Mogul.  These promissory notes are dependent for payment on payments that Realty Mogul receives on the underlying borrower loan.  While the borrower loan is secured by legal title to real estate, the borrower dependent payment note is not itself secured.  

Property Information

Whispering Oaks was built in 1977 and is a 12-building, 2-story wood and stucco clad garden style apartment complex on 5.02 acres in the Sharpstown neighborhood of southwest Houston.

The property consists of 180 units with a total rentable area of 122,896 square feet, which includes 156 one-bedroom units ranging in size from 602 square feet to the 16 one-bedroom+den units with 812 square feet. There are also eight two-bedroom, one-bathroom units at 812 square feet and 16 three-bedroom, two-bathroom units at 1,059 square feet. The units have individual HVAC units and each unit is separately metered for electricity. The concrete parking lots have room for over 400 cars which is deemed more than adequate for the unit mix. Landscaping is simple lawns with some gardens.

The property's age and unit mix are common for its submarket, which is dominated by Class C properties. Like this property, very few properties in the immediate area offer amenities. The property's pool will be filled in for liability purposes while the club house will be updated as part of the rehabilitation contemplated by the borrower’s budget. Depending on the floor, each unit has either a patio or a balcony. Like the other Class C properties in this submarket, this 1970's building is in constant need of repairs and upgrades to maintain its income stream. Unlike most of the others, mismanagement has allowed the occupancy at Whispering Oaks to fall to 40%.  The borrower's objective will be to renovate the property and substantially increase occupancy. 

Location Information

Whispering Oaks is located in the Sharpstown/Westwood submarket of Houston. With 38,541 units, amounting to 7.6% of the total Houston metro inventory, the Sharpstown/Westwood submarket is the second largest of the twenty-three unique Houston submarkets. In the ten-year period since third quarter 2003, there have been no additions to the submarket, and 93 units have been removed by conversion. Although the submarket inventory has remained flat, the metro inventory has grown at an annualized rate of 1.7%.

Houston Area Overview

Houston is the fourth most populous city in the United States, and the metropolitan area has over 6 million people. More than 17 million people live within 300 miles of the city. The metropolitan area consists of ten counties - Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, San Jacinto and Waller. Houston has thrived on expansive and modern infrastructure facilities, affordable living costs, a young and well educated workforce, and vital energy and healthcare industries. The area weathered the global recession and economic volatility better than most of the nation's largest employment bases, and Houston has the distinction of being only one of two of the country's top 20 metropolitan areas to regain all the jobs lost in the recession. In 2012, Houston added over 118,000 jobs across a wide array of sectors.

The city now has a well diversified economy. In 1986 80% of the local economy was tied to the petroleum, natural gas, and chemical industries, but today that number has been reduced to approximately 48%. Houston is home to the largest medical center in the world and its companies are leaders in high-tech sectors as biomedical technology, electronics, computers, software, aerospace, integrated power, and plastics manufacturing. Houston ranks second only to New York in the number of Fortune 500 companies with headquarters there, and more than half of the world's largest foreign corporations have non-retail operations in Houston. The Port of Houston is also one of the few American port facilities to have both import and export traffic.

Houston's employment base is experiencing consistent expansion with over 118,000 new jobs added in 2012 and similar additions expected in 2013 and on. Houston was ranked #1 in the nation for annual job gains in 2012 and is expected to continue with that ranking over the next few years. Job growth is expected to be fueled by continued expansion in both traditional and alternative energy sectors, as well as significant personnel needs in industries such as healthcare, education, trade, transportation, and professional and business services.

According to Rice University's Kinder Institute for Urban Research, Houston was the nation's fastest growing metropolitan area for the decade ending in 2010, adding more than 1.2 million new residents. Future forecasts are similarly strong, estimating that the Houston area will add a further 1.0 million people by 2020 and an additional 2.4 million between 2020 and 2030.

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The following offering documents have been prepared and are being delivered by the Sponsor of this investment opportunity, and not by RM Securities, LLC. RM Securities, LLC and its associated persons did not assist in preparing, do not explicitly or implicitly adopt or endorse, and are not otherwise responsible for, the Sponsors offering documents posted below or any content therein.
RM Securities, LLC and its Affiliates Compensation

RM Securities, LLC, its registered representatives, affiliates, associated persons, and personnel of its affiliates who may also be associated with it, including our associated persons and personnel of our affiliates who are also be associated with RM Securities, LLC (it (“RM Securities,” “we,” “our,” or “us”) will receive fees, expense reimbursements, and other compensation (“Fees”) from the issuer of this investment offering, its sponsor, or an affiliate thereof (“Sponsor”), or otherwise in connection with Sponsor’s offering. The Fees paid to us are in addition to other fees you will pay to Sponsor or in connection with Sponsor’s investment offering. You will pay Fees to Sponsor, either directly or indirectly as an investor in the Sponsor’s offering. Sponsor will use the Fees you pay, as well as funds you invest in the relevant offering, to compensate us. The Fees paid to us will directly or indirectly be borne by you as the investor (typically, but not always, in the form of an expense of the Sponsor’s offering in which you invest) because such Fees will reduce the proceeds available for distribution to you and reduce the amount you earn over time.

For more information on the Fees paid to us, or any other Fees you will pay in connection with Sponsor’s offering, please carefully review the Sponsor’s Investment Documents. Please also carefully review RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.

No Approval, Opinion or Representation, or Warranty by RM Securities, LLC

Sponsor has provided, approved, and is solely responsible in all aspects for the information on this webpage (“Page”), including Sponsor’s offering documentation, which may include without limitation the Private Placement Memorandum, Operating or Limited Partnership Agreement, Subscription Agreement, the Project Summary and all exhibits and other documents attached thereto or referenced therein (collectively, the “Investment Documents”). The Investment Documents linked on this page have been prepared and posted by Sponsor, and not by RM Securities. We did not assist in preparing, do not adopt or endorse, and we are not otherwise responsible for, the Sponsor’s Investment Documents. We make no representations or warranties as to the accuracy of information on this Page or in the Sponsor’s Investment Documents and we accept no liability therefor. No part of the information on this Page or in the Sponsor’s Investment Documents is intended to be binding on us.

Sponsor’s Information Qualified by Investment Documents

The information on this Page is qualified in its entirety by reference to the more complete information about the offering contained in the Sponsor’s Investment Documents. The information on this Page is not complete and subject to change at the Sponsor’s discretion at any time up to the closing date. The Sponsor’s Investment Documents and supplements thereto contain important information about the Sponsor’s offering including relevant investment objectives, the business plan, risks, charges, expenses, and other information, which you should consider carefully before investing. The information on this Page should not be used as a basis for an investor’s decision to invest.

Risk of Investment

This investment is speculative, highly illiquid, and involves substantial risk. There can be no assurances that all or any of Sponsor’s assumptions, expectations, estimates, goals, hypothetical illustrations, or other aspects of Sponsor’s business plans (“Assumptions”) will be true or that actual performance will bear any relation to Sponsor’s Assumptions, and no guarantee or representation is made that Sponsor’s Assumptions will be achieved. If Sponsor does not achieve its Assumptions, your investment could be materially and adversely affected. A loss of part or all of the principal value of your investment may occur. You should not invest unless you can readily bear the consequences of such loss. Sponsor’s Assumptions should not be relied upon as the primary basis for your decision to invest.

No Reliance on Forward-Looking Statements; Sponsor Assumptions

Sponsor is solely responsible for statements made concerning forward-looking statements and Assumptions, which apply only as of the date made, are preliminary and subject to change, and are expressly qualified in their entirety by the disclosures and cautionary statements included in Sponsor’s Investment Documents, which you should carefully review. Neither RM Securities nor Sponsor are obligated to update or revise such forward-looking statements or Assumptions to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Sponsor’s forward-looking statements and Assumptions are hypothetical, not based on actual investment achievements or events, and are presented solely for purposes of providing insight into the Sponsor’s investment objectives, detailing Sponsor’s anticipated risk and reward characteristics, and establishing a benchmark for future evaluation of actual results; therefore, they are not a predictor, projection, or guarantee of future results. You should not rely on Sponsor’s forward-looking statements as a basis to invest.

Importantly, we do not adopt, endorse, or provide any assurance of returns or as to the accuracy or reasonableness of Sponsor’s Assumptions or forward-looking statements.

No Reliance on Past Performance

Any description of past performance is not a reliable indicator of future performance and should not be relied upon as the primary basis to invest.

Sponsor’s Use of Debt

A substantial portion of the total cost of the real estate asset acquired by the Sponsor with investor funds (“Property”) will be paid with borrowed funds, i.e., debt. Sponsor’s estimated rates and terms of the debt financing are subject to lender approval, and there is no assurance that the Sponsor will secure debt at the rates and terms presented on this Page or in the Sponsor’s Investment Documents, or at all. The use of borrowed money to acquire real estate is referred to as leveraging, which can amplify losses and could result in lender foreclosure. In addition, if the debt includes a variable (or “floating”) interest rate, the total amount of interest paid over the term of the debt will fluctuate and can increase. As a result, Sponsor’s use of debt can result in a loss of some or all of your investment.

Sponsor’s Offering is Not Registered

Sponsor’s securities offering will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions from registration pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act (“Private Placement”). In addition, the offering will not be registered under any state securities laws in reliance on exemptions from state registration. Such securities (your ownership interests) are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable state and federal securities laws pursuant to registration or an available exemption. All Private Placements on the Platform are intended solely for “Accredited Investors,” as that term is defined in Rule 501(a) under the Securities Act.

No Investment Advice

Nothing on this Page should be regarded as investment advice (either with respect to a particular security or regarding an overall investment strategy), a recommendation, an offer to sell, or a solicitation of or an offer to buy any security. Advice from a securities professional is strongly advised to understand and assess the risks associated with real estate or private placement investments. For additional information on RM Securities’ involvement in this offering, please carefully review the Sponsor’s Investment Documents, and RM Securities’ Form CRS, Regulation Best Interest Disclosures, and Limited Brokerage Services Agreement.

1031 Exchange Risk

Internal Revenue Code Section 1031 (“Section 1031”) contains complex tax concepts and certain tax consequences may vary depending on the individual circumstances of each investor. RM Securities and its affiliates make no representation or warranty of any kind with respect to the tax consequences of your investment or that the IRS will not challenge any such treatment. You should consult with and rely on your own tax advisor about the tax aspects with respect to your particular circumstances.

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