One of the main reasons why investors are so attracted to real estate is the fact that there are tangible assets involved that one can touch and feel. More often than not these days though you are investing in opportunities that are backed by real estate that isn’t within driving distance and if you are investing in a passive capacity you aren’t directly involved during the consummation of the transaction. There have been countless fraudulent schemes perpetrated over the years where funds provided by investors didn’t end up going toward the purchase of the assets that investors thought they were. They were either diverted to the Sponsors personal bank account for the purchase of vacation homes and boats or invested in other more speculative and risky ventures.
Look no further than the modern-day poster child of a Ponzi scheme, Bernie Madoff, and you’ll see that confirming the actual existence of the underlying assets is critical. The issue is that is often easier said, than done.
This is why asset existence is at the heart of what we do at Verivest. When verifying a Sponsor’s purported historical track record and\or when providing our ongoing portfolio monitoring service, we work to ensure that the investment dollars are being used to acquire actual tangible assets and that those assets are properly titled in the name of the partnership or corporation that the investors have a claim to.
For us everything begins with the Balance Sheet, this is where we are able to identify the assets being held by the Partnership and how those assets were capitalized. There are three broad buckets of asset types – real property, loans and limited partnership investments.
Below is the process we go through to verify the existence of the assets held on the balance sheet...
Real Property and Loans
To confirm the existence of real property investments, mortgage loans / trust deeds or secured loans, we will collect some of the following information from the member...
Using this information, we will then search for the property in one of our subscription databases in an attempt to corroborate the dates and amounts and the property owner or borrower. If it doesn’t appear on the public record, we will notify the member of the situationand ask permission to reach out to the counterparty or closing agent to confirm the transaction took place. The member may also decide to just leave the transaction as unverified on the Sponsor Profile Track Record. The gold standard in the verification of asset existence is being able to use member provided information and be able to confirm it against the public record. The issue is that although many of the county governments records are now digitized and accessible through databases, some of them weren’t in the past.
If the member’s strategy entails investing as a Limited Partner into funds or syndications, wewill request the Subscription Agreement and Operating Agreement for the investment and the contact information of the issuer. We will then reach out to the Issuer to confirm that they made the investment in question.
LAST UPDATED JANUARY 28, 2021
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Verivest is not registered with the SEC or any similar state agency, is not an investment advisor and does not offer investment advice. Verivest does not (and cannot) recommend any of the sponsors or investment opportunities referenced on this site. All private investments involve risk and uncertainty, including lower than projected returns and a complete risk of loss of invested capital. Investors should conduct thorough due diligence and consult with qualified legal and financial advisors before making any investment decisions.