Does anyone know anything about Red Door Group Inc?

Question

The investor basically acts as the bank for them and then they rehabilitate condos and place tenants with an option to buy. They guarantee rent payments to the investor until they get a tenant who successfully purchases the condo.

The investor initially purchases the unit but Red Door essentially buys it back when the tenant is ready to buy. No condo fees and no management fee, either. Sounds good to me but I'd feel better if I knew nobody had complaints against them.

Thanks.

Answer 1

I got on their mailing list when I was researching TIC/1031 investment programs at work.  They have an interesting business model.  I don't fully understand how they can guarantee such high rates of return--it seems like their financing costs would be too high to make the project viable, on the face of it.  However, if they're very good at identifying projects that are below market because they need to be renovated, and have a related development company that's good at pulling off the construction on time and under budget, conceivably it could be a win/win.  They don't have any complaints with the BBB in the last 36 months.  That's a good sign.  What I would do:  call them and ask for 1) their most recent financial statements and 2)references.  I would ask for some references not only from clients, but also from securities broker/dealers, as I think some of their investments are sold as Regulation D securities through registered reps (Series 7 securities licenses).  The president of the company has a radio show, they're members of BBB, so on the face of it, they seem legit and on top of the market.  Good luck!

Answer 2

i used them there gooooood

Answer 3

I don't know anything about them. However, I am a real estate investor, and understand what they claim they're doing.

What they're describing may be legitimate, and probably is. However, I lost $15,000 last year in a somewhat similar transaction--again, not connected with Red Door Group in any way.

Part of the risk is that either Red Door Group or the developer (note, they use a master lease, and the developer pays some money each month to ensure a positive cash flow to the investor) gets overextended or is unable to make payments as scheduled. Or...if some other glitch develops, such as a larger-than-expected number of the tenant-buyers are unable to purchase.

One other major question I have is: Lease-options have effectively been outlawed in Texas, but it appears that most of Red Door Group's activities are in Houston. Question: What mechanism are they using to get around the lease-option ban? (From their reference to the triple net lease, I'd guess they're using some sort of land trust, though the triple net lease could apply to their lease from the developer.) I'd have a concern that whatever they're doing might be judged unlawful in Texas. (Lease-options are lawful everywhere else.)

A few other suggestions: Ask for references. Red Door says they'll provide them. Get them. And get references of recent investors who recently have been cashed out--ones who've been through the entire process recently.

And, while Red Door says it's totally hands off, I'd suggest you spend the money and actually visit the projects. I should have done that with my investment. I saved $500 or so by not going down from Virginia to South Carolina to inspect a property that was supposed to be in good condition. It was a dump that was never rented out; there was no tenant-buyer. Unfortunately, the person who put the deal together had good references, but an on-site inspection would have saved me $15,000.)

Also, ask for references that include successful tenant-buyers.

And have a real estate lawyer review the documents you need to sign. Honestly, it may be difficult finding a competent real estate lawyer who understands what they're doing. I've had real estate lawyers tell me they "didn't like" lease-options. And lawyers who've told me that while the concept of lease-options is good, they'll never work in practice. And I haven't yet found a lawyer near me who understands land trusts.

So, while I'm advising you to consult with a good real estate lawyer, and to pay attention to their advice, just recognize that many lawyers will reject even good ideas and proposals if they don't understand them.

So, that's what I'd do, and consider, prior to investing with this group.

Hope that helps.