Rich Uncle’s, found online at Rich-Uncles.com, is a company who says their goal is to create a platform that makes real estate investment accessible for everyone who wants to get involved.
Traditionally speaking, real estate investment was thought to only be available to people who had large sums of investment capital that they could translate into large stakes in investment opportunities.
Rich Uncle’s has a goal of making this type of investment available to people with different levels of capital available, so this type of investment opportunity is no longer off limits to the general public.
How Does It Work?
The whole concept of Rich Uncle’s rests on something called a Real Estate Investment Trust, or REIT, which is a corporation that takes capital from many different investors and uses it to buy and then operate income producing real estate.
In addition, REITs are exempt from taxes if certain standards can be met, including the distribution of at least 90% of the taxable income. REITs make this possible by generating and distributing this income to their shareholders in dividends.
Finally, this company does not pay commissions, instead choosing to use the internet for advertising and finding investors, which reduces their overhead and increases the percentage of returns they distribute to their members.
Is This a Legitimate Opportunity?
This company is funding real estate investment opportunities through a specific type of a crowdfunding platform. They say that their potential investors can begin purchasing ownership in REITs with investments of just $500.
Using the crowdfunding platform to raise capital for real estate opportunities is becoming a popular new concept in real estate investing. It not only opens up real estate investing to people who only have small amounts of money to invest, but it is beneficial for the properties and owners themselves.
Crowdfunding often allows these properties to be funded easier and faster than going through the traditional routes of finding bank funding or investors with large amounts of capital who are interested in the opportunity.
So this type of real estate investment is growing in acceptability and popularity, and people who are interested in it can look at the opportunities available through Rich Uncle’s, or other companies that take a similar approach.
We are happy to address any concern that any legitimate investors have regarding how the IRS addresses "Dividends earned" in person at our offices in Costa Mesa or over the phone with our Clent Relations Team @ 949 536 9226. If they are happy to explain the reporting process on 1099s and if you still have concerns connect you directly with our CFO, President or CEO as appropriate.
In addition, we strongly suggest you consult a tax professional for your own perspective on what Rich Uncles is, in fact, distributing to its clients and reporting on your 1099 and how it is declared by the IRS.
Rich Uncles has been in business for more than 3 years now, is approaching $200M in AUM with well over 5000 investors and has been in good standing with the SEC, BBB and our independent auditors Ernst & Young since inception.
A further technical response regarding understqnd your 1099 is listed below:
The Form 1099-DIV that you received from Rich Uncles NNN REIT showed both "Total ordinary dividends" and "Nondividend distributions"
This is primarily due to property depreciation deductions. Current tax codes allow real estate owners to depreciate, or write off, the costs of a property's improvements (i.e., the bricks and mortar, but not underlying ground) over a certain time frame. This is effectively a paper loss and is one of the benefits of owning commercial real estate.
NNN REIT's business model is to acquire properties in advance of selling REIT shares, using the REIT's acquisition line of credit. As REIT shares are sold, the line of credit is correspondingly reduced. We use this strategy to ensure that the proceeds from REIT shares sold are immediately deployed into dividend yield-generating real estate ownership, and not deposited into an escrow account until enough shares are sold to purchase the next property.
NNN REIT purchased its first properties in June of last year, utilizing the REIT's line of credit. Depreciation deductions began to accrue then, prior to selling any REIT shares. The line of credit was also employed to purchase our Dollar General portfolio in November, and our Dana Inc. acquisition in December. The line of credit balance was reduced to $0 last week (repaid from the proceeds of REIT shares sold), but we are about to dip into the line again to purchase our next asset.
A consequence of our buy-first, sell REIT shares-next strategy is that the REIT built up depreciation deductions in 2016 that fully "tax sheltered" the dividends that were paid to shareholders.
These depreciation deductions have reduced your tax or "cost" basis in your REIT shares investment; and under current IRS codes, you will be taxed at capital gains rates on the difference between your ultimate sales price of your REIT shares and your cost basis.
We trust that this clarifies any misunderstanding that you may have had. It is important to note that NO REIT share offering proceeds were used to pay dividends; all dividend were paid from property rental receipts.
Harold,
I heard about "Rich Uncles" on a radio program, and thought this
may be a good solution to put a smsll investment from my IRA. After
reading the reviews, as well, as your replies, I see, that your stragegy, is not for the investors, but, instead, to feed greedy
corporate pockets, with no, regard to the investors, or their
investments.
I am very disappointed in this company, and I am equally disappointed in the radio station, for allowing your company to be advertised. It is obvious this is not a legitimate business, with ethical regard , so, I feel grateful to the reviewers for stopping me , from making a very terrible mistake.
Carol
Depreciation is not wealth generation...it's depreciation. After the property is fully depreciated, there is no depreciation. When the property is sold (most likely at a gain), all of that depreciation has to be paid back.
Are you really that unsophisticated or are you just a rah-rah sock puppet?
The IRS categorizes both "return of capital" and depreciation as "return of capital" on your 1099. If the portfolio used cost serration analysis, your deprecation could be nearly 100% where your 1099 could report 100% "return of capital" and yet the dividend could be fully covered.
If they are not using cost segregation analysis, you could expect up to 50% tax deferral through depreciation (which would reflect 50% "return of capital" on a 1099)
I am not affiliated with Rich uncles nor up to speed on their portfolios financials.