YieldTalk news and links - 30 January 2022

✨ New Platform Review: Vint – Invest in Fine Wine 🍷 for under $100

Vint is a platform that offers fractional investments in collections of fine wine, and is open to all investors. Vint was founded in 2019 by Nick King, a former associate analyst at wine investment firm TSW.

Through its advisory board of wine experts, Vint selects investment-grade collections of wine, and stores them in bonded and insured facilities on behalf of investors.

When you invest on Vint, you’re investing in fractional ownership of a specific collection of fine wine. Vint releases new collections for investment approximately every 2 weeks. Collections are selected and reviewed by an advisory board comprising fine wine experts and experienced wine investors. The total value of each collection is typically between $30K-$200K.

The primary gains from an investment on Vint are expected from sale of the wine collection, following a planned hold time of 3-7 years. Vint also co-invests in each collection, buying up to 20% of the shares.

Investments on Vint are open to all US investors over the age of 18, and are offered through SEC Regulation A+, “Tier 2”. Reg A+ offerings must be registered with the SEC, including detailed offering circulars, and offering firms are subject to a number of financial disclosure requirements. Our rating: Excellent. You can sign up for a free account at Vint here. 👈

Notable offerings

YieldStreet (read our review) has launched Art Equity Fund II, which is expected to own a portfolio of approximately 10-20 artworks by artists who have been influenced by a century of experiences in Harlem, NYC. The target annual return is 13-17%, with an expected 5-year hold time. Open only to accredited investors. Find out more at YieldStreet. 👈

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Diversyfund’s (read our review) Growth REIT is now available, offering an easy way to invest in a portfolio of multi-family (apartment) buildings with a minimum investment of just $500. Open to all investors. Find out more at Diversyfund. 👈

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🎉 As a reminder, Hedonova is still offering YieldTalk readers a $50 sign-up bonus for new investments in their alternatives hedge fund, which is effectively an immediate 5% return on a $1,000 investment 📈. Click here to claim your $50 bonus 👈

Worth Reading this Week

A roundup of insights and interesting links from around the investment crowdfunding ecosystem.

Our focus around here is on alternative investments (rather than things like stocks and bonds) but major market movements are bound to influence investor attitudes, even if those investors are thinking about investments like wine, farmland, or litigation finance, which historically have almost no correlation at all with what’s happening in the stock market. This piece from Ben Carlson looking at market peaks and valleys going back to 1928 offers some calming long-term context compared to the shouty pundits on financial cable channels:

The Corona crash in 2020 is an extreme example here. There was a 34% correction in February and March but the market still finished the year with an 18% gain. The market was down nearly 28% in early-2009 but finished the year up 26%. I’m not saying this is for sure going to happen this year but just showing what’s possible in a stock market that seems to have little memory from month to month (or day to day for that matter). I know this correction feels scary because we have inflation and the Fed and interest rates but every correction has something. This one could always get worse and if history is any guide it just might. That’s the nature of risk.

Startups

I appreciate reading articles aimed at founders looking to impress investors, because they’re often quite instructive for investors learning how to evaluate startups. Sometimes the advice seems simplistic (“provide a much better product”), but simple can also make for good heuristics when screening a high number of investments (“grow revenues at least 100% per year”).

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Speaking of screening a high number of startups, Doriot has launched the beta of their “Fantasy Startup” app, where you’re given $10K in virtual cash to invest across up to 50 startups, using anonymized details from real companies. It’s free (and quite fun) to play, though as with many games, you can pay real money for digital goodies (like more virtual cash to invest if you blow your bank). Sign up for free here.

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📉 Equity crowdfunding hasn’t been around long enough for very many companies to have made it all the way to become publicly traded, so when one does, it’s still quite newsworthy. Perhaps hoping to cash in on what until recently had been a record bull market, security robot company Knightscope just listed on the NASDAQ, though not with the outcome its investors on StartEngine had hoped for:

As of today, shares in Knightscope are trading below the offering on StartEngine that closed on January 14, 2021. Kinghtscope raised a total amount of over $22 million on StartEngine at a pre-money valuation of $535 million at $10 a share. Shares of Knightscope are trading at around $7 today representing a 30% haircut for investors who purchased shares on StartEngine.

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A lot of companies (and families!) have been in something of a holding pattern for the past two years, and according to Howard Tullman writing in Inc, that’s turned the tables on the traditional dynamic between invetstors and entrepreneurs:

In a curious but completely understandable role reversal, even the careful and diligent venture investors are pushing to go all out and bet the farm in order to make up for the two calculation years that their funds lost while the world stood still, while the “crazy” aggressive entrepreneurs are all about rebuilding slowly and sensibly. They’re trying mightily to hire back enough people to get the job done because - having come so close to the edge - they don’t really care to risk the ranch and end up with nothing when they’ve spent years to build a perfectly solid business.

Real Estate

Demand remains strong in the multi-family sector, especially for luxury apartment buildings, with rents expected to continue rising, helping developers and investors offset rising construction and land costs (especially in desirable suburban locations):

Occupancy rates remain strong and rents are rising quickly for rental apartments. The biggest questions for developers are not whether enough renters will want to live in their proposed buildings. Instead many worry about whether construction delays will hurt their schedules or if rising costs will blow their budgets.

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🔥🔥🔥 Residential real estate prices continue surging upward, growing by a record $6.9 trillion in 2021, according to Zillow research, bringing its total value to more than double what it was 10 years ago:

Though 2021 started off in a fog of uncertainty around the ongoing pandemic, vaccine rollouts, and the likely trajectory of markets, it quickly became clear that the housing market was going to roar ahead. Inventory continued to tighten as many homes went under contract in a matter of days, and often for well-above their listed prices. The typical U.S. home rose in value by 19.6% last year, and not only did rapidly rising existing home values contribute to the massive gains in total value, but more new homes were built than in any year since 2007 – further contributing to the overall value of residential real estate nationwide. Areas of the sun belt were areas of especially high capital flow into housing.

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While the regulatory landscape remains fraught to say the least, more investors are growing comfortable chasing the “higher” returns in cannabis-related real estate:

Returns on investment in cannabis real estate on the debt side currently range between 12 and 15 percent and higher on loans with two- to four-year loan terms, says Schwamm. On the equity side, the range is much more variable and more dependent on the type of the company involved—whether it’s a start-up, in growth stage, publicly-traded or privately held. It tracks the multiples of what other industries are getting with an additional “cannabis premium,” Schwamm notes.

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Recent analysis of the SEC Small Business Capital Formation Advisory Committee (SBCF) annual report for 2021 sheds some interesting light on the relative popularity among the alphabet soup of SEC regulations used for private real estate investing, with “Rule 506(b)” investments still dominating. 506(b) investments cannot be publicly advertised, but investors can “self certify” as accredited, compared with other options requiring more investor scrutiny:

Rule 506(c) offerings also are among the least expensive. But there’s a trade-off. Although Rule 506(c) offerings can be advertised, they can be sold only to accredited investors. And the verification process, while not difficult, can add to costs and may discourage investors who wish to keep their financial situation private. Reg A offerings provide an even greater regulatory burden and higher costs for real estate sponsors, explaining their third-place finish.

Crypto

Late last year, we shared a report from JP Morgan touting Bitcoin as a useful hedge against inflation, but the recent (and dramatic) sell-off in crypto alongside other assets implies that as crypto has become more mainstream within the traditional finance world, the era of non-correlation with other mainstream asset classes may be coming to an end:

So what’s causing the latest downturn? The sell-off may have far more to do with traditional economic factors than what has historically moved crypto prices, according to financial experts. A combination of high inflation, planned interest rate hikes, and a sell-off in the traditional stock market seems to be behind the recent declines. That undercuts one of cryptocurrency advocates’ central arguments: it acts as a hedge against inflation and central bank policies of fiat currencies like the US dollar.

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Just as crypto prices plummet and home prices soar, Miami-based fintech startup Milo is launching a new “crypto-mortgage” product for home buyers who want to finance their next mortgage by borrowing against their Bitcoin holdings. Asset-based lending is nothing new, but is rarely used by everyday home buyers:

The program is available to both U.S. and international investors who are seeking to use their Bitcoin holdings as collateral for Milo’s 30-year mortgage loan. Milo allows customers to continue to own their bitcoin, and diversify into real estate ownership, while taking advantage of potential price appreciation of both assets. Customers can finance 100% of their real estate purchase, and no dollar downpayment is required.

Where many see innovation in offerings like Milo’s, the SEC continues to signal its displeasure with crypto-based lending, expanding to multiple companies the investigation it started with Coinbase:

Coinbase pulled the planned Coinbase Lend product, which was going to offer a 4% annual percentage yield, on Sept. 17 after the SEC threatened to sue over it. But not before complaining loudly that plenty of its competitors already offered similar interest-bearing product and “by preventing Coinbase from launching the same thing that other companies already have live, they’re creating an unfair market.”

Odds & Ends

• Real Estate investment platform Patch of Land is no longer accepting new investors, and appears likely to shutter soon
• For a limited time Personal Capital is offering 6 months of free wealth management services
• It’s almost that time of year again! A new offer from TurboTax: File FREE: On your own, with expert help, or when an expert does your taxes. For simple tax returns only - Must file by 2/15