AlphaFlow is a registered investment advisor that helps investors passively invest in a diversified portfolio of real estate loans. Due to current SEC restrictions, we are limited to working with accredited investors at this time.
Our account minimum is $10,000 which allows us to provide an optimized allocation across 75-100 real estate loans. We currently accept funds via bank transfer (ACH). ACH allows you to move funds directly between a checking or savings account and your AlphaFlow account. Once you confirm your bank account by logging in to the bank in question or identifying two very small deposits that we send to the desired account, we transfer your money electronically and allow you to make additional deposits at any time. In most cases, bank transfers will be deposited into your AlphaFlow account within 2-3 business days. Please note that any small deposits sent to your bank account for verification purposes will be withdrawn from that bank account within 10 business days.
To deposit funds, log into your AlphaFlow Portfolio and click the “Transfer Funds” button. When the funds arrive, we will send you an email confirming receipt.
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AlphaFlow’s platform is primarily set up as dashboards for your to keep up to date with your investments and payments. You can see every loan in your portfolio at any time by simply logging into your dashboard. We also give you access to the tools we built to help manage the portfolios; namely an Exchange of deals on other platforms and the ability to connect your accounts from other real estate crowdfunding platforms.
Absolutely. In order to invest and manage our client’s portfolios, we built a number of tools and we offer these free to our clients as a courtesy. To highlights include:
The SEC defines ‘Accredited Investor’ under Rule 501 of Regulation D to include a natural person with (1) a net worth or joint net worth with the person’s spouse exceeding $1 million, not including the value of the primary residence, and / or (2) annual income of $200,000 in each of the two most recent years, or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income in the current year.
As part of your initial onboarding, you went to the accreditation step (it’s the page where you’ll find your Managed Portfolio page). If you choose from the drop down menu, you can verify via (1) 3rd party letter like one from your CPA (2) Income via documents (3) assets via breakdown. If you’ve done it before, it’ll just be resubmitting the same information. We’ll cover the cost of renewal, while our partner, InvestReady, handles the accreditation.
The minimum investment is $10,000. Given that your portfolio may be split across 100 individual loans, AlphaFlow targets a minimum value of $100 in each loan by the time each portfolio is optimized.
AlphaFlow invests in real estate debt, generally called bridge loans. These are short-term, 1st lien notes backed by residential real estate. The notes are typically between $75,000 to $2,000,000, yield between 7%-11%, target a maximum average loan-to-value of 75% and are secured by the property and often a personal guaranty. Your funds are spread across 75-100 of these notes in at least 15 states.
For now, AlphaFlow does not have an early liquidity option but we invest only in loans with 3-12 month maturities. AlphaFlow has found that while all loans are 6-12 months in duration, within about 6 months, you will typically have about 40-50% of your principal back. You have the option to set returned principal to auto-reinvest.
With the example of a CD, there would be a specific maturity date. However, with AlphaFlow, the loans all have defined maturities but (1) they often repay early individually or (2) there are extensions of 6 months on a few loans, as that’s a standard option built into these loans in case more time is required to complete the rehab project.
AlphaFlow builds your Optimized Portfolio for you and does all of the work, so you don’t have to go through the trouble of finding, underwriting, and investing in each loan one by one. We’ve built a proprietary system to take that work off your shoulders. As a result though, investors today can’t choose their own investments.
AlphaFlow’s team is investing in loans we like around the industry on a daily basis. When you invest and we receive your capital (this can take up to 7 business days), we allocate you slices of loans in which we have availability at the time. This changes on a daily basis, so there is no way to show you the exact loans you’d be investing in prior to your investment, as we may not even have some of them in our inventory yet. All loans will fall within the same standards of underwriting though.
You can log into your dashboard at any time, 24-7, and see each and every loan in your portfolio!
Your initial investment will be diversified across at least 75 individual loans within the first 45 days. From there, your portfolio will be continually rebalanced to maintain diversification. We strive to put all of your investment to work as soon as possible though, so we may initially place all of your investment in a smaller number of loans so that you are earning interest on all of it, before then continuing to change your allocations and spread you across multiple loans until we get to 75-100!
Payments are effortless! When you sign up for an AlphaFlow Optimized Portfolio, you’ll connect a bank account to fund your investment. At the end of every month, you’ll receive a distribution on your investments in your AlphaFlow account. You can always add a second bank account if you’d like us to make deposits elsewhere! From there, you have 3 options: (1) auto re-invest your earnings and / or returned principal, (2) leave the funds in your AlphaFlow account to decide to reinvest or withdraw later yourself, or (3) auto-withdraw the funds to your account.
All investments are in residential real estate loans secured by first lien positions.
AlphaFlow sources loans from non-bank lenders approved through a thorough vetting process conducted by AlphaFlow’s investment team. Individual loan selection is powered by data-driven decisions based on market trends, resulting in a rejection rate of approximately 80%.
The maximum Loan-to-Value on any given loan is 80%, but AlphaFlow does not typically go above 75% unless the loan has significant compensating factors. The target blended LTV for your portfolio will be 75% max.
AlphaFlow has an extensive list for underwriting the borrower, the property, and the market in order to diligence every investment. AlphaFlow’s review includes typical items such as credit scores and track record, as well as market trends like days on market for the region along with how the specific local is trending.
When a loan repays, the funds are returned to you and you have 3 options: (1) auto re-invest your earnings and / or returned principal, (2) leave the funds in your AlphaFlow account to decide to reinvest or withdraw later yourself, or (3) auto-withdraw the funds to your account. Our goal is to make it as effortless as possible to allow you to “set it and forget it!”
AlphaFlow’s team is investing in loans we like around the industry on a daily basis. When you invest and we receive your capital, we allocate you slices of loans in which we have availability at the time. This changes on a daily basis, so depending on when you invest, you may have overlap with other customers but you’ll likely have a unique portfolio from most other AlphaFlow clients. All loans will fall within the same standards of underwriting.
The underlying loans in AlphaFlow Managed Portfolios were originated by non-bank lenders. Borrowers will accept higher rates from these lenders to ensure they have access to capital more quickly and with more flexibility than they would receive from a traditional funding source.
On most platforms, investing in 6-12 loans often means a minimum investment of $30-60K. With AlphaFlow, you are automatically placed into 75-100 loans, all with a minimum investment of $10K.
We partner with many of the top real estate crowdfunding platforms so we have tremendous respect and close relationships with many of them. In general, AlphaFlow is focused on creating a more passive investing experience that utilizes technology building and rebalancing a diversified portfolio, all at a low fee and with low investment minimums.
Yes, AlphaFlow will work with Self Directed IRAs. We work with a several custodians, but IRA Services Trust Company and Polycomp have been some of our favorites.
You will receive one single K-1 for all of your investments in each year with AlphaFlow. Whether you only invest once or add funds multiple times, it’s a total of one K-1 per year!
AlphaFlow charges a 1% annualized asset management (“AUM”) fee. AlphaFlow may charge servicing, origination, or other fees in certain circumstances on certain real estate loans in your portfolio, typically when defaults occur and there are additional 3rd party fees, and those will always be disclosed.
We had great results with our previous three funds but wanted to take what we learned one step farther. The optimized portfolio platform was built to take the same risk/return principles we used with the funds and improve the investment experience in 3 main ways:
1) We’ve virtually eliminated all cash drag. Within a few days of receiving an investor’s capital, he/she will begin earning returns on the entire investment.
2) Clients can invest and re-invest capital at any time.
3) We continually rebalance client portfolios to keep them diversified as loans repay. Ultimately, the underlying principal is the same: Investors make one investment with us and we build them a highly diversified portfolio of 75-100 first lien residential real estate loans spread across 15+ states.
AlphaFlow adheres to the same security encryption standards as your bank. We support browsers that use 128-bit encryption, which is just a means of scrambling information when it’s sent, in this case, between your device and AlphaFlow. Information that is encrypted at one end is then decrypted when it’s received at the other end. It’s the strongest and most secure form of encryption that is generally available in internet browsers today.
To host your data, we use Amazon Web Services (“AWS”). Physical access is strictly controlled both at the perimeter and at building ingress points by professional security staff utilizing video surveillance, intrusion detection systems, and other electronic means. Authorized staff must pass two-factor authentication a minimum of two times to access data center floors. If someone were able to get past all that security and break into a server, they would then have to crack several layers of authentication and military-grade 256-bit encryption to access your data. Translation: even if someone walked out with our hard drives, it would take them BILLIONS of years using the world’s fastest supercomputer to crack your encrypted data.
Here are a few tips to help keep you safe online:
Keep your LinkedIn and Facebook passwords safe – don’t share them with anyone.
Mix it up–make sure that your password includes numbers and capital letters.
Use virus protection and a firewall on any computer you use to access AlphaFlow.
Don’t install programs from people or companies you don’t know.
Learn to prevent identity theft and identify phishing attempts.
No, because AlphaFlow does not require any personally identifiable information for you to create an account.
Absolutely not! We hate spam as well. We’re going to add notifications, newsletters, and perhaps other communications as we grow but you’ll be able to unsubscribe from any and all of them at any time.
You can find them here.
You can find it here!
We’re always looking to improve our data and if there is something that isn’t correct on your dashboard, we’re eager to fix it. Please just let us know what investment and what information is incorrect, and we will review it promptly. Please reach out at invest@alphaflow.com.
Certainly! Please email us at contact@alphaflow.com.
As part of your initial onboarding, you went to the accreditation step (it’s the page where you’ll find your Managed Portfolio page). If you choose from the drop down menu, you can verify via (1) 3rd party letter like one from your CPA (2) Income via documents (3) assets via breakdown. If you’ve done it before, it’ll just be resubmitting the same information. We’ll cover the cost of renewal, while our partner, InvestReady, handles the accreditation.
We’re always eager to onboard new platforms. Please just reach out to us at contact@alphaflow.com and tell us a bit about your platform and why it might be a good fit.
We’re flattered you asked. Learn more about us here.
AlphaFlow Managed Portfolios models the same investment mandate and AUM fee as AlphaFlow’s three previous funds, but with three major improvements:
(1) We’ve minimized all cash drag. Within a few days of AlphaFlow receiving your capital, you will often begin earning returns on your entire investment.
(2) You can invest and re-invest capital at any time.
(3) We continually rebalance your portfolio to keep you diversified as loans repay.
Behind that is a lot of proprietary technology to make things work but the return profile and the cost is the same as with our funds.
If you’re interested in joining our team, please send us an email at careers@alphaflow.com with a resume or LinkedIn profile, along with a note on why you’re interested in AlphaFlow. No formal cover letter is needed. Please no 3rd parties.
When an investor makes an investment into a limited liability company (LLC), he or she is typically taxed as a partner in a partnership. Form K-1 is issued by the partnership to the investor and it reports net income (loss) and certain other items related to the investment in the partnership. Since a partnership is generally not subject to taxation, members of the partnership are typically required to report their share of the partnership’s financial results on their individual income tax return.
A Form 1099-INT is commonly issued in a debt deal and it is used to report interest income generated from lending activities, such as investing in promissory notes. A 1099-INT, as contrasted from a K-1, would broadly involve no ownership interest in real property.
If an investor meets one of these exceptions they will typically NOT be receiving a 1099:
1) Interest income for the year is below $10;
2) Payments are made to a: corporation, a tax-exempt organization, any individual retirement arrangement (IRA), Archer medical savings account (MSA), Medicare Advantage MSA, health savings account (HSA), a registered securities or commodities dealer, nominees or custodians, brokers, or notional principal contract (swap) dealers.
The IRS requires, generally, that form 1099-INT be provided to each recipient by January 31 of each tax year. Form K-1 is not required to be furnished to each investor until April 15th of each tax year. Starting for the 2016 calendar tax year, Form K-1 will be due on March 15th. However, an extension is allowed that will extend this date until September 15th.
Form K-1 due dates are driven by due dates for partnership tax returns, and so are due later than other tax forms an individual commonly receives. But most crowdfunding entities understand that investors demand Form K-1 as soon as possible. The problem is that many crowdfunding partnership returns are dependent on tax information furnished by other parties (specifically the sponsor).
Many crowdfunding investment companies provide required tax documents via a secured client investor portal. This eliminates problems commonly associated with mailing such forms.
A Form K-1 may report different items, including ordinary and rental income, interest, dividend and royalty income, and capital gains or losses, just to name a few. Each of these items is subject to specific rules of taxation and dependent on the individual investor’s personal tax situation.
Investors in an equity deal can be taxed differently depending on the type of deal. A “flip” deal will typically be taxed as ordinary income, while a buy and hold will typically receive “net rental” real estate income or loss along with capital gains treatment upon disposition. The payments investors receive on debt deals are typically classified as interest income and taxed at ordinary rates. Long-term capital gains will be taxed at rates of 15% to 20% depending on your tax situation.
Investors in equity deals are also typically subject to passive activity rules. These rules can be complex and may limit the immediate deductibility of any losses. Interest income is considered portfolio income and is not subject to the same restrictions.
The tax treatment by individuals for items reported on a K-1 can be complex. Investors are encouraged to consult their tax advisor for further clarification.
You should not file your personal tax return until you have included all required tax forms. If file your tax return prior to receiving any or all of K-1 forms, you should amend your tax return as soon as possible to reflect all the accurate forms. Be aware that you may face additional tax due, plus interest and penalties. You should consult a qualified tax professional to discuss filing requirements.
Distributions shown on line 19 of your Form K-1are not considered income. These distributions are typically not taxable, unless they are in excess of basis. Instead, report as income (or losses) those items shown as such on your K-1. Typically, cash payments arising from a real estate equity deal represent partnership distributions under U.S. tax law and most state and local jurisdictions. Sometimes they are incorrectly referred to as “dividends.”
Partnership distributions in general are not taxable because investors are taxed on their allocated share of partnership income. In limited circumstances, they may be taxable if the amount of distributions exceeds an investor’s basis in the partnership.
Many non-resident investors hold title to crowdfunding real estate interests as individuals. In this situation, they may find themselves taxed similarly to U.S. individuals. Income tax rates in the U.S. range from 10% to 39.6% based on an individual’s taxable income.
If a partnership (including an LLC filing as a partnership) has income that is effectively connected with a U.S. trade or business, it is required to withhold on the income that is allocated to its foreign partners. This withholding tax requirement does not apply to income that is not effectively connected with the partnership’s U.S. trade or business. The goal of course is to ensure that the IRS collects tax from nonresident aliens in case they fail to file a tax return and, accordingly, pay any tax that is due.
The IRS allows foreign partners to certify to the partnership certain deductions and losses that will be applicable to the current year. In addition, a nonresident alien partner can also certify to the partnership that the partnership investment is (and will be) the only activity of the partner for the partner’s taxable year that gives rise to effectively connected income, gain, loss or deduction.
In general, equity investors in real property will be subject to state income tax in the state where the property is located, provided that state imposes income tax. Typically, the controlling factor is the state where the investment property resides, not the state where the investor resides.
Assuming a state imposes income tax, there are three main scenarios for withholding and filing requirements:
1. No state withholdings are made by the partnership and the individual partners are required to file state tax returns and to pay income tax on their respective share of the partnership income.
2. The partnership withholds state income tax on behalf of the partner and remits it to the state. This withholding is then reflected on Form K-1 and the partner is responsible for filing the required tax forms.
3. The partnership withholds, remits and files all information with the state and the individual partner is not required to file or pay anything. This is called a composite or group filing.
State filing requirements are varied and often complex. We strongly recommend that you discuss your state filing requirements with your tax professional.
Every investor who held an equity interest (member or partner) at any time during the tax year should be sent a Form K-1. If an equity interest was held in by an IRA (traditional or Roth), the amounts reported on the Form K-1 are not attributed to the investor’s individual tax return, but are instead associated with the retirement account itself.
However, there can be potential tax consequences and reporting requirements depending on circumstances and activity in the retirement account. For example, IRAs and some tax-exempt entities that receive more than $1,000 of gross qualified Unrelated Business Taxable Income (“UBTI”) must file a tax return on Form 990-T. The account will typically only owe taxes if its UBTI is greater than $1,000. You should consult your tax professional to ensure compliance with all required tax filings and payments resulting from investing through IRAs.
Section 1411 of the Internal Revenue Code imposes the Net Investment Income Tax. A tax of 3.8% is assessed against certain net investment income of individuals, trusts and estates once income reaches certain thresholds.
Investment income may include, but is not necessarily limited to: interest, dividends, capital gains, rental and royalty income, income from businesses involved in trading of financial instruments or commodities, and businesses that are considered passive activities to the taxpayer. Therefore, income reported on Form K-1 or 1099-INT as well as any gain resulting from the disposition of property may be subject to NIIT.
It depends on the way the investment is structured. Form K-1 is indicative of ownership in a partnership, which partnership may produce interest income for the owner-investor. Alternatively, 1099-INT forms indicate lending investments. In both situations however, the income that is reported is typically classified as interest income to the investor.
In a common crowdfunding investment structure, equity investors are partners of a limited liability company (LLC) which will be taxed as a partnership. While partnerships are not subject to taxation directly, the income, deductions and/or credits flow through to the individual partners. The partnership will report each investor’s share of the financial activity of the partnership on Form K-1. Therefore, each Form K-1 must include a federal ID number and other relevant partner information such as name and address. So while an investor may not have taxable income in a given year, you must furnish certain identifying information required by the IRS.
Taxable income as reported to investors on K-1 may include non-cash expense, like depreciation. As a result, taxable income is often lower than cash distributions. Additionally, investor distributions paid are often determined in advance, and may be paid out with different timelines than required for income tax reporting.
A flip project will generally be taxed as ordinary income that is subject to the investor’s marginal tax rate. This is because a flip is classified as a “dealer” and is deemed to be in an active trade or business.
A long-term rental is defined as passive income and is subject to the passive activity rules. These rules allow you to offset passive income against passive losses. Any resulting net passive income will be taxed at ordinary income tax rates. In addition, upon the sale or disposition of a rental property, capital gains (or losses) will be generated that will be typically classified at a preferable long term capital gains rates.
Most commonly, real estate equity investors will see depreciation recorded on real estate rental holdings. This depreciation is recorded by the entity holding title to the real estate itself. Accordingly, this expense will result in lower taxable net income that is passed through to crowdfunding equity investors.
Investing in real estate crowdfunding opportunities will most likely add complexity to your tax filings. While filing your own tax returns correctly is possible (sometimes in multiple states as necessary), we would advise most investors to seek the assistance of a tax professional. Many investors find it much more efficient and less stressful to turn these activities over to someone familiar with the intricacies of the federal and state tax codes. A tax professional can not only assist with varied required tax filings, but also with your understanding of tax implications of the different types of crowdfunding investments available to you.
