Equity Crowdfunding A Movie – An Opportunity for a Passive Income Stream?

Gentle Readers,

Any blogger with more than one post in a niche gets random emails soliciting posts or access to your platform. Most of them are clearly spam. They are the equivalent of offering to write a post about Viagra for a lesbian’s financial independence blog. They all claim to have read you and love your blog, but they’ve never interacted with you on any platform. (Hint, I’m on twitter and facebook and right here at www.zjthorne.com). No liking a tweet. No blog post comment. No indication that they’ve read you at all.

This time was different. The approach was interesting because they actually did some homework on me. They showed that they had read one of my pieces, or at least the title. They put in the minimal required effort to pique my interest. They are the first. There are perks with being first.

When you approach someone like you respect their time, they are more inclined to listen.

Based on our interactions, I believe this person’s idea was worth investigating. They did not ask for a post, and this is not a sponsored post. This is what happens when people respect others’ time and expertise (let’s joke and pretend I’m an expert here, thanks).  I am not receiving any money for this post and I have not decided if I would invest in this project.

Enough with the caveats.

What is Equity Crowdfunding?

Title III of JOBS Act made online equity crowdfunding legal. In a nutshell, you do not have to be an accredited investor in order to participate in some opportunities to invest now. Accredited investors have a lot of money and the government assumes that they know what they are doing when it comes to investing. Thus they are allowed to invest in securities that are not registered with financial authorities. The government thinks that slick folks won’t be able to pull one over on accredited investors and that they don’t need to be protected from themselves.

Those of us who do not make enough money are now allowed to buy equity in an early stage company. You are reading a FIRE blog and I assume you know what equity is. The goal is that this asset produces returns. You can invest in some startups now. That’s the gist of equity crowdfunding.

What is the opportunity?

That Christmas Movie LLC is seeking investments to get a Christmas Comedy out the door for the 2017 Holiday Season, “I’ll Be Next Door For Christmas.”  It is going to be a full length feature film and claims that it will be the first Christmas movie to raise funds this way. (The JOBS Act did not make this legal until 2016, fyi)

Essentially, they are making a low-budget Christmas Movie with some very talented folks, who’ve made comedies I’ve enjoyed before. They will leverage the money earned through equity crowdfunding to access other capital at a cheaper rate.  They’ve reached their minimum goal already and intend to make a movie on whatever budget they end up with. If I understand it correctly, they will not use more than $2 million total to produce this film.

If you have anywhere from $100 to $100,000, you can purchase a share of this security. You are buying Revenue Participation Rights. It is impossible to know what the interest rate would truly be, because that will depend upon returns, if any.  They’ve set up the company in a way to allow the investors to receive 100% of the adjusted gross proceeds up to the repayment amount, that is the $100 to $100,000 you put up. After all investors are repaid, 50% of adjusted gross proceeds would go to investors on a pro-rata basis. There is no term. You buy it and hope to receive residuals forever.

There is even a lesbian link

Jennifer Tilly joined the cast. She is not a lesbian, but she starred in a lesbian classic, Bound. Queer women throughout the US are grateful to her.

What do you think? Should I invest? I have the writer/director’s email and am not sure what questions I should be asking. What would you ask? 

The Downsides of Co-ops

Gentle Readers,

While I am nowhere near ready to begin my home-search in earnest, since my current net worth has been hovering around the -$146,500 mark for the summer, I did check out my first open-house this weekend. It’s a cooperative I’ve been watching on Zillow and I had the time for a small trek.

I walked the 20 minutes from my current home, which also gave me another look at the neighborhood I’m considering. Before I was in such pain, I used to be a marathon runner and would run through that neighborhood as part of my training. Walking a neighborhood is very different from running in a neighborhood. As a woman in a city, I expect street harassment in both scenarios, but it is different when you are in running clothes. During that time of day, the walk felt safe. Good perk to feel first hand.

The building was a little more run-down than the photos showed. That was not a surprise. It’s also a bit off the beaten path, which is why it is going for $135,000 for all of its 700 square feet. I live in a group house now and could not really visualize what 700 SF meant and this was a good learning opportunity. It’s a lot of space for one person, but not overwhelming. I am hoping to buy something around that size, because I want the opportunity to live with someone comfortably if that is a possibility in the future. I definitely don’t want a studio, because I want the ability to host people without us all looking at one another’s pajamas.

The layout was a little strange. The kitchen is a good size, but it is currently situated so that you cannot fully open the oven or fridge because they face one another. This seems to be an issue of old outlets, but the room to move the oven over is available. There’ll be a whole in the cabinetry, but you could work with it. Overall, the place was cute and had nice windows and a bathroom of one’s own plus some good closet space.

Not bad as an incentive to keep me working toward my home-buying goal.

What distinguishes a co-op different from a condo?

Co-ops are different from condominiums in very important ways. With a condo, you are buying the unit you live in. With a co-op, you are buying a share of the building’s corporation. This is a huge difference with enormous impacts on you for as long as you own. The corporation/board has a lot of power. You do not.

Co-ops almost always require higher down payments and have higher monthly fees. I cannot find a co-op in my city that requires less than a 10% down payment. FHA loans are a no-go here, which would make it hard on first-time home-buyers.  Co-op and condo buildings both prefer to have relatively high owner-occupancy, which prevents owners from renting their homes out easily or at all. Co-op boards have the power to block potential buyers, which means closing on a co-op is hard when you are buying in and when you are trying to sell. It’s a lot of hassle that could keep you paying on a space you do not want anymore.

Co-ops often have high association fees. Partially, this is because the co-op fee may cover an underlying mortgage on the building and property taxes on top of maintenance and utility costs. The share you live in may sell for lower than a similarly sized condo, but the co-op fee can more than offset that. In some buildings, the fees include all utilities up to wi-fi. It may be a wash. You must look at the bylaws closely.

You also have the problem of finding a real estate agent and mortgage broker who knows what co-ops mean for buyers. At the place I checked out near me on Saturday the agent could not answer any of my questions. She eventually told me that she does not normally do co-ops, and it showed.  A big problem in some cities is the dearth of banks that offer co-op mortgages. Shopping around rates will be hard.

There is one major perk for those of us who would like the safety of stealth-wealth. Co-ops offer privacy. You own a share in a corporation, which does not include a public record of ownership. You can hide your address to people not in the building. This is helpful for folks fleeing abuse or famous people who’d like to be left alone.

The more I learn about co-ops, the less I want them. They feel less free than I’d like in my major purchase, but I am intrigued by the privacy option.

Would you consider a co-op over a condo?

 

Checking in on a Delicious Venture – Perks of Being a Silent Partner

Gentle Readers,

I have one investment that I do not include in my list of assets or liabilities, because I don’t know precisely how to in a way that makes sense for me, yet.

I invested in a friend’s small business last summer. I am one of under 30 shareholders. I am a silent partner. This sounds terribly foreign to me, even a year later. In part, because I am an out of state investor. I invested on the strength of his paperwork and photos and his pitch.

My friend created a food business that I understand and believe he can succeed in. I finally got to check in on that business in person as part of my vacation trip today.

(when did this become my life? It sounds terribly mature)

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(checking out the kitchen and the sous vide)

It tastes incredible.  Seriously, my mouth is really glad I had to check out my investment. I now understand why all of his customers are spreading the word.

I do not know if my share will make a financial return. I believe it will, based on projections. He is attracting clients rapidly. I suspect that he’ll need to do another capital infusion in the next 12-18 months, unless there is a recession, because he will need to expand to keep up with the demand. It’s a good problem to have.

I also believe that investing in my friend gave him more than money. This business is great for him and for his relationship to his career. He was floundering after leaving his former profession, and came up with an incredible idea that he was capable of executing. He just needed capital. The change in him has been incredible to see.

Even if I end up writing off this investment, my money is worth what it can do to make the world better. One person at a time.

Have you invested as a silent partner?