What Investors Should Learn From the Sub2 Fund Complaints
Passive real estate deals are only as good as the person running them and the paperwork behind them. In episode 509, Mike DeHaan, Dan Austin and Dylan Koch read through publicly posted investor complaints about Pace Morby's Sub2 fund and a second account from an operator who says a creative finance RV park deal left her holding a $1.5 million note she didn't agree to. Nothing here is proven, and the hosts are careful to say these are accusations, not findings. But the patterns described are worth understanding if you ever hand money to a sponsor.
What are investors alleging about the Sub2 fund?
Mike read a Facebook post, since taken down, from an investor who said he and his wife put money into the Pace Morby real estate investment fund. It was pitched, according to the post, as passive income with a 9% preferred return and quarterly distributions. The problems started when they tried to reach their money.
Mike said the thread had roughly 50 comments from people describing similar experiences. These are investor claims, not adjudicated findings.
- Unable to log in to the fund portal, and the phone number listed on the fund site not working
- Emails to support and investing addresses going unanswered
- Being told the only exit was finding someone willing to buy their shares
- No clear answer on when the fund becomes liquid
- K-1 tax documents delivered late or not at all
- An SEC annual filing the investor said showed roughly $745,000 in cash as of 12/31/2025, with investor money as the only funding source
- No key person insurance on the two principals named in the filing, per the investor's reading
- A 2.4 out of 5 Trustpilot rating and BBB complaints in Tempe, Arizona, as cited in the post
Why do the hosts say 'don't worry about creating drama'?
Mike's strongest point wasn't about the fund at all. It was about how the commenters behaved. Many said they were hesitant to share details publicly because they didn't want to create drama.
Mike argues that's backwards. If you believe your money has been taken, documenting it and filing formal complaints is the job, not a social faux pas. He compared it to publicly calling out an airline that wronged you: the pressure is what produces a response. The original poster listed his own next steps as formal demand letters, SEC investor complaints and contacting the Arizona attorney general, and noted the filings he referenced are public record on sec.gov.
Dan added that operators who raise capital this way tend to target people vulnerable to that kind of pitch. Dylan pushed back a little, saying there's personal responsibility in any investment, but that a small check shouldn't mean losing everything. Mike pointed to a commenter who said she invested $5,000 and questioned whether a check that size fits the accredited investor profile these offerings are supposed to serve.
How did the RV park creative finance deal allegedly go sideways?
The second story came from a woman who commented on the same thread. She did not name Pace Morby or Sub2.
As she described it, she bought an RV park through a creative financing structure with her mentor's group. The arrangement was that they would receive 40% equity in exchange for bringing $1.5 million to closing. At closing, she saw a promissory note on the HUD for $1,500,000 at 12% interest that she says was not part of the agreement.
She was reportedly told not to worry, that it was private investor money the group had raised and they would cover the payments while the park stabilized. That didn't happen. She then received a demand letter from the note holder, was told the RV park had to fund the payments, and says the person who brought the money disappeared. She was told the lender didn't speak English and wouldn't negotiate. Foreclosure notices followed. She signed a deed in lieu, walked away, and gave up her equity and everything she'd put in.
Dylan summarized the structure as he understood it: the group allegedly brought its own private money, didn't disclose the note to the 40% equity partner, and left her on the hook for the debt. The practical lesson holds regardless of who was involved. Read the HUD before you sign it, and remember a lienholder has rights to the property no matter what your side agreement says.
What does this say about how sponsors actually get paid?
Dan made the broader point that, in his view, many capital raisers don't structure deals around investor returns at all. He described operators positioning themselves to make money regardless of outcome, through acquisition fees of three to five percent upfront, or an equity slice that pays even on a sale at a loss.
Mike's framing was that the marketing is the product: the lifestyle content, the family footage, the vision of what your life could look like.
Both hosts expect more of this. Dan thinks a tighter economy squeezes more of these structures over the next twelve months. Mike is less optimistic it ever fully stops, and predicted that if things unravel, the likeliest outcome is the operator disappears and the content vanishes rather than a public reckoning.
The takeaway from EP 509 isn't schadenfreude. Passive means passive until it doesn't, and the liquidity terms, fee structure and the person signing matter more than the pitch. Listen to the full episode for the hosts' complete read of the investor posts.
Frequently asked questions
Are the claims about the Sub2 fund proven?
No. Mike was explicit that these are accusations from investor posts and public filings, not official findings.
What red flags did the hosts identify in a passive fund?
Per the post Mike read: no portal access, unanswered emails, no defined liquidity date, late or missing K-1s, and no exit other than selling your shares.
What is the lesson from the RV park deal?
Read the closing HUD line by line. The operator says she discovered a $1.5M note at 12% at closing, and a lienholder's rights don't disappear because of a verbal side agreement.
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Educational content from the Collecting Keys podcast. Not financial, legal or tax advice.