Multifamily guru Brad Sumrok slapped with fraud suit

A Brad Sumrok student once referred to the multifamily investor as a “cheesy used-car salesman” when describing how his mentoring programs were marketed.

A new suit against Sumrok, however, makes much harsher claims about him and his programs. 

Dr. Sanjeev Mall, a physician in Frisco, Texas, who dropped $100,000 on Sumrok’s offerings, is suing him, alleging Sumrok misrepresented the value of his mentoring program and committed “fraud to induce Dr. Mall to invest in the mentorship classes,” the complaint reads.

Neither Sumrok nor a spokesperson responded to requests for comment.

Sumrok, a Dallas-based investor, claims to have coached thousands of successful students to invest billions of dollars in deals through multifamily syndication — buying apartment buildings with funds pooled from retail investors.

His sales pitch: “retire in five years or less by investing in apartments.” 

Sumrok attracts students by hosting conferences that often appeal to fledgling investors, then sells them on mentorship offerings that start at a few thousand dollars and can run up to tens of thousands of dollars.

Mall claims Sumrok “induced” him to invest $31,000 in the personal mentoring program, a tier that included help with finding and analyzing deals and “direct access to Brad and his team,” according to the suit. After that initial payment, Sumrok encouraged the doctor to throw down another $69,000 for the education.

“Sumrok promoted a situation where he would take his one-on-one mentees under his wings and show them the ropes,” the complaint states.

“Sumrok did not personally help Dr. Mall do anything,” according to the claims. 

The guru allegedly did not tell Mall about deals, or syndications to check out and eventually stopped scheduling one-on-one sessions. Mall also claims Sumrok’s curriculum was recycled, “canned presentations of little or no value.” 

The allegations state that Sumrok violated the Texas Deceptive Trade Practice Act, which protects consumers from “false, deceptive or misleading” practices, according to the Texas Attorney General’s site. The complaint’s argument is that those dealings amount to fraud.

Mall is seeking up to $1 million in monetary relief.

In the end, Sumrok’s alleged failure to introduce Mall to deals could shake out as a lucky break.

Many syndicators, who often rely on value-add plans to achieve touted returns, have struggled to stay above water on deals they bought with floating-rate debt. Scores of operators picked up properties at the top of the market, then failed to wrap renovations before interest rates started rising.

A loan tied to one of Sumrok’s own assets has felt the impacts of the Fed’s rate hikes. As of last March, cash flow on a $200 million Dallas apartment portfolio he picked up with WindMass Capital in 2021 was nearly in the red after debt service had surged by 68 percent in just three months’ time, according to Morningstar. .

The debt service coverage ratio — the capacity for revenue to cover loan payments — on the $160 million mortgage was 0.09, Morningstar shows. A ratio of 1 signifies break even; a negative figure shows negative cash flow.

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