Época colonial

ago and which have standard common area interior unit finishes, such as carpet and vinyl flooring, Formica

countertops, detached garages and 8-foot tall ceilings. Class B- properties will often have original common area and interior unit finishes, such as older carpet and vinyl styles, older original appliances and brass lighting packages and hardware, and single-panel doors. An upgraded Class B+ property will have undergone recent upgrades and renovations to the common and interior finishes such as new Berber carpet and vinyl plank flooring, new Formica stone-like countertops, new wood cabinets, new stainless steel appliance packages, modern brushed chrome lighting packages and hardware and six panel doors. Class B+ properties generally maintain a rental price advantage over their Class A competitors.

Conditions to Closing Underperforming Multifamily Rental Properties

See “Real Estate Asset Management Strategy—Conditions to Closing Real Estate Investments” below. Asset Management Strategy for Underperforming Multifamily Rental Properties

Once we acquire underperforming multifamily rental properties, we will hire Resource Real Estate Opportunity Manager II as the property manager; however, in certain cases, Resource Real Estate Opportunity Manager II may subcontract for certain property management services. The property manager will be responsible for leasing and operating the properties. With respect to the underperforming multifamily rental properties, Resource Real Estate Opportunity Manager II will formulate a renovation plan after consideration of the condition of the property, the neighborhood and the expected level of return that can be achieved from the renovations. Examples of renovations may include building a new clubhouse, painting or siding the exterior, and replacing carpeting and flooring, kitchen and bath appliances, kitchen cabinetry and lighting. Resource Real Estate

Opportunity Manager II will receive a property management fee and a construction management fee for its services, as applicable.

REO General

We intend to acquire commercial properties owned by banks, mortgage companies or other financial institutions following foreclosure and in which the mortgage loans or other lender liens no longer exist. We expect that the total acquisition cost for the equity interest in the commercial properties, will be at a discount to the amount of unpaid balance on the debt that was foreclosed upon for such commercial properties. We also expect to focus on multifamily rental properties, but may buy other classes of commercial REO. We may lease and operate the properties with the purpose of generating cash flow until our advisor determines that a disposition of the properties is in our best interest and we may sell or refinance the real estate when market conditions warrant, which may be after stabilization, if required.

REO Acquisition Strategy

When evaluating potential acquisitions and dispositions of REO, we generally will consider the property’s: • location;

• business plan; • market position; • occupancy trends; and • functionality.

Conditions to Closing REO Investments

See “Real Estate Asset Management Strategy—Conditions to Closing Real Estate Investments” below. REO Asset Management Strategy

We will seek to stabilize the operations of REO property through aggressive property management and to expend capital on required deferred maintenance or property improvements in an attempt to increase cash flow from the property and ultimately to refinance the property or sell the property should market conditions support a sales price that we believe optimizes the overall return for our investment in the asset. Once we acquire an REO asset, we will hire Resource Real Estate Opportunity Manager II as the property manager; however, in certain cases, Resource Real Estate Opportunity Manager II may subcontract for certain property management services. The property manager will be responsible for leasing and operating the properties. Resource Real Estate Opportunity Manager II will receive a property management fee and a construction management fee for its services, as applicable.

Additionally, Resource Real Estate Opportunity Manager II will institute its daily leasing rate optimization program, review the delinquency reports and take action as necessary to assure that the tenants are paying their rents and will implement an aggressive marketing program to decrease vacancies. All of these programs are designed to increase the near term cash flow potential as well as the longer-term value of the properties.

Discounted Real Estate-Related Debt General

Resource Real Estate and its affiliates have an extensive history of investing in discounted and distressed commercial real estate debt that dates back to 1991, representing almost $800 million in value as of September 30, 2013. The officers and employees of Resource America and Resource Residential, affiliates of our advisor, have extensive experience in the acquisition, management (including workouts) and disposition of both non-performing and performing real estate-related debt investments. In addition, in early 2005, Resource Real Estate formed a team dedicated to originating and acquiring commercial whole loans, mezzanine loans and B-Notes. Resource Real Estate’s acquisition, asset management and finance teams acquire, originate and manage those real estate-related debt instruments. We expect to invest a portion of our assets in real estate-related debt investments secured, directly or indirectly, by multifamily rental properties, a real estate sector where Resource Real Estate has extensive

experience and managing capabilities.

When acquiring real estate-related debt investments, we expect to focus on acquiring first mortgages, second mortgages, mezzanine loans, B-Notes and other subordinate loans, with acquisition costs of between $5 million and $100 million each that are secured directly or indirectly by multifamily rental properties. Based on our advisor’s and its affiliates’ experience, we, or a third party we contract with, may service the mortgages and other loan assets. We intend to focus on acquiring non-performing, sub-performing and otherwise distressed loans at a discount to their unpaid balance. Once acquired, we may accept a discounted payoff from the borrowers, negotiate a workout of the loan terms with the borrowers, negotiate a deed in lieu of foreclosure, or foreclose on the investments to gain ownership of the underlying real estate and subsequently finance or sell the investments after the asset’s stabilization, if required, to optimize value.

The purchase price that we will pay for any real estate-related debt investment will be largely based on the fair market value of the underlying real estate as determined by a majority of our directors (including a majority of

the conflicts committee). In the cases where a majority of our conflicts committee require, and in all cases in which the transaction is with any of our affiliates, we will obtain an appraisal of fair market value by an independent expert selected by conflicts committee; however, we will rely on our own independent analysis and not on appraisals in determining whether to invest in a particular asset.

We generally intend to hold our discounted real estate-related debt investments, whether we continue to hold them as debt or convert them to equity via a foreclosure or deed in lieu of foreclosure, for two to six years, which we believe is the optimal period to enable us to capitalize on the potential for increased income and capital appreciation; however, economic and market conditions, and changes in REIT regulations, may cause us to adjust our expected holding period in order to maximize our potential returns. We cannot predict the various market conditions that will exist at any given time in the future. Because of this uncertainty, we cannot assure you that we will be able to sell our real estate-related debt investments at a profit, which could adversely affect our ability to realize any potential appreciation on our investments.

Types of Real Estate-Related Debt

First and Second Mortgages. First mortgage loans are secured by first-priority mortgages or deeds of trust on real property and are senior to other creditors with respect to the underlying property. Although we have no present intent to do so, we may also invest in construction loans, which similarly are in a first-priority position. Second mortgage loans are secured by second-priority mortgages or deeds of trust on real property that are subject to prior mortgage indebtedness.

Mezzanine Loans. We may invest in mezzanine loans that are secured by 100% of the equity securities of a special purpose vehicle that owns real estate encumbered by a first mortgage loan. The mezzanine loans may include provisions wherein we receive a stated interest rate on the loan as well as a preferred equity interest, such as a percentage of gross revenues or a percentage of the increase in the fair market value of the underlying property, payable on the earlier of the maturity of the loan or the refinancing or sale of the underlying property.

To protect and enhance returns in the event of premature payment, our mezzanine loans may have provisions such as prepayment lockouts, penalties and minimum profit hurdles. In addition, the mezzanine loans may include other collateral to secure our investment, including letters of credit, personal guarantees of the principals of the borrower or additional collateral unrelated to the underlying property.

Subordinate Interests in Whole Loans (B-Notes). We may also acquire subordinated interests in first mortgage real estate loans (whole loans) from third parties that are directly secured by a property, which are referred to in this prospectus as “B-Notes.” B-Notes are loans that are secured by a first mortgage, but are subordinated to a senior lien interest in the property, which is referred to in this prospectus as an “A-Note.” In addition to the interest payable on a B-Note, the borrower under the note may be charged fees or we may be entitled to receive additional income from payments by the borrower in excess of the price we paid to acquire the note. Otherwise, we, as a B- Note lender, will have the same obligations, collateral and borrower as the A-Note lender, but we typically will be subordinated in recovery to the A-Note lender if the borrower defaults.

We may also buy a whole loan and sell an A-Note to an unaffiliated party and we would retain a B-Note. In this case, we would keep any profit made from the sale of the A-Note.

Acquisition Strategy for Discounted Real Estate-Related Debt

Acquisition Criteria. When evaluating potential acquisitions and dispositions of mortgages or other loans, we generally consider the following criteria with respect to the borrower:

• acquisition price in relation to perceived asset value; • potential value of the underlying properties;

• the balance sheet and any other financial statements of the borrower provided to us, which generally will have been reported on by nationally or regionally known accounting firms;

• the borrower’s experience; • the borrower’s payment history;

• whether the borrower has any judgments or bankruptcies on its record; • the borrower’s operating history; and

• recourse to the borrower, if any.

With respect to the property serving, directly or indirectly, as collateral for the loan, we generally will consider the property’s:

• location;

• operating history; • business plan; • market position; • occupancy trends; and • functionality.

With respect to structuring or evaluating the terms of a loan, including payment and collateral terms and conditions, we generally will consider the borrower’s:

• equity;

• loan-to-value levels;

• debt service coverage ratio levels; • legal structure and rights; and • credit ratings.

Conditions to Closing Debt Investments

Our advisor will perform a diligence review on each property underlying any mortgage, loan or other debt security that we purchase. We will generally seek to condition our obligation to close the purchase of any debt investment on the delivery of certain documents from the seller. However, the information available to us at the time of making any particular investment decision may be limited and we may not have access to certain detailed due diligence information regarding any particular real estate asset. Specifically, the facts and circumstances surrounding certain distressed debt investments vary based on the prior individual or institutional owner, and the scheduled timing or deadline for the sale and therefore, these circumstances do not always afford us the opportunity to perform as complete a diligence review as we would otherwise prefer and normally conduct for a non-distressed asset. See “Risk Factors—Risks Related to Investments in Real Estate.” Such documents are expected to include

all documents listed below under “Conditions to Closing Real Estate Investments,” where available, and would also include for our real estate-related debt investments:

• any default notices and correspondence;

• loan documents and files for the real estate-related debt investment;

• underlying documents demonstrating the security of the loan, such as the mortgage, deed of trust, pledge of interests or other evidence of security;

• comprehensive interest rate, credit risk and liability assessments and documentation, as available; and • such other loan documentation as may be appropriate.

Asset Management Strategy for Discounted Real Estate-Related Debt

Once we acquire a real estate-related debt investment that is non-performing, we will employ, as applicable, one or more of the following asset management strategies:

• attempt to negotiate a full or discounted payoff of the loan with the borrower;

• attempt to negotiate a workout of the loan terms, which may include a forbearance agreement; • attempt to acquire the underlying property via a deed in lieu of foreclosure; and

• commence foreclosure proceedings to acquire ownership of the underlying property.

If we acquire ownership of a property securing any discounted real estate-related debt asset, we will seek to stabilize the operations of the property through aggressive property management as well as to expend capital on required deferred maintenance or property improvements in an attempt to increase cash flow from the property and ultimately to refinance the property or sell the property should market conditions support a sales price that we believe optimizes the overall return for our investment in the asset.

Experience Buying, Improving and Selling Discounted Real Estate-Related Debt

In the past, our sponsor and its affiliates have also bought discounted real estate debt and disposed of it either in the form of debt or real property (subsequently obtained through foreclosure proceedings) for its own account through various credit and economic cycles. The table below sets forth details, as of September 30, 2013, about all such investments sold or otherwise disposed of by our sponsor or its affiliates in the last 10 years. All such investments were purchased as first mortgage loans on the underlying properties described below. We have included the information below only for purposes of your evaluation of the experience and reputation of our sponsors and its affiliates. Investors in our company should not assume that they will experience returns comparable to those shown below. In addition, certain of our sponsors’ and its affiliates’ programs have experienced adverse developments. See the “Prior Performance Summary –Adverse Business Developments and Conditions” for a discussion of the adverse business developments for investment programs sponsored by our sponsor and its affiliates.

Selling Price, Net of Closing Costs Property Location Date of Sale Years Held Cash Received Mortgage balance at time of sale(1) Purchase money taken back by program(2) _Total Total Acquisition

Costs(3) _{Net Cash}(4)

Treetops Pittsburgh, PA 2003 11 5,057,544 — (1,005,710) 4,051,834 1,764,000 2,287,834 1301 Connecticut Washington, DC 2003 8 6,652,107 5,747,001 3,155,475 15,554,583 8,000,000 7,554,583 Smythe Stores Philadelphia, PA 2003 7 409,475 — 1,655,406 2,064,881 1,007,554 1,057,327 Mill Spring Apartments Sharon Hills, PA 2003 7 776,126 — 1,729,490 2,505,616 2,528,976 (23,360)

Lofts at Red Hill Red Hill, PA 2003 6 262,700 — 233,083 495,783 400,000 95,783

Woodcrest Pavilion Cherry Hill, NJ 2004 8 2,548,572 — 2,131,649 4,680,221 2,527,417 2,152,804 Crafts House Apartments Philadelphia, PA 2004 8 900,000 986,852 (147,973) 1,738,879 1,031,525 707,354 Axewood Office Complex Ambler, PA 2004 7 1,300,000 — 2,011,004 3,311,004 2,478,919 832,085 Deerfield Beach Apartments Pompano Beach, FL 2004 7 3,341,441 — 2,100,776 5,442,217 2,797,861 2,644,356 Countryside Village Seabrook, NJ 2004 7 7,132,420 7,750,000 (3,985,965) 10,896,456 7,374,894 3,521,562 The Loewy Building Winston-Salem, NC 2004 7 3,089,753 1,308,994 753,698 5,152,445 3,050,369 2,102,076 Winthrop Square New London, CT 2004 7 1,200,000 8,133,216 (4,431,588) 4,901,628 4,760,894 140,734 NorthCal Property Los Angeles, CA 2005 9 3,321,765 1,977,126 (841,023) 4,457,868 2,005,000 2,452,868 The Granite Building Pittsburgh, PA 2006 13 925,000 — 725,523 1,650,523 1,082,325 568,197 Malco Industrial Center South Pasadena, CA 2006 11 2,373,861 2,273,000 (951,030) 3,695,831 1,650,000 2,045,831 Locke Mill Plaza Condos North Concord, NC 2006 11 68,308 3,000,000 (2,900,127) 168,181 1,278,143 (1,109,962) Redick Hotel Omaha, NE 2006 9 3,964,685 2,400,000 (3,091,988) 3,272,697 3,545,421 (272,724) Alex. Brown Building Baltimore, MD 2006 8 19,898,710 70,268,965 9,606,006 99,773,681 87,411,397 12,362,284 Pensacola Place Chicago, IL 2006 8 9,000,000 10,000,000 3,843,965 22,843,965 18,114,910 4,729,055 1521 Locust Street Philadelphia, PA 2007 10 2,411,720 — 999,470 3,411,189 1,582,088 1,829,101 Richmond Kmart Richmond, VA 2007 10 946,433 — 3,893,773 4,840,205 3,961,430 878,775 Clemens Place Hartford, CT 2009 11 8,897,089 11,940,000 5,769,155 26,606,244 14,548,344 12,057,900 St. Cloud St Cloud, MN 2010 16 2,225,000 1,021,273 (2,030,210) 1,216,063 818,263 397,800 Evening Star Building Washington, DC 2010 12 53,388,527 — 4,921,206 58,309,733 19,703,029 38,606,704 Waterford at Nevillewood Presto, PA 2010 1 19,316,474 — 2,939,757 22,256,230 15,927,213 6,329,017 Mill Creek Terrace Kansas City, MO 2010 1 10,256,915 — (960,746) 9,296,169 6,530,000 2,766,169 National Press Building Washington, DC 2011 12 16,595,307 — 27,886,841 44,482,148 6,797,750 37,684,398

Highline Club Novi, MI 2011 2 8,953,520 — 407,536 9,361,056 7,297,284 2,063,772

Northside Village Atlanta, GA 2011 1 13,800,000 — 986,852 14,786,852 7,999,999 6,786,853 Regency Park Indianapolis, IA 2011 3 8,273,726 — 833,144 9,106,870 10,848,558 (1,741,688) Bingham Cleveland, OH 2011 1 38,768,993 — 2,947,907 41,716,901 25,624,292 16,092,609

RBS Portfolio Various 2011 1 1,100,000 — (2,592) 1,097,408 901,993 195,415

Parkway Terrace Suitland, MD 2012 2 19,194,656 — 1,680,594 20,875,250 11,238,725 9,636,525 Midwestern Mortgage

Portfolio Various Various 5 36,711,300 4,972,839 2,299,459 43,983,598 38,302,979 5,680,619 Silverleaf Houston, TX 2012 1 6,200,000 4,462,666 (6,867,479) 3,795,187 3,171,100 624,087 Park at Bellaire Houston, TX 2012 3 3,880,000 242,269 373,444 4,495,713 3,261,505 1,234,208 The Enclave Winston Salem, NC 2012 3 9,300,000 1,431,963 (4,909,298) 5,822,665 6,893,531 (1,070,866) Mansfield Mansfield, CT 2012 2 16,075,000 9,483,207 (8,793,957) 16,764,250 9,647,420 7,116,830

Selling Price, Net of Closing Costs Property Location Date of Sale Years Held Cash Received Mortgage balance at time of sale(1) Purchase money taken back by program(2) _Total Total Acquisition

Costs(3) _{Net Cash}(4)

Elkins West Elkins, WV 2012 16 806,839 2,031,805 2,838,643 994,160 1,844,483

Birch Grove/Sycamore

Chase Decatur, GA 2013 2 12,507,464 — 332,767 12,840,231 8,488,256 4,351,975

International Village Indianapolis, IA 2013 5 10,588,612 — (6,056,598) 4,532,014 6,354,671 (1,822,657) ASB Properties various various 16,653,593 66,502,915 (43,008,451) 40,148,057 22,922,931 17,225,126 Town Park Birmingham, AL 2013 3 9,922,771 — (784,564) 9,138,207 6,250,000 2,888,207 Willington Willington, CT 2013 3 238,404 7,708,381 (673,218) 7,273,567 5,500,000 1,773,567 880 Montclair Birmingham, AL 2013 5 — 2,084,730 4,813,343 6,898,073 9,497,856 (2,599,783) Parkway & Parkgreen Houston, TX 2013 3 10,646,934 9,979,492 (2,493,327) 18,133,098 9,500,000 8,633,098 Whisper Tree/Heights at 2121 Lewisville, TX 2013 2 36,056,022 — (1,272,108) 34,783,914 18,100,000 16,683,914

(1)

Includes both financing secured through a mortgage, and financing obtained by selling a participation in the investment. If the investment does not have a mortgage balance at the time of sale, we did not foreclose on the property, but sold the debt investment. (2)

Includes cash activity from operating activities funded by or distributed to the program as well as funds obtained through financing or sale of participations where applicable.

(3)

Includes all costs related to original purchase of first mortgage investment as well as any costs incurred to maintain the investment, including capital improvements and operating costs (e.g., real estate taxes).

(4)

Excess (deficiency) of property operating cash receipts, including sale proceeds, over cash expenditures. Performing Real Estate-Related Debt

General

We also intend to make loans directly to real estate borrowers who are acquiring or refinancing multifamily properties or to acquire these loans. We anticipate that these loans will have a face value between $5 million and $50 million and be secured directly or indirectly by multifamily rental properties. We generally intend to originate loans with terms of 2 to 5 years; however we may make loans with terms that are longer or shorter depending on the market conditions and borrower or collateral.

Lending presents us with an opportunity to benefit from the positive trends in the multifamily industry, while being senior to an equity investor and typically receiving regular cash interest payments. Direct lending enables us to better control the structure of the loans and to maintain direct relationships with the borrowers. We intend to invest in mezzanine loans that are senior to the borrower's equity in, and subordinate to a first mortgage loan on, a property. These loans are secured by pledges of ownership interests, in whole or in part, in entities that directly own the real property. In addition, we may require other collateral to secure mezzanine loans, including