Earn 13% annual interest - who wants the last 10% of this loan syndication deal?

Question

Only 10% left of a loan syndication earning interest @ 13% on a $421,000 Fix and Flip. First trust lien and two personal guarantees. For accredited investors. Interest paid monthly on a 12 month term. Who wants it before it’s gone?

This is an ongoing rehab project that has already been pre-funded using internal funds so you start earning interest immediately. The developer has successfully repaid a loan previously with us and is a successful real estate attorney and investor with a 5 attorney firm. He also has a very strong credit score.

The property is: 262 Claremont Ave, Montclair NJ 07042

https://patchofland.com/investments/upscale-full-rehab-in-growing-montclair-nj.html

This is a full SFR rehab in a quickly growing local market and although the loan is written for a 12 month term the developer expects to exit within 6 to 8 months. The developer lives in the area and has also sold a similar but slightly smaller property in the neighborhood for $635,000.

• Total Loan: $421,000 with 10% remaining to be filled
• 13% Loan - managed by Patch of Land, interest paid monthly, balloon payment at maturity
• 70% ARV- although based on new updates it drops to 62%
• First Position Lien
• 2 Personal Guarantees on the loan
• Borrower with strong credit, extensive experience and high income.

If interested, send me a PM and I’ll get you the full note, appraisals and other due diligence documents.

AdaPia DErrico · Answer

Account Closed

@Mehran Kamari thanks for the great clarification! I hope I can clarify further because we are a bit unique in that we are one of the new Real Estate Crowdfunding firms and thanks to the JOBS Act legislation, we are able to solicit to accredited investors.

We pre-fund deals using internal capital and then syndicate it back out to our investors.

This particular project is being run by an accomplished RE investor and RE attorney based out of New Jersey for a rehab and flip. It's not a distressed property and in fact the developer is seeing great interest from potential purchasers even though the rehab isn't yet finished. Since we have already funded this project, and the developer has already closed on the property and started rehab work, we are just selling out the remaining 10% that has not already been purchased by our investors.

Anyone that is looking to invest will start earning their interest as soon as their funds clear escrow (generally 2-3 days). We do all the management and distribution work on the syndication and there's no fee to investors for participating. Please PM me if you have any questions at all and thanks!

Dion DePaoli · Answer

AdaPia DErrico 
	 
	 So what exactly is your company here?  You mention you are one the "new crowdfunding companies", so you have been approved as a Funding Portal or you are a licensed Broker/Dealer? 
	 
	 Who is the Mortgagee listed on the Mortgage and Note and how are you pooling the investors into that note?  
	 
	 Subject Property is in New Jersey, you seem to be in California, are you a licensed lender with the state of New Jersey?  
	 
	 If the intent is to fund the additional 10%, which sounds like it is your portion of the funding being taken out, who would then be the Syndicated Trustee?  
	 
	 The structure of this is not clear, folks use the word syndication and crowdfunding way out of context, can you explain how the capital is stacked into the note?
	 
	 Then what evidences their ownership/investment - 
	 Is this through legal assignment, equity assignment, or novation? 
	 
	 The note rate is 13%, what are the servicing fees that are being deducted for the servicing and adminstration of this investment?

Mehran K. · Answer

AdaPia DErrico Very interesting business model. I like that you've already put your own money up front prior to syndicating it out. As an investor, this would make me feel a bit more comfortable.

AdaPia DErrico · Answer

Mehran K.

Being a new company and an "Internet" company at that, we are very sensitive towards a potential investor's potential mistrust or skepticism. I mean, look at Bitcoin and Mt. Gox!

Along with the pre-funding/underwriting, which does in fact give an investor a little more safety, we are doing deals we feel provide lower risk and lower volatility overall. For a developer, they can close the deal faster, which as you know, is vital in fix and flips and rehabbing.

AdaPia DErrico · Answer

Mehran K. for some reason the post wouldn't take the hyperlink to your name, but I wanted to reiterate what I said above - thank you for taking the time to come onto the thread and provide clarification.

AdaPia DErrico · Answer

@Dion DePaoli You raise very good questions here and I'm going to answer each in turn:

So what exactly is your company here? You mention you are one the "new crowdfunding companies", so you have been approved as a Funding Portal or you are a licensed Broker/Dealer?

The "registered funding portal" specified in Title III of the jobs act doesn't actually exist yet. Since we aren't using unaccredited investors, and instead are operating under a Reg D rule 506(c) filing as the issuer, we are in full compliance with securities regulations. Once Title III is finalized and enacted, we will definitely be looking into working with unaccredited investors and therefore filing as a "registered" portal, however the SEC determines what that process will be. We expect it to be similar to registering as a B/D

Who is the Mortgagee listed on the Mortgage and Note and how are you pooling the investors into that note?

The mortgagee is Patch of Land and then we syndicate it with low minimums to our investor.

Subject Property is in New Jersey, you seem to be in California, are you a licensed lender with the state of New Jersey?

Based on the loans being to an LLC for a business purpose and the volume of business as a private lender, we aren't required to have a lending license yet in NJ. We are actively working on full licensing in several states so that we can move into more sophisticated offerings.

If the intent is to fund the additional 10%, which sounds like it is your portion of the funding being taken out, who would then be the Syndicated Trustee?

We prefund all of our deals and then syndicate the entire loan out but we also realize we might not be fully taken out. We are very happy to remain in every single loan we offer but that means we don't have as much funds to prefund more deals. We remain the Syndicated Trustee because we approve all of our deals before we prefund and would only be willing to prefund deals we are happy to hold. We have a duty to our investors to only bring the best possible deals to the platform because we are committing our own funds up front and to maintain high quality opportunities for our clients. We are also in talks with a hedge fund to provide us funding so that we keep 10-20% of each deal.

The structure of this is not clear, folks use the word syndication and crowdfunding way out of context, can you explain how the capital is stacked into the note?

Funny you say that because we actually say Crowdfunding is the 21st century term for syndication. Its very similar from my perspective. If you are referring to risk, everyone is in the note with the same level of risk, including us if we haven't filled it completely and therefore are maintaining a position.

Then what evidences their ownership/investment - Is this through legal assignment, equity assignment, or novation?

We currently operate through borrower dependent notes which are encumbered by the individual project however we will be moving to assigning interest through a specialty LLC.

The note rate is 13%, what are the servicing fees that are being deducted for the servicing and adminstration of this investment?

On this particular note we didn't charge a servicing fee or administration fee. We have built in systems that greatly reduce these costs and are passing them on to the investor. On some of the newer deals we started charging 1% to cover escrow and servicing costs.

I'm happy to discuss this further as is anyone on our team, if you'd like to follow up with a call, please PM me.

Mehran K. · Answer

No apology needed @Marvin S.! Was just trying to clear things up. Hope that helped.

Mehran K. · Answer

@Marvin S. I don't see how she could have been any more detailed in her post, it's very clear! People are pooling money together in a syndication to loan to a house flipper on the project listed. They have all they need to fund the loan except for the 10% they are asking for.

Doesn't seem like there is any note being sold, just investors looking for their 13%. Hope that makes sense.

Earn 13% annual interest - who wants the last 10% of this loan syndication deal?

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