Fractional Private Money Loan
Hi BP, my first post here. Thank you for all your comments in advance.
I have been a SFH buy and hold investor and am considering this private money lending opportunity. The plan is to acquire two adjoining parcels in a prime California neighborhood and build four homes for sale. Land acquisition escrow is estimated to close this month after delays from May, due to issues with the city. Return is at a per annum rate, and payout will only at exit, either at the end of land acquisition and entitlement phrase (Q1 2017) or after construction and sale (Q1 2018). First position loan is less than 70% LTV, the offer here is a second position fractional loan among approx. 10 investors lending different amount. The investment is secured by a notarized promissory note and deed of trust. No personal guarantee will be given. The borrower is structured within a LLC. Planning/permitting and escrow communication is well-documented. Estimates seem to be conservative and pro forma comprehensive. I realize that this will be a high-risk investment but the return is also appealing.
Is this structure and process a standard one?
I am in contact with one other investor of this deal, would it be necessary to be acquainted with most of them? In case of default, each singular note would be treated separately, and priority based on investment fund proportion, correct?
Is it a high concern that personal guarantee is not given?
Wiring transfer of fund will directly go to the borrower (LLC), would it be possible to transfer to escrow for the land purchase?
Any comments would be much appreciated.