There is always opportunity in the midst of crisis. Right now, one of the greatest opportunities is picking up almost-complete development projects. Most small builders were in high-cost construction loans that made sense 3 years ago, but don't work today. The cost to build is far higher than the price per square foot of bank-owned properties. Builders just can't make the numbers work, and many are reluctantly handing the projects back to the bank.
A local contractor found this 10 single-family home subdivision in the Oakland Hills with views of the Bay. The builder owed over $7M in private loans and was holding on by a thread. Even if he were able to complete the project, it would not pencil out after paying off the debt. We were able to short the loan to $1.5M and take over the project. We needed to raise $3M to complete the project, so we decided to give our investors 40% of the profits. Conservative projections show a 47% return for investors. The heavy work was already done. We expect to have these on the market by this summer.
We started the Network Capital Fund last year as an opportunity for Real Wealth Network members to both borrow and lend to each other, and do it safely and legally. Some of our members have capital they want to invest, but they want to remain passive. Other members have the skills, expertise and ability to find incredible deals, and need cash to acquire them.
Network Capital Fund pools investor funds and then lends it out to local rehabbers at 12% interest rate and 6 points for a 6 month term. This means the capital gets recycled twice, increasing returns for investors. In some cases, the rehabber will also split profits with the lenders. The borrowers must have experience in rehabbing homes. Every deal they bring to Network Capital fund is scrutinized with local appraisers and inspectors. Once the deal is approved, the funds are released in phases, with each phase being signed off on before the next phase of funding is releases.
If you find great deals, bring them to us and we'll help you fund it. If you want to put your money to work, let us know here!
Tags: Development, Distressed Properties, Flipping, Hard Money Loans, Private Money Investing, REOs, Short Sales
