Flipping a Ten Home Subdivision
May 23rd, 2010
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
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Finding Deals and Private Money
April 8th, 2010
You may have seen an email earlier this week on a 10-home development project in the San Francisco Bay Area. This opportunity presents a high return for investors in a short period of time. We had a tremendous amount of interest in the project, so I wanted to mention why this type of project is right for some people. As you know, I have mentioned that California has a ways to go before the shadow inventory burns off, jobs stabilize and we're back to equilibrium. Holding for the long-term in CA doesn't make sense to me right now because cash-flow is not as high as other states, and price appreciation in CA won't happen for years to come in most areas. However, manufactured or forced equity growth can happen. If you find a distressed property, fix it up and resell it, you can make money – especially with the added tax credit incentives to buyers right now. But not everybody has the time or expertise to take on the risks of such a project. That's why Real Wealth Network set up a private money fund called Network Capital Fund. Folks who want to put their idle dollars to work can get the benefits of flipping without having to put in the time or effort. If you have an equity line and are paying 5%, but stand to make 15% in the fund, you could earn 10% passive income on borrowed money. This kind of return may be higher than if you were to use the equity line for buy & hold property because the interest payments cut into the cash-flow. For example, if you had a $200k equity line and used it to buy cash-flow property, your return would be approximately 6-8% because you've got to account for the cost of funds. But if you put that $200K into the fund, the return might be 15% – $30,000 cash. Now if you used that cash gained (not the equity line) to purchase rental property, your return would double or even triple vs. using 100% borrowed money. PS – If you can find a fantastic deal, we may be able to fund it. We raised $3M in a weekend for the 10-home development project. We would like to know about the good deals you find. Don't let lack of financing stop you. We can help you raise the money. To Your Health & Wealth, Kathy and the Real Wealth Team
Tags: California, Private Money Investing
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Investor Tip of the Week – January 8th
January 8th, 2010
If U.S. financing were not available to you, how could you get your hands on some funding anyway? Think like an Australian. They are willing to put 50% down while paying over 8% and 6 points to get a loan.
Who do you know who’d like that kind of return as a private lender, knowing their money is secured to income property? Private financing may be all around you.
One of RWN’s team members gathered a group of colleagues and they pooled their IRA funds to buy Dallas property. 2010 will be another year of unprecedented deals. Don’t let it pass you by.
Tags: Financing, IRA Funds, Private Money Investing
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