Wednesday, May 18, 2011

Loan Closed And A Possible New Investment

Hard money loan #13 closed today. Not sure how the borrowers made out with this investment. I'm pretty sure they lost money, but don't know how much. Not that it's any of my business. It'll be interesting to see if they ask to borrow from us again. I've got no problem lending to them again - after all, they always paid on time. I'm just curious to see if their loss sours them on flipping or not. My funds are sitting with my partner waiting for the next deal.

The first payment on loan #17 was mailed out today. As usual, this borrower paid early.

I also spoke today with someone over at Rising Sun Capital Group. I came across an article one of the principles wrote on the Bigger Pockets blog. RSG is a company that flips properties locally here in the Phoenix area and I'm thinking about investing some money with them. This is more risky than my hard money lending. If I invested with them, I would be actually owning property and thus taking on the risks that entails. I would be counting on their expertise in evaluating deals and choosing good ones, as well as their rehabbing and resale experience. In my phone conversation, I did find out that they have lost money on some deals in the past. (In comparison, my partner has been a hard money lender since the 90's and has not lost a penny of his or his partner's principle.) Of course, the potential returns are higher too. All my funds are currently tied up in loan rights now, so I have some time to think about this more. (The funds from hml #13 belong to my IRA and are not enough to meet Rising Sun's minimum investment.) When the Houston apartment sells and I get that money back, I may go this route. That likely won't be for at least a year.

I do find it funny that the guy I spoke too wrote an article about wanting to become a hard money lender and here I am, a hard money lender, looking to get into his business. I guess the grass is always greener on the other side!


Another Investor said...

The Rising Sun folks seem to be fairly discriminating in the properties they pick up. Not sure how long they will be able to buy at the auctions or bid low on listed properties, given the drop in inventory and the renewed demand.

What are they offering for their investors? How does that compare with what you are getting on your California loans?

Shaun said...

They split the profits 50/50 with investors and they look for deals where they can make at least 10% of the final selling price in profit. From an ROI basis, it would be a higher ROI than my loans. But there's also more risk. And there's also the fact that I've never done business with them before. I think for the time being, I'll watch how they operate.

Another Investor said...

How much skin do they have in the game?

Shaun said...

Unclear, but my impression was zero. Obviously, that's a red flag. From what I was told, they set up an LLC for each investor with them as the manager. They use hard money to buy properties, which allows investors to get in with a lower initial investment. But yeah - I would want them to have some of their money at risk too.

© 2006 Shaun | Site Feed | Back to top