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Updated over 7 years ago on . Most recent reply
Is fractional investing the same as doing a partial?
Ok first I’m trying to get my foot in the door in the NPN space. No complaints so far; it’s not an easy get rich thing so just plugging away.
I don’t understand partials but I came across something called fractional investing (I believe the term was)
This is a little different than a note. It’s actually a first lien position on the property based on the amount you put in. So for instance say 6 people go in to lending $600,000 to a developer (these are all non occupied investment properties in Texas) and all 6 put In $600,000, supposedly all six people will have their name as a first lien holder on the property.
It’s a lower return than what’s expected from a NPN but much less risk.
The one I’m looking at is a development of a two story commercial retail center with a LTV of 45%. All borrowers must pass a criminal background check and personally guarantee the loan.
Further should they not fulfill there obligation it’s Texas so foreclosure is fast. Exit strategy is expected payoff or refinance in 9-12 months.
Reason I’m doing this is while I work my way through building my NPN business I don’t want to leave cash sitting in the bank not making money.
ROI is expected to be between 8-10%. Sure not some of the much higher numbers that are available in the NPN world but better than what I’m getting now by far WHILE I continue to work on NPN as stated above.
Just curious if this is similar to doing a partial?
Thanks for any help.
Most Popular Reply

Bob Malecki
#5 Tax Liens & Mortgage Notes Contributor
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- Kingston, WA
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That's why I would rather form a LLC rather than a fractionalized DOT so that there is one controlling interest managing the assets and operations. As long as the other members agree, it makes life much simpler.
Excellent responses Jay!