Is fractional investing the same as doing a partial?

[Account Closed]

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.

[Bob Malecki]

Originally posted by @Jay Hinrichs:

One thing you want to do when you do a fictionalize is to get a handle on what happens in a default.. IE can you up front designate ONE person to sign all docs .. some issues we ran into in CA.. was investors not all agreeing to foreclose and so the loans would sit in limbo until they worked it out.. nightmare really.. so get that settled up front..

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!