All Forum Posts by: Jeremy K.

@Matt M.  short answer is yes.  Wouldn't like it one bit, but wouldn't change my lifestyle if it went south.

Hi @Lesley Resnick - the investment vehicle is a "note fund", like the type PPR offers. At only 25k, it wouldn't be a disaster for me if the note fund returned less than 10%, but it would be a disaster for the fund, since they've never missed a preferred payment since they started in 2007.

Hi @Paul B. -

I think that makes a lot of sense. I'm open to a different funding source, and could see a HELOC being a good option at the right rate. My concerns would be the time to close and broker/bank fees. Putting up my house as collateral wouldn't scare me since there's no way I would default on a payment of $25,000 even if the note fund went south. Broker/Bank/appraisal fees would be the biggest number to keep an eye on since the P2P fees are only 1%-3% total.

@Shiloh Lundahl - my thoughts exactly!  

Thanks Julian!  I agree. It seemed a little like people were only comparing this with a real estate transaction (which would require a hell of a lot more capital).  Rate arbitrage is a pretty standard play in the finance world - a little out of the box here.  But I appreciate the general sense that it's not enough of a return to justify the opportunity cost of using the money elsewhere.  I'd love to find out how your got started loaning to rehabbers at that kind of a return.  

Hi David & Jay - yeah, I see your points of view.  I'm still in my analysis phase, but my concern also is that the return is too low.  For easy numbers, it would be about a 20% cash-on-cash return for the 3 year term, which is about 6.5% per year if all turns out perfectly.  Not exactly blowing the doors off, and probably not pricing the risk quite right.  

Hey Travis - 

Thanks for your comments. I'm sure you're right about finding good rental deals if you know where to look. I should clarify that the rentals in my strike zone (2-3+ bed, no HOA, Lohi/Highlands/ Wheatridge area) are in the higher price range, and I'm glad to know there are less % down options. My overall point was that $25,000 is not a high enough ante in our market for a rental, but it's perfectly fine in a note fund. Point taken on the DTI.

Thanks Roman - this note fund pays a 10% preferred rate of return, which means you get the first 10% generated, and the company gets the rest (ie: if they generate 11% return, you get 10%, they get 1%).  They've never missed a preferred payment in their 10 years of operation, so it seems on the safe side.  I'm comfortable with the risk

Hi Pari!  Yes, I'm very interested in getting into the note world. I've listened to the podcasts with Dave Van Horn and Bob Malecki (and Note MBA with Chase & Robert) and thought it was a really exciting space.  Hey - I'm a finance nerd, these things excite me.  I've started that journey, and like many people, found note funds as a way to get my feet wet while I'm learning.  There seems to be a steep learning curve, so it's going to take a little while to get up to speed.  Thanks for the encouragement!

Hi Steve - Just got that rate from 3-4 places yesterday.  I was surprised too!