All Forum Posts by: Ken Jernigan

@Jay Hinrichs Not to put too fine a point on it, but you have to distinguish between the lender and the borrower. I'm not closely familiar with the RS structure. but their website states the lender is RS Lending, Inc., not the individual investor. This means the secured party is RS Lending to specific DOT. It could be that the investor only has an unsecured claim against RS Lending. If it ends up in court, then Realty Shares control of distributions would be subject to approval of the trustee.

Devil's in the details with this stuff, so it would be useful to look at the actual investment documents. They don't appear to be on the website.

This could be bad news for RS investors if the company is forced into bankruptcy. As their website states, investments are not directly in the projects, but in obligations of a sub, RS Lending, Inc. This means individual investors do not have a direct claim on project collateral and face RS counter-party risk. They state this is a common arrangement among crowdfunding platforms, including LendingClub.

The big unknown is what a bankruptcy trustee may do when facing competing claims of creditors and investors. If individual investors are left out, it could be very bad for real estate crowdfunding. Best hope is another platform rides to the rescue.

More info here: https://www.realtyshares.com/learn/article/what-kinds-products-realtyshares-offer

Only if the developer is familiar with the NMTC program. Financing new markets deals can be tricky due to the convoluted structure and multiple parties involved.  You have to work through certified community development entities. A list by state is here: https://www.novoco.com/sites/default/files/atoms/f...

It's a small market so I wouldn't think  it would directly translate to a higher price for the land. 

You need to get copies of filed tax returns to verify any P&L the seller provides. Risk here is that the business continues under new ownership, especially if you have no prior experience or relationship to the business. Beware of absentee management--it gives employees an opportunity to steal.  What type of business is this?

You might talk to the tenant to determine terms they're seeking. They might agree to a letter of intent upon expiration of the existing lease. Lenders don't necessarily need leases in place to make  a loan. They'll look at condition of the building, value relative to other similar properties and strength of the local market. If local lenders aren't interested, there are national commercial lenders who would probably consider this one. 

@Henri Meli Right on. There's not enough info to accurately determine NOI on the building and compare cap rate to similar properties. Absence of personal on the lease is troubling, but doggy day cares normally make money. Due diligence should include tax returns and personal financial statement on tenant, tax returns on the building and preliminary environmental assessment. Might also do a lien search.

But this should pencil out at something less than 40% equity. Most industrials get financed at 75-80% LTV.

Most reputable kitchen equipment vendors provide design services. Be mindful of code compliance for things such as hood vent and grease trap.

@John Wijtenburg just to clarify--SBA requires owner-occupancy to at least 51% of square footage of building. Also they won't do anything with a residential component unless it is incidental to the operation of the business, like an apartment for an on-site manager for a hotel. In some cases, you can get 90% leverage on CRE.

You might try an SBA lender for a higher LTV. But I think your lack of experience might be an issue. Adult care is a highly regulated business.

Not usually. The senior lender will want a subordination agreement and may impose restrictions on repayment.