You have questions, we have answers. This passive investment is a big decision. Let’s explore the most asked questions about working together.
What Exactly Am I Investing In?
We are currently accepting investors in PFG Fund III, LLC, which is our fourth private money mortgage fund. When you invest in PFG Fund III, LLC, you will be investing in a promissory note with a promised return on your money. This structure was selected so we can pay you a flat and predictable return each and every month. It also gives you the flexibility to receive a direct deposit each month or reinvest your interest for faster exponential growth.
What Are My Risks?
This is the most asked and probably the most important question you should have as a passive investor. There are always risks with investments that are not backed and insured by the federal government. Using real estate to secure notes is one way to manage risks from loaning money. As an investor in PFG Fund III, LLC, you want to know what the risks are to the investment fund so you can understand what the risks are to you individually. Here is a short summary of some of the key risks. But please send us a request for more information so we can send you the complete list of risks in the prospectus:
Default By Buyers
There is a risk of default by the borrower. A default would occur if the borrower stopped making payments and we are forced to repossess the property. Pine Financial Group, Inc. is a conservative lender with a low default rate. We have never experienced a default rate of more than 3% of the loans we originate. We have the borrower sign a note and a deed of trust or mortgage. We close every deal with a reputable title company and carry the appropriate title insurance. If there is a payment default, we have the option to negotiate with the borrower or accelerate the loan. To accelerate a loan means to demand full payment for all principal and interest, and if that does not occur, we will work towards repossession of the property. Chances are high that the borrower will deed the property to us in lieu of foreclosure to save their credit from the foreclosure, but if that is unsuccessful, we will foreclose to take ownership of the property. In any case, we are in a secure position with a low loan amount compared to property value.
Reduced Demand For Rehab Loans
If the money in the fund is not loaned out in our high-interest rate real estate loans, it could impact our profitability. It is the goal of management to keep as much money loaned out as possible, keeping returns to investors high while maintaining a conservative profit. Because this fund is set up to pay a promised 8% return, funds will be paid to investors regardless if money is loaned out. Not keeping money loaned out could impact the Fund’s ability to pay the promised return. If that does occur, we have several options that we may implement, which include:
- Lending in new markets
- Changing our loan products
- Other real estate-related investment options
- Return of capital to the investors
Too Much Demand For Rehab Loans
Too much demand and not enough money sounds like a great problem to have but it would cause Pine Financial Group, Inc. to turn down business. That could affect our reputation in the market. If this occurs and we find ourselves turning down business, we will attempt to raise additional funds to continue business and fulfill market demand or change guidelines or loan products to reduce demand.
What Are My Returns And How Are They Paid?
The fund will be signing notes in favor of investors with a promised 8% annualized return. Investor interest will be paid monthly. Investors will have the option to receive interest each month or reinvest that interest back into the fund to speed up growth.
What If Something Happens To The Property?
Property, casualty, and fire insurance is purchased on every property. The insurance is set up as a builder’s risk or vacant property policy. While a property is under construction and vacant, there are additional risks, and it is imperative that the correct policy is in place. Pine Financial Group, Inc. is listed on every policy as the loan servicer and will be listed on any payments for claims filed because of a loss. We are also notified if there is ever a lapse in the policy.
What If Something Happens To The Fund Manager?
The fund manager is Pine Financial Group, Inc. There are policies in place within the company delegating responsibilities should anything happen to a senior person. Pine Financial Group can run on its own if one or two people cease to contribute. If Pine Financial Group, Inc. ever discontinues business, all investors in PFG Fund III, LLC, will receive their investment back with interest as the loans within the fund are liquidated.
What Is The Maximum Loan-To-Value (LTV)?
The majority of loans will have a maximum loan to value of 70%. Although very rare, there could be exceptions to this, depending on compensating factors, which could include larger down payments, superb credit, or Pine Financial Groups’ experience with the borrower. Overall LTV of the entire loan portfolio tends to be between 60% and 65% of the total collateral value.
How Is The Loan-To-Value Determined?
In most cases, a full interior/exterior appraisal is done giving us the value after repairs are completed. The appraiser must be an approved Pine Financial Group, Inc. appraiser. The approved appraiser bios and experience are listed in the business plan as part of the Prospectus.
How Do We Know The Property Is Getting Repaired?
Pine Financial Group, Inc. establishes a repair escrow fund for all rehab loans, which is held in our trust account. The funds are released to the borrower or the borrower’s contractor as repairs are completed. The final draw is not released until the project is 100% complete. With each repair draw request, we personally inspect the property.
What If I Need Or Want My Money Back?
This fund is set up to have a minimum commitment from its investors of 24 months. Investor funds will be returned upon request after 24 months with no penalties or fees. If an investor requests their money back, all funds with interest will be returned as quickly as possible. If there is not enough money available to return capital, it will be returned as soon as sufficient money is available. This would most likely occur at the time of the next loan payoff but should not exceed 90 days. Please see the investor prospectus for more information about liquidating your investment.
What Paperwork Is Involved?
There is not much paperwork! After reviewing the Prospectus, every investor will need to complete an Investor Application. This is a simple form that collects basic information about the investor. Investors will then receive a signed Note showing the amount and the terms of their investment, along with a statement showing their updated account balance.
Can I Invest In Individual Loans Or Do I Have To Invest In A Fund?
Because we are licensed to broker loans backed by real estate, there could be opportunities to invest in individual loans on a case by case basis. If you are interested in this option, please reach out to us to set up a consultation.