In previous newsletters we discussed Debt and Equity investing as a Member of a Company. Investors looking for more security while investing their capital in Private Placement Memorandums (PPMs) have an option of a direct Promissory Note to the Company in situations where they will not become Members of the Company. This is a much simpler and more secure method of investing. In this case, the capital is provided at a given interest return rate, the security provided within the strength of the Company, and the assets of the portfolio that it holds.
Because the Note is debt to the Company, it has a priority position and becomes the first return of Capital; even before the Members’ funds are returned. This makes the investment an excellent choice for retirement funds.
Generally these types of investments will have a lower rate of return because of the security offered, and for some Investors, they will prefer this even though the return is less.
Many of these investments will be made for a specific project, such as an apartment building, recreational vehicle, or mobile home park, where the income is at a known value or a potential rate based on comparables of the market.
Liberty Creek will only purchase assets that are undervalued to the current market at deep discounts. This provides a measure of security for the value of the capital being deployed. A typical investment will be purchased at 50-65% of current market value, along with annual income producing percentages of 10-15%.
Investors are provided the same reports as the Members of the Company to assure transparency.
Generally terms are for a minimum of three years, and the interest may be rolled over for compounding or paid out on a quarterly basis.
Regardless of whether Investors use a Promissory Note or become Members of a Company, underperforming real estate purchased at deep discounts provides an excellent opportunity for alternative investments.