Q: What is the typical investment amount?
A: Our minimum is $50,000, but our investors range all the way up to $1,000,000. The average investment amount is approximately $150,000.
Q: Return and how interest is paid (monthly or at end of note?)
A: 10% return paid monthly. Example: $100k investment pays $833.33 monthly. Principal is returned in 12 months or earlier, when the project is sold or refinanced.
Q: Financing structure – what % of ARV is financed by a bank? by the investor note? Through equity?
A: At purchase we put down 20% in equity, the other 80% via a Note from a Private Lender. As the project moves along value is added through the additional equity we put up during construction. We typically end up with 30% equity in the deal as we seek funds to reimburse some of our construction funds.
Q: Contract used?
A: Two simple documents make up our contract: The Installment Note, which lays out the terms of repayment and a Deed of Trust that is recorded against the property with Maricopa County and secures your interest.
Q: How many concurrent projects is Blue Sky Homes working on?
A: We typically have between 20 and 30 projects going on at any given time in Central Phoenix and Arcadia. The workload on these projects varies depending upon what stage in the process they might be in at that time. I.e., the design team works particularly hard in Stage One as we finalize the plan for the home and obtain permits, while the construction team is most involved during Stage Three once the permit is issued and until the finished home hits the market.
Q: Protocol for if asset / flip underperforms?
A: Your 10% is guaranteed by the asset, which means that if we fail to pay back ALL principal and interest due then you as the lender may foreclose and take the property. Even on projects that we have lost money we have ALWAYS repaid in full both principal and interest. Since 2009 we have repaid over $75,000,000 in private loans over the course of 250+ projects without ever missing a payment.
Q: What if the loan pays off early–can I still make a 10% annual return?
A: Our company enjoys consistent deal flow, meaning that if your private loan pays off earlier than expected you always have the option to roll the funds immediately into a new loan on another project and continue the 10% annual return.
Q: Can I lend $50,000 in a first-position loan?
A: $50,000 loans will be in a junior position. Typical purchase prices in our market of $250,000+ mean that a $50,000 loan is not large enough to warrant first position.