REAL ESTATE DEBT FUND
Institutional Quality Investment Disclaimers
The following information is an investment summary provided to prospective investors and others. This information is not an offering to sell either a security or a solicitation to sell a security. At the request of a recipient, the Company will provide a private placement memorandum, subscription agreement and the Limited Liability Company Operating Agreement. The Managing Member in no way guarantees the projections contained herein. Real estate values, income, expenses and development costs are all affected by a multitude of forces outside the Managing Member’s control. This investment is semi-liquid and only those persons that are able and willing to risk their entire investment should participate. Please consult your attorney, CPA and/or professional financial advisor regarding the suitability of an investment by you.
Accredited Investors Only
This offering is a 506(c) and is open to accredited investors only. An accredited investor has either a net worth of $1 million, not including their primary residence, OR an annual income of $200,000 (or $300,000 if married) for the last two years and you have a reasonable expectation that it will continue.
This document is confidential and may not be reproduced or redistributed. The information presented herein has been prepared for informational purposes only and is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or fund interest or any financial instrument and is not to be considered investment advice. This presentation is for institutional use only and is not to be distributed to any party other than its intended recipient.
The following materials present information regarding a proposed creation of a special purpose vehicle (the “Issuer”) which would offer securities (the “Securities”) to place private commercial loans to be selected and managed by the portfolio manager referred to herein (the “Manager”). These materials have been prepared to provide preliminary information about the Issuer and the transactions described herein to a limited number of potential underwriters of the Securities for the sole purpose of assisting them to determine whether they have an interest in underwriting the Securities.
The views and opinions expressed in this presentation are those of PassiveInvesting.com, LLC, HVR Investments, PIC Fund I, LLC and HVR Debt Fund I, LLC and are subject to change based on market and other conditions. Although the information presented herein has been obtained from and is based upon sources PassiveInvesting.com, LLC, HVR Investments, PIC Fund I, LLC and HVR Debt Fund I, LLC believe to be reliable, no representation or warranty, expressed or implied, is made as to the accuracy or completeness of that information. No assurance can be given that the investment objectives described herein will be achieved. Reliance upon information in this material is at the sole discretion of the reader.
This data is for illustrative purposes only. Past performance of indices of asset classes does not represent actual returns or volatility of actual accounts or investment managers and should not be viewed as indicative of future results. The investments discussed may fluctuate in price or value. Investors may get back less than they invested.
Forward-looking information contained in these materials is subject to certain inherent limitations. Such information is information that is not purely historical in nature and may include, among other things, expected structural features, anticipated ratings, proposed or target portfolio composition, proposed diversification or sector investment, specific investment strategies and forecasts of future market or economic conditions. The forward-looking information contained herein is based upon certain assumptions, which are unlikely to be consistent with, and may differ materially from, actual events and conditions. In addition, not all relevant events or conditions may have been considered in developing such assumptions. Accordingly, actual results will vary and the variations may be material. Prospective investors should understand such assumptions and evaluate whether they are appropriate for their purposes. These materials may also contain historical market data; however, historical market trends are not reliable indicators of future market behavior.
Information in these materials about the Manager, its affiliates and their personnel and affiliates and the historical performance of portfolios it has managed has been supplied by the Manager to provide prospective investors with information as to its general portfolio management experience and may not be viewed as a promise or indicator of the Issuer’s future results. Such information and its limitations are discussed further in the sections of these materials in which such information is presented.
Past performance of indices or asset classes does not represent actual returns or volatility of actual accounts or investment managers and should not be viewed as indicative of future results. The comparisons herein of the performances of the market indicators, benchmarks or indices may not be meaningful since the constitution and risks associated with each market indicator, benchmark, or index may be significantly different. Accordingly, no representation or warranty is made to the sufficiency, relevance, important, appropriateness, completeness, or comprehensiveness of the market data, information, or summaries contained herein for any specific purpose.
Past performance is not indicative of comparable future results. Given the inherent volatility of the securities markets, it should not be assumed that investors will experience returns comparable to those shown here. Market and economic conditions may change in the future producing materially different results than those shown here. All investments have inherent risks.
What is the Real Estate Debt Fund?
• In June 2020, we started a private lending business that originates short term loans (usually 6-9 month durations.)
• The loan is securitized with a first-position lien that we hold
• Since inception, we have funded 1,727+ loans equating to $353,577,020+.
• Borrower demand continues to be strong which allows us to fund about $8-$12mm in loans per month.
• We have a dedicated borrower management company, Rehab Wallet, to service and oversee all loan activity.
$1,000,000+ earns: 10%
$500,000-$999,999 earns: 9%
$100,000-$499,999
$25,000-$99,999
Risk Mitigation
We
have developed several lending safeguards based on our 51 years of lending experience to ensure we mitigate risks.
Inappropriate Usage of Borrower Funds
Unfamiliarity With the Location
To ensure renovation funds are used appropriately, we require borrowers to complete renovation work and provide proof of completion (via video and picture evidence) before receiving allocated funds, which are held until the proof of completion is approved by our team.
When buying real estate, location is key. We rely on personal knowledge, third-party tools for property data and valuations, and require Broker Price Opinions (BPOs) for every property in our portfolio to assess their value.
Foreclosures
Slow Demand
Despite best risk management efforts, occasional borrower defaults can lead to foreclosures. With just 2 foreclosures since inception (an industry leading .14% default rate), we strive to keep this number low by focusing on repeat borrowers, and employing a Director of Compliance to proactively monitor and address potential default issues.
Our business is based on building strong relationships and providing great customer service in the communities we loan in. This focus on relationships and customer service has created a strong demand for our product. If demand were to become slow, we would increase our outreach programs through real estate meet-ups, podcasts, webinars, social media, and community networking with new loan originators that has been a foundation of our business.
How Does the Fund Work?
9 Conduct comprehensive due diligence on borrower’s background, references, and financial capacity.
9 Acquire independent third-party property valuations to ensure accurate assessment.
9 Originate low-leverage loans secured by a first-position lien for enhanced security.
9 Employ institutional banking software, managed by seasoned professionals, to service loans efficiently.
9 Offer short-term, 6-9 month loan commitments for flexibility and responsiveness.
How is Your Capital Protected?
9 Real property secures a low-leverage firstposition lien, ensuring optimal security.
9 Borrowers provide personal guarantees, reinforcing commitment and accountability.
9 Capital is strategically diversified across all debt fund properties and safeguarded through title protection.
9 Investors enjoy a conservative return on capital, prioritized via a preferred return structure.
9 With an average interest rate per loan of 13.75%, only 50% of loans need to perform for investors to receive the preferred return.
9 Short-term loans offer prompt payoffs, granting investors timely access to capital as needed.
Why do WE Like the Fund?
9 $3,200,000+ invested by the GP.
9 Capital is securitized with tangible, hard real estate assets for enhanced security.
9 Enjoy the flexibility of no long-term commitment for your capital—access your funds as needed.
9 Benefit from monthly cash flow distributions and heightened ROI through monthly compounding returns.
9 Our historically low borrower default rate underscores the strength and reliability of our lending practices.
The Rehab Wallet Team has a robust 51+ year track record in lending which demonstrates our enduring expertise and success.
FAQ
What happens if a loan defaults5?
We hold first position liens with immediate rights to foreclose. Once foreclosed our team will either wholesale it to a well-known rehabber or we have the option to rehab the property ourselves and put it up for sale to get the property off our books.
How do you vet potential borrowers?
We use the number of deals that a potential borrower has successfully exited in the past. If we don’t know them, we have them send HUDS showing proof of those deals. The main focus for Rehab Wallet is the asset. We are only working with experienced borrowers at this time.
Do I have to compound my return or can I take out monthly distributions?
You are not required to compound your monthly return. When signing the private placement documents, there will be an option to select whether you would like a monthly distribution sent via ACH each month or if you’d like to compound your return. At any time you can choose to start/stop the compounding or monthly distributions.
How does the 90-day liquidity option work?
The liquidity option allows you to request your investment out of the fund with no penalty. When you submit your request, it can be for your entire amount or just a portion of it. Your requested amount will be returned to you within *90 days or sooner. *some exclusions apply – see PPM for details
Is my capital diversified across all of the loans in the fund?
Yes, this provides lower risk than lending private money on individual assets. Using a fund for this type of setup is essential to reduce risk since your investment is diversified across all loans immediately when you invest in the fund.
What requirements do the assets have to meet?
The asset needs to meet our guidelines of 65-75% ARV (After Repair Value.)
Our more experienced borrowers get the higher end of that spectrum. Our focus has been loan amounts under $250,000 with exceptions made only to very experienced borrowers above that number.
How long does it take to place my capital in the fund to start earning a return?
Once you sign your subscription documents, you will wire your funds to our company escrow account. Your funds will sit in this escrow account until it is placed into a loan. It can take up to 4-6 weeks to place your capital into the fund before you start earning interest.
Will I receive depreciation benefits from an investment in the fund?
As an investor in the fund, you will be earning interest. Whether you compound it or receive direct deposits, you will still earn and accrue interest. This income will be interest income on your K1. There is no depreciation.
APPENDIX
The Rehab Wallet Footprint
The Rehab Wallet team maintains a robust local presence within our target markets and actively engages with real estate networking groups to cultivate relationships with potential borrowers. Our emphasis lies in fostering connections with both current and prospective borrowers, ensuring a steady influx of new loans. In addition to our local engagement, we strategically employ targeted online campaigns to capture the interest of individuals seeking hard money loans for rehab projects, as well as boutique mortgage brokers.
Rehab Wallet Funded Project
This property is located in Hephzibah, GA. It was purchased on 3/3/2023 for $97,500 and our borrower put $60,000 into the rehab. They were able to sell the property on 7/6/23 for $235,000.
BEFORE AFTER
Rehab Wallet Funded Project
This property is located in Charleston, SC. It was purchased on 12/30/22 for $399,000 and our borrower put $70,000 into the rehab. They were able to sell the property on 6/9/23 for $613,414.
BEFORE AFTER
CO-GP
Harsh is the founding partner of HVR Investments & co-founder of Optin Venutres LLC. Harsh brings in global sales and executive management experience through his work for a multitude of different Fortune 500 technology companies managing worldwide sales and business development team. He also worked as a senior sales executive for different startups and publicly traded companies. He was instrumental in several merger and acquisitions. He also works for GHC as VP of business development
Harsh also is an active investor and developer in Real Estate Market in 6 different states in USA. He has also invested, co-developed and successfully joint ventured for different multi-family development, Hilton and Marriott hotels, storage and commercial shopping complexes.
Harsh earned his bachelor’s degree in Electrical Engineering from The University of Bombay. He then went on to earn his Master Degree in Electrical Engineering and Minor in Sales Management at MSU.
Sponsorship / Management Team
The Real Estate Debt Fund and Rehab Wallet is led by a management team with a combined 51+ years of relevant professional real estate experience.
KELLI GARRETT MANAGING PARTNER
DAN HANDFORD MANAGING PARTNER
DANNY RANDAZZO MANAGING PARTNER
HARRIS
MELISSA
The PassiveInvesting.com Portfolio
MULTIFAMILY
PassiveInvesting.com is a private equity real estate investment firm focused on building passive income and equity for its investors through risk-adjusted real estate investments in the hottest real estate markets in the United States.
In 2018, the managing partners, Dan Handford and Danny Randazzo joined forces and have since then acquired just over $2 Billion in real estate assets. Currently, the portfolio consists of $1.6 billion AUM in 5 different asset classes and just over 1,800 investors active in those assets.
PassiveInvesting.com currently manages and is actively acquiring the following asset types: multifamily, car wash, self-storage and hotel. In addition, Rehab Wallet is the private lending arm of the company: funding fix and flips and providing bridge loans to customers across the Unites States.
REAL ESTATE DEBT FUND
Terms and Definitions
1. An investment of $1,000,000 offers a preferred return of 10% and entails a minimum lock-up period of 12 months. This means that investors committing to this opportunity are expected to keep their funds invested for at least a year, during which they will receive a preferred return of 10% on their investment.
2. An investment of $500,000 offers a preferred return of 9% and entails a minimum lock-up period of 6 months. This means that investors committing to this opportunity are expected to keep their funds invested for at least six months, during which they will receive a preferred return of 9% on their investment.
3. Investors in the Real Estate Debt Fund enjoy a valuable opportunity to compound their monthly returns month over month, making it an enticing option for those with a long-term investment horizon. This unique feature empowers investors to reinvest their monthly returns, allowing their wealth to grow exponentially over time. By offering this monthly compounding option, the Real Estate Debt Fund aligns itself with the preferences of investors seeking sustained and compounded growth.
4. The Real Estate Debt Fund stands out by providing investors with a distinctive 90-day liquidity option, allowing them the flexibility to pull their capital out of the fund. While our commitment to swift responsiveness typically ensures a quicker turnaround, this unique feature guarantees that investors have the option to reclaim their funds within a 90-day time frame. Our dedication to meeting investor needs is underscored by this advantageous liquidity provision, reinforcing our commitment to transparency and responsiveness in managing the Real Estate Debt Fund.
5. The loan default percentage is the number of assets we have taken possession of as a result of a foreclosure. This does not mean that we lose money on these loans. In fact, we have realized a net profit on the loans we have taken possession of todate and then sold. Our goal is to remain below a 0.005 or 0.5% default rate and we are achieving that goal.
