I get these types of emails daily. This time around it's for a syndicate. Interesting proposition as you'd expect. Obviously some of the concerns which pop into my mind include: Exposure above initial investment Timeframe Holding entity Risk Payment of return (when or if) Who are your partners Who is behind it Would you stump up the cash (or borrowed $ - easiest way to make $$ on $0 of your own)?
Can someone help me understand the numbers? $1.00m equity raise $1.0mil debt funding $2mil total funds available. TDC $3.4m What/where is the extra $1.4mil from? You would want to understand how the 'team' is making money. Generally these types of deals are excellent for them. Also - what do you actually own? Units in a unit trust? What does the unit trust actually own? Who is borrowing the money and who is liable for the debt. More questions than answers at this point. I'm generally reluctant with these types of deals, as I know someone stands to make good money, but it's generally not the mug investor. Blacky
@Blacky - I'd need to understand what's behind those numbers a helluva lot more. Two stages 16 & 22 lots, so if first lot is sold out it pays costs for stage 2 or do they release some profit at end of stage 1 to provide base return to syndicate? ie if it were a linear relationship (which it's not) 16/38 of costs, gross realisation and net profit however as the project runs over 3 years, you wouldn't release profit until it's realised.
I wouldn't invest purely based on how they've presented the IM and figures. If they can't put much effort into raising capital, i don't have much trust in them delivering a project.
Its a fancy way of asking for unsecured finance for a high risk payoff that mainstream lenders wont touch. ie Lender of last resort. It may also breach ASIC rules
I know people who do this all over Sydney and have made a killing. They usually split the syndicate units between how many lots they can subdivide it into and the cost is usually in line with how big the block they get is..e.g $5mil required for 100 lot subdivision= 40-60k a unit. They always aim to have a finished product costing them 200k or less and either on sell or settle on it at market value. The unit sells it to the individual at market price to not kill valuations. Usually the bigger the syndicate and more units, the less per unit and more profit too as the bigger land is it gets cheaper per acre.. The catch is the group that organises the whole syndicate is usually given 2% of the profit
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