disclosures - private lender link€¦ · our goal for this brochure is to hopefully educate and...
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DISCLOSURES:
THIS BROCHURE DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY, AND IS NOT A COMPANY PROSPECTUS OR PRIVATE PLACEMENT MEMORANDUM.
IN MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED.
PROSPECTIVE INVESTORS ARE URGED TO READ THE PRIVATE PLACEMENT MEMORANDUM
CAREFULLY. EACH PROSPECTIVE INVESTOR WILL BE OFFERED AN OPPORTUNITY TO TALK
WITH MANAGEMENT OF THE COMPANY TO VERIFY ANY OF THE INFORMATION INCLUDED
HEREIN AND TO OBTAIN ADDITIONAL INFORMATION REGARDING THE COMPANY.
ANY HISTORICAL PERFORMANCE DATA CONTAINED IN THIS BROCHURE (TOGETHER
WITH ANY AMENDMENTS OR SUPPLEMENTS AND ANY OTHER INFORMATION THAT
MAY BE FURNISHED TO PROSPECTIVE INVESTORS BY THE COMPANY) REPRESENTS PAST
PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT AND FUTURE
PERFORMANCE MAY BE DIFFERENT THAN THE PERFORMANCE DATA PRESENTED.
ANY REPRODUCTION OR DISTRIBUTION OF THIS BROCHURE, IN WHOLE OR IN PART OR THE
DISCLOSURE OF ANY OF ITS CONTENTS WITHOUT THE PRIOR WRITTEN PERMISSION OF THE
COMPANY IS PROHIBITED.
© COPYRIGHT 2018 AVONDALE PRIVATE LENDING LLC
Dear Investor,
Sincerely,
John SpearsManaging Member
Dominique OrbonLoan Officer
According to a recent Gallup survey, 89% of families with annual income over $100,000 have money invested in the stock market. What’s amazing is that to the contrary, a very small percent of the investing public (maybe 1%) practices private lending or note investing as an investment strategy. In other words, very few investors understand that you can “be the bank”.
Our goal for this brochure is to hopefully educate and inspire you to explore the opportunity that exists in private lending and note investing. We explain what this niche is all about and how you can profit from it. In addition, we present the opportunity to invest in Avondale Private Lending LLC, our private fund that focuses on first lien loans to real estate investors seeking to renovate or develop residential property in the Dallas-Fort Worth area.
In the next few pages, we describe some aspects of Avondale Private Lending LLC that we believe you will find important. However, we encourage you to read our Private Placement Memorandum (PPM) before investing. If you have any questions, please feel free to call or email us.
What is private lending?
Private or non-bank lending is a niche area of finance where individuals or businesses lend money to others. In short, this niche exists simply because private lenders can help borrowers bypass the complexity of highly regulated banks.
Private Loan Bank Loan
Based on collateral, borrower’s experience level.
Based on borrower’s credit score and income.
Negotiable rates/terms. Non-negotiable rates/terms.
5 days to close. 30 days to close.
10% down. 20% down.
10-12% 6%
0-2% 1%
Borrowers often use private money loans to develop or renovate real estate. In these situations, the property itself acts as collateral in the transaction and serves as protection to the lender in case the borrower were to default on the loan. Most private lenders fund in the first lien position, meaning they are the first creditors to be paid in a default.
These private loans are typically short-term loans, from 1 month to 2 years, where the lender charges a higher interest rate than a traditional bank. Even with higher interest rates of 10-12%, these loans are still worthwhile for the borrower because the loan process is much faster than traditional financing. Without this quick access to capital the borrower may miss out on their business opportunity. In addition, down payment requirements from private lenders are not as demanding as banks.
The following is an example of how borrowers compare the two different types of financing, with loan rates and terms generalized for each type of loan.
Private Loans vs. Bank Loans
Qualification
Flexibility
Speed
Down Payment
Interest Rates
Origination Fee
The Loan Process
Borrower applies for a loan:
• Borrower submits a loan application.
• Lender analyzes the borrower’s background, credit score, assets, bank accounts, and experience.
• Lender approves borrower.• Borrower proposes a
property to develop or renovate.
Lender analyzes the property:
• Property comparables• Appraised value• Repair/construction budget• After Repair Value (ARV)• Loan-to-Value (LTV)• Title commitment and
policy
Borrower closes on the loan:
• Title company orchestrates closing with Borrower
• Lender documents signed
1. Promissory Note2. Deed of Trust3. Non-homestead Affidavit4. Personal Guaranty5. Loan Agreement
0-2% Origination Fee
1 2 3
Construction draws:
• Lender reviews picture updates from Borrower, budget, timeline, receipts, lien wavers to determine if draw request matches up with completed work
• Property inspections• Draw wired to Borrower
Property sold:
• Buyer and seller close the sale by signing documents at the title company
Loan paid off:
• Title company pays off Lender by wiring principal amount of the loan, plus any unpaid interest, wire fees, etc.
Project begins:
• Permits filed• Demolition or
construction of residence• Sub-contractors submit
receipts to Borrower for completed work
• City inspections
Interest Accumulates at a 10-12% Rate
4 5 6 7
Why invest in private loans?
1. You are the bank.
2. It’s a secured investment.
3. It’s a high yield, income-producing investment.
4. It’s an alternative investment.
5. It’s a tangible investment.
Private lending allows you to participate in one of the oldest forms of finance - being the bank. Acting in this capacity allows you to be in control - define your own terms, rates, and standards.
A private real estate loan is secured primarily by the first position lien on the property. The Deed of Trust is the legal document that collateralizes the loan and serves as the security instrument. In addition, the loans are secured by a Promissory Note, Personal Guaranty, hazard insurance policy and title policy.
Because private loans typically charge 10-12% interest, plus origination fees of 0-2%, an investor can achieve high single-digit or double-digit annual returns.
Most investors already have exposure to stock and bonds. Private loans can diversify your investments by decreasing exposure to broad public markets.
Unlike investments in the stock market, a private loan is a tangible investment, where investors can meet the borrowers and visit the properties tied to the loans.
6. Make money while you sleep.Interest income associated with private loans accumulates 24 hours a day and 7 days a week during the term of the loans.
Avondale Private Lending LLC (the “Fund”) is a private loan fund that serves as an income-producing, alternative investment for the investors. To accomplish the Fund’s objective, the company makes and services business purpose loans to residential real estate investors seeking to renovate or develop residential property in the Dallas-Fort Worth area. The Fund is a pooled loan portfolio comprised of approximately 30-40 active loans with interest rates of 10-12%, origination fees of 0-2%, and secured by Deed of Trust and Personal Guaranty legal documents.
Fund Overview
Fund Facts
Each year the Fund is required to engage a third-party Certified Public Accountant (CPA) to perform an audit of its year-end financial statements, and provides the results of the audit to all investors. For 2016 and 2017, the audits were performed by the Dallas-based accounting firm, Montgomery Coscia Greilich LLP.
7-12% annually.
The Fund makes and services business purpose loans, to professional real estate investors in the Dallas-Fort Worth area. The characteristics of properties subject to loans include:
• residential renovation• residential new construction• residential rental property
The Fund only accepts accredited investors, which includes those that meet one of three tests: $1 million individual net worth (excluding primary residence), OR individual income of $200,000 in the last two years, OR joint income with a spouse of $300,000 in the last two years.
The Fund takes investments in increments of $50,000.
Quarterly.
2.00% of equity assets under management.
The Fund is structured as a Texas Limited Liability Company (LLC) and each investor owns membership units of the LLC. The units offered are not registered under the Securities Act of 1933, in reliance upon the exemptions from registration provided by the Securities Act of 1933 and Rule 506(c) of Regulation D.
The Fund has used multiple law firms for legal documents and regulatory filings including: Geraci LLP (Irvine, CA), Vela Wood LLP (Dallas, TX), Higier Allen & Lautin (Dallas, TX) and David J. Willis (Houston, TX).
The Fund’s primary objective is to invest in the niche asset class of private loans secured by first lien deeds of trust. These short-term, collateral-based loans seek to provide investors with strong cash flow from borrower interest payments while preserving investors’ principal investments.
The Fund has equity commitments totaling $6.7 million and a $2.5 million credit facility with LegacyTexas Bank. This totals $9.2 million in total assets under management.
Objective
Structure
Investors
Target Investments
Assets Under Management
Minimum Investment
Management Fee
Target Return
Distributions
Audit
Legal
Avondale Private Lending was founded by John Spears after his own private lending experiences in 2015. After funding several successful renovation projects in Dallas, he came to realize how common it was for traditional banking institutions to refuse renovation projects and how banks respond too slowly for real estate financing, even for borrowers with solid track records. Recognizing the opportunity, Mr. Spears formed the company in 2016. Since then John has funded over $20 million in private residential loans, established extensive relationships with other private lenders across the country, and earned the Certified Fund Manager designation from the American Association of Private Lenders. Prior to starting a career as an investment manager, John spent 10 years in consulting and business valuation. His educational background includes a bachelor’s degree in Finance from TCU, a CIMA© certification taught in conjunction with the Wharton School, University of Pennsylvania, and a Certificate in Financial Planning from SMU. In addition, he serves on the Board of Cenergistic LLC, a portfolio company of the venture capital firm, Kleiner Perkins Caufield & Byers.
As Loan Officer for Avondale Private Lending, Dominique has underwritten and processed over 100 private loan transactions totaling over $20 million. She is well-versed on the numerous details related to vetting borrowers, property valuation, loan origination and servicing. Her daily focus is on each step of the loan process from the initial meeting with a borrower to a loan payoff. In addition, Dominique brings significant experience with residential real estate investors, title companies, and wholesaling companies. Her prior work experience includes administrative roles at Nicox, the nonprofit A Wish with Wings, and Theo Executive Group. She graduated with a bachelor’s degree in Business Administration from the University of Texas at Arlington.
DOMINIQUE ORBONLoan Officer
JOHN SPEARSManaging Member
108 loans originated since inception.
Avondale Private Lending has originated over 108 loans since inception in 2016, totaling over $20 million in total loan volume, and zero loan defaults. All of these loans are secured by residential properties in the Dallas-Fort Worth area and personal guarantees by borrowers.
In 2017 the Fund originated 84 loans and total loan volume of $17 million, resulting in a 9.19% return to investors net of fees.
Property AddressLoanAmount
Interest Rate
Origination Fee
Internal Rate of Return(IRR)
2109 Tulane Dr, Richardson, TX $208,500 12% 2% 36.9%
5411 Preston Haven, Dallas, TX $745,000 10% 0% 10.2%
3108 San Sebastian Dr, Carrollton, TX $158,500 10% 1% 20.8%
6856 Colfax, Dallas, TX $640,000 10% 0% 14.4%
204 Shady Brook, Arlington, TX $135,000 10% 1% 16.0%
417 Autumn Trail, Royse City, TX $115,000 10% 1% 16.8%
10137 Mount Pheasant Rd, Fort Worth, TX $146,000 10% 1% 17.3%
2007 W 10th Street, Dallas, TX $110,000 10% 1% 26.7%
2949 Hollandale Ln, Farmers Branch, TX $110,000 10% 1% 23.0%
325 Forrest Hill Ln, Grand Prairie, TX $115,000 12% 2% 27.6%
107 N Windomere Ave, Dallas, TX $280,000 12% 2.5% 18.8%
3007 Shadow Wood Drive, Dallas, TX $97,000 12% 2% 18.5%
3216 Townsend Dr, Dallas, TX $270,000 12% 2% 16.9%
2941 Seymour Drive, Dallas, TX $175,000 12% 2% 20.8%
810 Fondren Drive, Arlington, TX $150,000 10% 2% 19.7%
3011 Ranch House Rd, Willow Park, TX $220,000 12% 2% 18.6%
3712 Wingate, Carrollton, TX $225,000 10% 1.5% 17.7%
2505 Newcastle Drive, Garland, TX $108,000 12% 2% 21.2%
6604 Hillbriar Drive, Dallas, TX $300,000 12% 2% 21.8%
6624 McCart Ave., Fort Worth, TX $120,000 10% 2% 55.5%
1220 Beatty Drive, Cedar Hill, TX $127,500 12% 1% 24.5%
Loan Examples
How to Invest
• Read the Private Placement Memorandum. This document is a comprehensive summary of the fund and provides details regarding the offering, principal terms, management and risk factors.
• Sign the Company Agreement. The Company Agreement goes in to detail about the rights and powers of you as a member of the LLC and provides a list of investors and their ownership percentages.
• Sign the Subscription Agreement. The Subscription agreement indicates the dollar amount that you would like to invest.
• Sign the Accredited Investor Certification. This document provides information that allows us to determine whether you are an Accredited Investor.
• Send the Accredited Investor Verification to your CPA, Financial Advisor or Attorney to verify that you meet the accredited investor status.
• Fund with a wire or check. We will provide wiring instructions for wires to our company bank account or you may write a check to Avondale Private Lending LLC.
