Read this. It may just
be worth your while.
Little Rock’s core
business in private first mortgage finance – what is it; how much does it cost,
and why have we not been spreading the message lately?
An old saying: “Stick with the knitting”
Should “very” small business operators stay within the
strict parameters of their defined business model? Innovation and awareness are
of course compulsory, but it is always better to get better, so to speak, at
what you already do well, than to tilt at windmills. Comparative benefit is the
key.
In growing a small business, there is a fine line between
taking opportunities within the boundaries of existing and proven product and
moving on opportunities which may only be marginally within your tried and true
model. Even if we have the capability, the small business operator,
particularly a sole trader, must weigh up whether or not we have the capacity
in terms of time and other resources to go down a path which may even be in a
related area, but it is not “the knitting”. Regardless of the result, any
broadening of approach will impact on core business.
In the case of Little Rock, first mortgage private lending
on real estate under clearly defined circumstances is our bailiwick. For those
of you who have read my previous material, you know that we refer to it as “transition” finance.
The temptation is to want to believe that bigger is better
when we know it “ain’t necessarily so”; that even if there is a positive
outcome, at what comparative cost to “the knitting” does it come?
We have been extremely busy lately with deals that are not a
neat fit into our core business. More complex transactions than really suit our
role the private finance market. Positive outcomes? Sometimes.
What has suffered? Marketing. Our conversation with you -
our target audience. This is why we have not been on the air lately.
So, what do we do? Most of you know.
Over the past couple of months, we have built up a
store-house of funds (and in the millions) available
immediately to do what we do best –
- $500,000 to $1,500,000
- Non code
- Medium term, up to 12 months
- Plain vanilla transactions which require immediate attention and urgent settlement, but which do not presently fit into institutional guidelines. (But for what we refer to as technical reasons, and definitely not because they are simply not good enough)
- Examples – left over completed development stock for progressive sale; investment houses or units; long term purchase in one line of distressed assets from Receivers where “on-sales” have already been verifiably made (and generally with settlements on some of the stock) to support a CMV well in excess of the discounted purchase price. Barrier to entry here is the inherent risk of the borrower in purchasing in one line, usually with a bullet settlement date with the Receiver. This is very different from ...
- Purchase of a single property from a Receiver at an alleged substantial discount. Our immediate question is “Why can’t anyone buy it at the same price?” If the answer to that is they can, then it is worth what is being paid to the Receiver, regardless of any previous valuation, particularly as we do not rely on formal external valuations for our due diligence.
- Pricing? And what does “the knitting” cost? Well, it is the private market. Interest rates and fees will vary according to volume, urgency, appeal, simplicity and availability of funds, but will range from between 10 % per annum to (say) 18 % per annum – generally in the order of 12.50 to 13.00 % per annum. Fees will be determined by the same criteria.
CALL US, AND THE SOONER
THE BETTER – “KNIT ONE, PEARL TWO”
