Fund Investing FAQs
Q: What is an accredited investor?
A: In order for an individual or an entity to qualify as an accredited investor, they must typically meet at least one of the following criteria:
- an individual with income exceeding $200,000 or joint income with his or her spouse of at least $300,000, in each of the last two years with the expectation to reasonably maintain the same level of income in the present year;
- an individual with a net worth exceeding $1 million, excluding the primary residence, either individually or jointly with his or her spouse;
- an entity that has assets exceeding $5 million that was not formed solely for the purpose of making the investment; or
- an entity whose owners all satisfy 1, 2, or 3 above.
For more information about the SEC’s requirements and common exemptions, see Regulation D Rule 506 in this brochure, Q&A: Small Business & the SEC.
Q: Do I have to be an accredited investor to participate in the fund?
A: Yes, our funds are set up for accredited investors only.
Q: How long is the fund investment term?
A: Each fund investment is a 3-year term. You should expect to receive the promised annual preferred return for 3 years.
Q: Can I take get my money back before the 3-year maturity date?
A: No, but fund investors have an indirect form of liquidity if they choose to redeem shares to purchase notes (upon availability), which may then be liquidated.
Q: What is the minimum fund investment?
A: The minimum fund investment is $10,000.
Q: How much does it cost to purchase a share in the fund?
A: Each share is $5,000, with the minimum requirement of a $10,000 investment.
Q: What’s the difference between Class A, B, and C shares?
A: The classes are set up for different offerings within the same fund.
Q: Is my fund investment passive?
A: Yes, investing in the fund is the most passive investment we currently offer. Investors receive their monthly return the 1st of each month directly into their bank account via ACH.
Q: When and how do I receive my preferred returns?
A: Preferred returns are directly deposited into your account (via ACH) the 1st of each month.
Q: How long has PPR been managing funds?
A: PPR has been managing note funds since 2007. Since then we’ve never missed a payment, nor have we failed to deliver the preferred return or lost any investor’s principal investment capital.
Q: Is there upside potential with my investment?
A: No, investors should expect to receive the promised annual preferred return.
Q: Is this return guaranteed?
A: Although we have never failed to pay the promised preferred return, past results do not guarantee future fund performance.
Q: Are the shares “liquid” in the fund?
A: Investors have the opportunity to redeem shares from their fund investment at anytime during their term to purchase notes from our Note Vault or weekly E-zine.
Note Investing FAQs
Q: What is a note?
A: A note is simply a promise to repay a loan. In the note industry, this promise is in the form of a contract in which one party (the borrower) agrees to repay a certain portion of the loan to the other party (the lender) within a set period of time and under specific terms (including interest rate on the loan, penalties for late payments, etc.)
Q: What’s the difference between investing in non-performing notes and performing notes?
A: Aside from the fact that performing notes are receiving payments, the main difference between the two classes of notes is usually how much time is spent to collect a profit and how much risk is involved with each. Performing notes can be a safer, much more passive way to invest, whereas non-performing notes are considered much more active, requiring a more significant time commitment and higher level of risk tolerance.
Q: Why are notes discounted?
A: Notes may be discounted for a variety of reasons, such as performance, value, condition, and status of the property.
Q: How is my note investment secured?
A: When a note and mortgage (or deed of trust) is first originated, the recording of the mortgage perfects the collateral (the property) for the bank. If and when the note and mortgage are ever sold by the bank in the future, a new assignment of mortgage is drawn up and recorded in the county courthouse where the mortgaged property is located. Once recorded, this transfer of the mortgage to a new owner is now public record.
Q: What do I do if my note stops performing?
A: If a performing note is purchased directly from PPR, it is immediately covered by a performance note warranty. In this instance, PPR will attempt to get the asset re-performing within a six month period or will issue a cash refund and/or note credit for the remaining principal investment (minus payments received) in exchange for the return of the non-performing note and collateral. If the note is purchased from another source, the note buyer would typically initiate legal action and work the loan like any non-performing note.
Q: What do I do if a borrower pays off the performing loan early?
A: This is a common outcome with the majority of performing notes since the average mortgage is only kept for 5 to 10 years. When the note is paid off early, the note owner should record a satisfaction of mortgage. This document states that the property is no longer collateral for the loan because the term of the loan has ended or the borrower has transferred ownership of the property.
Q: How can I sell a performing note?
A: Notes can be sold in a variety of ways, either by individual investors or through online venues such as FCIexhange.com, LoanMLS.com, or the Distressed 2nd Mortgages Group on LinkedIn, as well as other traditional bidding sites such as Auction.com.
Q: How long is a workout meant to last?
A: Every workout is different, and timelines vary from case to case. Many times loan modifications are longer than the original term to adjust for back payments and arrears, while still having payments remain affordable for the borrower.
Q: Can I Invest in Notes While Working a Full-Time Job?
A: You can certainly be successful investing in performing notes part-time because the servicer really does the bulk of the work, from collecting the borrower payments to accounting and tax reporting. The same can be said with non-performing notes when an investor employs a servicer, but in the case where an investor is properly licensed, it is still possible to work notes with a full-time job.
Q: Can I Invest in Notes With No Money?
A: It does require capital to buy notes, but the short answer is no, you don’t need any of your own money. Many companies are built by pooling investor capital, for example private equity by selling shares. You can also raise capital through debt, for example using a business line of credit.
Q: Is it possible to educate myself on the note industry?
A: The short answer is yes. There is plenty of educational material readily available on the note industry, but notes are a learn-by-doing business. It isn’t until somebody goes through the process of buying, maintaining, and owning a note, that they truly learn about notes.
Q: What are tax implications of note investing?
A: Although PPR does not offer accounting advice, when an investor owns an individual note and is receiving payments, the interest portion of monthly payments are taxed as interest income. If an investor sells or cashes-out of a note, it’s either a short-term or long time capital gain/loss depending on whether you own the note longer than a year and a day.