Making Money thru Mezzanine Funding

From: Khurram Saeed


Hi All
Has anyone on this forum, done mezzanine funding, backed by Residential Property. Meaning giving money to deveoplers to develop and charging high interest rates for that money.

Does anyone have any solicitor contacts in melbourne who has done this sort of thing before? I am very very curios about this, because from what i have heard, it seems too good to be true...i.e. you have no down side yet you get upto 15-35% return.

Any help at all will be extremely helpful.
Thanks
Khurram
 
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Reply: 1
From: Igs Kanny


How does that guy sleep at night? HK I mean.
Mezzanine Funding for mums and dads.

Mate,

It's what banks do for other banks (and maybe for LARGE developers), not for bloks like U and me. From what I've heard.

Igs
 
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Reply: 1.1
From: Khurram Saeed


Thanks for that Igs.
So if i had 200,000 odd dollars, and i just wanted to do mez funding to small botiuque type developers, could I do something like that? Or am I dreaming?

Thanks for your insight, Igs. I appreciate it more then you know mate.

Cheers
Khurram
 
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Reply: 1.1.1
From: Always Learning


Khurram
<p>
You say:
i.e. you have no down side yet you get upto 15-35% return.
<p>
No down side, don't fool yourself, if a developer is paying 35% then accept that there will be an element of risk. I am not saying you shouldn't do it, but if I had $200K, I would do dome due diligence and explore the risks. Maybe a look into history, such as the Gold Coast Bust in the early 90's will be a good start.
 
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Reply: 1.1.1.1
From: Yuch .


It was in the Financial Review a few weeks ago that there was an article about HK and his investment strategy.

The article also reported that some people invested in HK's messanine lending have lost their money.

I went to his mezzanine intro night, personally I think it's very risky, especially with the current market. Gotta make sure you do extensive due diligenceon the developer you lending your money to!

Regards
yuchun
~ The secret to success is to start from scratch and keep on scratching. ~
 
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Reply: 1.1.1.1.1
From: Mark Pardi


This style of funding was mentioned a few months ago.

It has been around for years.

Its big end of town stuff used primarily for big commercial projects

The money is also provided by organizations.

It is so not new

and it is so not for "regular" folk its not funny.

Also ask your self this ?

What is the risk profile of a developer that has to rely on 25-35% interest rates to get his project over the line.

Mezzanine Lending.........PLEASE !!


Mark Pardi

General Manager Property Buyers Network NSW Pty Ltd

2/7 56 Berry St Nth Sydney
 
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Reply: 1.1.1.1.1.1
From: Steve Piggott


Mezz is just the fancy new word for 2nd or subsequent mortgages.
Yes it can be risky in a development scenario, but you can also hedge your risk by constructing a bank guarantee with a tri-party agreement with the developer/builder and his financier. If you construct the deal so that your BG is only granted upon the successful completion of the project. And if the dev/builder goes down , his financier still has to complete the project to spec.
Also in leiu of your 30+% you will now take units in the project and essentially guarantee your money and a healthy profit.
The notion that a developer needs to borrow funds at 35% because he lacks financial stature is nonsensical. Every astute developer wants to leverage his money into as many projects as possible in a boom period. Therefore paying 35% is smart if you can do multiple projects instead of locking up funds in one project. I have been involved in projects where mezz funds have been implemented. In my opinion the mezz funder was in a better position than the primary lender.
I know HK is promoting mezz for small investors, and if done correctly people can achieve good and safe returns. I dont understand why people knock things they do not fully understand. Risk is simply not having all the correct information.
Mostpeople would say jumping out of a plane without a parachute is perilous.
But what if the plane is stationary on the tarmac and there is a huge matress to land on! What is percieved as risk to most is demystified and performed with mitigated risk by those who know how to manage.
Anyone with the right information and tools can do mezz funding and profit safely.
Research the topic and employ the right individuals and results will follow.
This is not an Ad for HK btw, even tho I know he is into a large deal with Perpetual Trustees to implement his mezz funding strategies.
Happy Investing Neb :)
 
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Reply: 1.1.1.1.1.1.1
From: Khurram Saeed


Finally a well thought out answer....rather then the usuall dooms day scenarios...
thanks steve.
You know i have to ask you this, you are not one of HK's consultant are you?

Have you done any of this type of funding yourself, i would love to know more...my email is:
khurram_99_au@yahoo.com. Maybe we can meet for coffee or something, lunch dinner or whatever, and i can pick your brain a bit...if you dont mind.
Khurram
 
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Reply: 1.1.2
From: Ross Sondergeld


Hey Khurram,



Subject: Making Money thru Mezzanine Funding


I'd highly recommend that you search the archives.

Mezzanine Funding has been reviewed... Also find the related Australian
Financial Review article in the archives.



Ross Sondergeld ~ Buyer Agent

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...with a Buyer Agent on your side!!! "

Buyerside Real Estate Mobile 0412 289 464
Office 9b, 34 Glenferrie Drive Office (07) 5562 1555
East Quay Corporate Park Fax (07) 5562 1248
Robina QLD 4226, Gold Coast Buyerside@hotmail.com
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Reply: 1.1.2.1
From: Mark Pardi


Mezz or second mortgage funding is not all safe and all upside

Always check the sources ! who is promoting it and who is using it.

In my position I can not mention or elaborate too much.

However I have been involved in some very large projects with very large companies and have seen lots of 2nd mortgage stuff around

and again its not for small time investors especially when promoted to the masses.

Mark
 
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Reply: 1.1.2.1.1
From: Steve Piggott


Just for the record.. No I am not one of HK's consultants.

Happy Investing Neb :)
 
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