Private Equity Funding: Good Investment Opportunity?

I ran across this website recently, Pac Equities, Inc. It seems like they do private equity funding – that is, lend money to real estate developers who cannot get funding via conventional means (aka a bank?). I know nothing more about this than what their website told me, but my interest is piqued. It looks like you get a 10% annual return, including all expenses involved. Your investment is secured by “A legally recorded Assignment of Beneficial Interest in a Deed of Trust”, which I guess mean you are one of the primary lienholders on the property. According to them, “Pac Equities? own money, a minimum of 10% of the total loan made to each project, is invested along with your investment.” Anyone out there want to weigh in on this?

The minimum investment is $10,000. They seem some good information on their FAQ, such as the obvious question:

Q: What if the Economy goes into recession or there is a drop in the Real Estate market?

A: Real Estate market values move slowly, these are short term investments that allow a relatively quick exit. Your Deed of Trust Investment is secured with a high equity position in the real estate project. You are protected with a loan to value ratio of 70%. And remember, over 30 years of experience and knowledge are vested in this real estate project.”

Must research further…

Comments

  1. Be Cautious! This looks like one of the “scams” out there. The common method they use is to use part of the money they receive from late registers (investers) to pay those early registers. Some day they will shut down the website and their business, leaving a lot of late registers unpaid. But I know a lot of people invest on these kind of website and make quick money by registering early (a lot of such kind of companys pay by day, or even hour!) My suggestion is to stay away from them. Risk is very, very high.

  2. Chris in Maryland says:

    At minimum, this is a very risky investment in which you are providing money to borrowers who are such great credit risks that every conventional means of obtaining a loan is closed to them. However, just as likely, this is a flat-out scam to dupe investors.

  3. Yeah, looks like a scam but I’d like to hear more about it. Anybody with experience in this area?

  4. This sounds like another ABFS.

    On the flip side, I contemplated investing in ABFS about two years ago but got scared off by the risk. In hindsight, it would have been a good investment.

    I wouldn’t put anything but the riskiest portion of my investment portfolio into somthing like these funds.

    -Wes

  5. Yeah, seems like even a riskier proposition in this current environment. I’ll keep an eye on the company, but stay away from it for now.

  6. Margret says:

    Stay clear! better naught than ought!

  7. [Removed at request of commenter]

  8. Thanks for the comment, very very interesting stuff!

  9. W.P. Gentry says:

    I’m attempting to find other investors who went with Pac Equities. If anyone has an investment with this company please contact me about actions we can and will take.
    W.P. Gentry (360)573-0339

  10. I keep hearing people complain about Pac Equities and it possibly being a scam. There is a company in Greenville, SC Private Funding Source that does similar private funding and they are very legit. I’ve had my money invested for about a year and no complaints. Check out their website for more information.

  11. Rusty – How do you know it’s legit? I’m not saying it’s not. But just because you’ve gotten your interest for a year doesn’t mean anything – Do they file documents with the SEC? Lots of scams can run for years before anything happens. Pac Equities ran for a lot longer than a year.

  12. I personally know two of the individuals from the company. Also I have seen the properties they have financed, purchased and sold. They deal with commercial and residential properties. So while there may be some risk with any investment, I feel that they are using the funds for the purpose it is intended and advertised.

  13. Risky and expensive. There are many other places that will get you 10% a year.

  14. So Pac Equities turned out to be a scam, but are there any legitimate investment opportunities out there in private equity funding.

  15. Its a pretty common industry trend that most developer/operators in the middle market including REIT’s use pension fund, insurance co, family trust, endowment and private individuals money to fund the equity required to purchase and or develop assets, before debt service. Typical development returns are 25% IRR ( Internal Rate of Return) and 2 times the multiple ( Return on Investment) average holds are 3-5 years before dispostion. Most of the developer/ operators typcially fund 10% of the equity required and charge asset/property managment fees of 1-4% and most also charge acquistion and disposition fees as well.

  16. Ben Koshkin says:

    Annual returns of 20-30% are currently possible in the Houston area buying foreclosed homes for cash, fixing them up and selling them. There is typically low risk because the houses are usually purchased at $38-49 per square foot which is below replacement value.

    Ben Koshkin

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