Q: Describe what your fund does and how it earns money.
A: We pool money from multiple investors and then typically use the resulting fund to make loans to borrowers who are buying properties to fix up and resell for a profit. In return, the borrowers pay interest to the fund and share a portion of their project’s appreciation.
Q: How does the management team earn money?
A: We collect points on each loan, and also share in the interest and appreciation after our investors are allocated their 8% preferred return. We do not charge a management fee based on a percentage of the assets under management, as do many other funds. Our objective is to make money with you, rather than from you.
Q: Is your fund registered with the State of California and the federal SEC?
A: The GCA California Real Estate Fund is registered with the California Department of Corporations, the regulatory body for this type of offering. As an intrastate offering, the fund is exempt from SEC registration.
Q: What kind of experience do the fund managers have?
A: Both of the managers have a long history of real estate investing – more than 50 years combined. In addition, Mr. Braegelmann has managed a private lending business with a very similar operating model to the fund for more than a year.
Q: What kind of returns should I expect if I were to invest in the fund?
A: While we can’t guarantee a specific return, the fund features an 8% annualized preferred rate with the potential for higher returns.
Q: What is the minimum investment amount?
A: The minimum investment is $25,000. Minimum incremental investments are $5,000.
Q: What are the biggest risks associated with this type of investment, and what to you do to minimize them?
A: Loans made by the fund are secured by real estate as collateral, with a maximum target of 70% loan-to-after-repair value. Rehab fees and interest payments for each loan are impounded and paid out of an escrow account. Therefore the biggest risks are that a rehab project is not completed with high quality, is not completed on schedule or is never completed. These risks are managed through the use of a third-party construction oversight company. This service monitors the progress of most projects and provides funds to the rehabber only as key milestones are completed.
Q: Are there any fees to either invest in or withdraw money from the fund?
A: There are no fees to either invest in or withdraw money from the fund.
Q: How liquid is an investment in the fund?
A: Because investments in the fund are combined with other investors’ money and then generally loaned to borrowers for periods of six, nine, or twelve months the fund has a minimum one year investment period and reserves the right to take as long as four quarters to fully fund withdrawal requests. However, after the one-year minimum investment period withdrawals can typically be fully accommodated in six months or less.
Q: How transparent are the fund’s investment activities?
A: Each loan made by the fund is managed through a standard third-party escrow process. The property transactions become part of the public record. We (the fund managers) will provide a list of current loans and their associated properties to investors upon request. These can easily be cross-referenced with public data using any one of a number of property listing websites now available.