Quote:
Originally Posted by Casey2296
I'm in private equity real estate loans, it's a simple equation, collateral + risk = rate, term, and loan to value. It's an interesting model to me, no foreclosure since I already am in possession of your collateral, more like a margin call, if the price of your 48 Jackie drops below our agreement and you can't pay the delta within 30 days the card is mine, I'll auction it off and get my money back plus some since I only gave you 50 cents on the dollar. These vaults a smart to only offer 12 month terms since the market is so violate. I would guess fair market rate should be in the 12-14% range and an ltv of 50%, and that's on solid pre-war, modern? Maybe 20%. And when you add the 1% transaction fee the rate of return starts to push the ROR an additional percentage point.
I can see why hedge funds would gladly fund a line like this with that model.
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I suspect that terms may vary from shop to shop, and probably over time for any given shop as they tweak their approach. But the terms I heard from PWCC are 40% LTV, 12% annual rate with a 3 month term, with 1-month extensions possible. However, they never did answer my question about who holds the option for the extension.
And I totally agree that the hedgies and private equity guys would make these loans all day long.