How to Add Money to a Hard Money Fund
When someone gets into a Hard Money, they often wonder how the system works.
Lenders have a separate subscription account. They deposit money there. It is like a holding account.
If someone put money in the fund and it isn't working, it dilutes the yield for everyone. Bill and Wendy use the money and pay 8% when they use it. Then on the quarter, that money goes into the regular fund.
When you join a Fund, you become a member in an LLC.
Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the "Small Builder" borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and "Ground up Construction Loans" for investors only in NC, SC, GA, VA and TN (some areas of FL, as well).
As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.
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Hi, I'm Wendy sweet, Bill Fairman and we are so glad to have
you with us today. I have a question that a lot of people ask us, but I'm going
to ask you to give you the opportunity to give an answer. How's that sound?
It's always nice when I have an opportunity. That's right. So bill, there's,
there's a lot of people that ask us questions about getting into the fund and
what that looks like when you get into a fund. So I think somebody asked us
recently, how often does that happen? Our answer was hopefully every day.
you with us today. I have a question that a lot of people ask us, but I'm going
to ask you to give you the opportunity to give an answer. How's that sound?
It's always nice when I have an opportunity. That's right. So bill, there's,
there's a lot of people that ask us questions about getting into the fund and
what that looks like when you get into a fund. So I think somebody asked us
recently, how often does that happen? Our answer was hopefully every day.
Yeah. I mean it doesn't have every day, but it'd be nice
if it did.
if it did.
Sometimes we're getting more than one day and one day too,
which is always nice. But just talk about a little bit of how that works.
which is always nice. But just talk about a little bit of how that works.
With our fund, I like to say everything happens on the
quarter because we give out our statements on the quarter. Those are, that are
taking income from it. They get their checks on the quarter, everything happens
on the quarter. Does that mean you can only put money in at the quarter? No. As
a matter of fact, you might miss the boat if you wait until the quarter. The
way most funds work is that you have a separate subscription account. When
someone wants to put money in the fund, that money first goes into a
subscription account. There's a couple of things that happen there. Number one,
quarter because we give out our statements on the quarter. Those are, that are
taking income from it. They get their checks on the quarter, everything happens
on the quarter. Does that mean you can only put money in at the quarter? No. As
a matter of fact, you might miss the boat if you wait until the quarter. The
way most funds work is that you have a separate subscription account. When
someone wants to put money in the fund, that money first goes into a
subscription account. There's a couple of things that happen there. Number one,
we celebrate. Woo.
Yeah. After we celebrate,
you're not making any money. How's that for a deal? So
this subscription account, the subscription account is like a holding account.
And like I said, you can't start as a fund member until the quarter starts. So
why do you have a subscription account? Well, if someone puts a chunk of change
in the fund that hasn't been working in the fund, what does that do for
everyone else that's in the fund? Kind of dilutes what they're making, right?
Because you're percentage, your yield is based on amounts under management. So
you take all the money that you've made throughout the quarter, you subtract
all the expenses and then you divide it into the amount of money that you have
under management. Well, if I have a big chunk of change that is added, that
hasn't been working to get an income, then it dilutes the yields for everyone
else, right?
this subscription account, the subscription account is like a holding account.
And like I said, you can't start as a fund member until the quarter starts. So
why do you have a subscription account? Well, if someone puts a chunk of change
in the fund that hasn't been working in the fund, what does that do for
everyone else that's in the fund? Kind of dilutes what they're making, right?
Because you're percentage, your yield is based on amounts under management. So
you take all the money that you've made throughout the quarter, you subtract
all the expenses and then you divide it into the amount of money that you have
under management. Well, if I have a big chunk of change that is added, that
hasn't been working to get an income, then it dilutes the yields for everyone
else, right?
So we put it in this subscription account when we wait for
the quarter to start yet. But that doesn't mean it's never going to earn any
money. We are always utilizing money in this subscription accounts, right when
they come in, it just doesn't start into the fund until the quarter in. So what
we do is we guarantee you we, it's like a temporary note, we pay you 8% when we
use it, not when it goes in, but when we use it. So I have money in this
account, I have loans that are coming up due, I'll move money from that account
to the operating account when I've moved it over and we pay you 8% until the
end of that quarter. And then you just in line with everybody else's in there,
at least that money is working for you in an ads for your balance in it. And it
goes from there.
the quarter to start yet. But that doesn't mean it's never going to earn any
money. We are always utilizing money in this subscription accounts, right when
they come in, it just doesn't start into the fund until the quarter in. So what
we do is we guarantee you we, it's like a temporary note, we pay you 8% when we
use it, not when it goes in, but when we use it. So I have money in this
account, I have loans that are coming up due, I'll move money from that account
to the operating account when I've moved it over and we pay you 8% until the
end of that quarter. And then you just in line with everybody else's in there,
at least that money is working for you in an ads for your balance in it. And it
goes from there.
So at the end of the quarter, bonafide, and I'm in the
pool of people that are, yeah.
pool of people that are, yeah.
So let's say you put in $100,000 well you're going to earn
8% on that $100,000 from the time I started using it in a deal. So when your
quarter starts, you may start with 100,000 or maybe 101,000 to start with
8% on that $100,000 from the time I started using it in a deal. So when your
quarter starts, you may start with 100,000 or maybe 101,000 to start with
even more than I thought because I'm able to take the
interest that I earned and add that to your balance. Unless of course you've
chosen to
interest that I earned and add that to your balance. Unless of course you've
chosen to
take money out
at the end of each quarter, and get paid, right? Again,
you're not going to get that 101,000 or you're not gonna
get that 1000 cause he hadn't been in a quarter yet. But the Following quarter,
you'll get what you'll get plus the 100.
get that 1000 cause he hadn't been in a quarter yet. But the Following quarter,
you'll get what you'll get plus the 100.
Geez, that was easy to explain. All right, so a lot of people
ask me while we're on that subject, what if I want to add more money? What am I
put in a hundred and I want to add another 50 you know, two months from now.
Right. Well we do the same thing. You still have to get a subscription booklet
sign because it's now a new investment. Now it'll go through that same
structure. It'll go into the subscription account where it may or may not earn
money until we, when we use it, it will earn money, but it may not earn money,
until we use it. And then from there it will go through that same space or line
that it's in. And then when the quarter starts, it'll be added to your current
again. Can you have several accounts? Yes, you may. So for example, you could
put a several IRA accounts in there. You'll have two or three accounts. They'll
have different account numbers obviously, but you have to keep those
separately, especially if their IRA, they can't be mingled. They have to be,
have to be separate and, So you'll get several statements. If you're receiving
that many quarterly, you'll get several checks or ACH deposits.
ask me while we're on that subject, what if I want to add more money? What am I
put in a hundred and I want to add another 50 you know, two months from now.
Right. Well we do the same thing. You still have to get a subscription booklet
sign because it's now a new investment. Now it'll go through that same
structure. It'll go into the subscription account where it may or may not earn
money until we, when we use it, it will earn money, but it may not earn money,
until we use it. And then from there it will go through that same space or line
that it's in. And then when the quarter starts, it'll be added to your current
again. Can you have several accounts? Yes, you may. So for example, you could
put a several IRA accounts in there. You'll have two or three accounts. They'll
have different account numbers obviously, but you have to keep those
separately, especially if their IRA, they can't be mingled. They have to be,
have to be separate and, So you'll get several statements. If you're receiving
that many quarterly, you'll get several checks or ACH deposits.
I don't even think we do checks anymore unless it's going
to an IRA. Right. We do all ACH now pretty much,
to an IRA. Right. We do all ACH now pretty much,
but that's the way it works and we're doing that for the
benefit of the members. And you will be a member and you will thank us because
it will benefit you at some point, but not putting you in right away. Right.
benefit of the members. And you will be a member and you will thank us because
it will benefit you at some point, but not putting you in right away. Right.
So you know, do they really have to read that whole
placement? Oh, it's, it's like bathroom reading. But it's important isn't it?
Everyone likes reading actuarial table. That's right. One of the grass grows
too.
placement? Oh, it's, it's like bathroom reading. But it's important isn't it?
Everyone likes reading actuarial table. That's right. One of the grass grows
too.
It's very important that you read the private placement
memorandum, the subscription booklet, because the subscription booklet also
acts as an operating agreement. When you get into any fund, you are becoming a
member of an LLC, right? And you own a piece of that LLC. So that operating
agreement is part of the operating agreement for the LLC. Um, if you have a tax
advisor, an investment advisor, an attorney, make sure you look it over because
those documents are going to describe everything about that fund, what they
invest in, what their longterm strategy is, what the waterfall is. And the
waterfall means in the event of a wind down or some kind of catastrophic event,
how everybody gets paid. Is there going to be leverage in the fund? We talked
earlier about having a tax consequence of having your IRA leverage. Well, you
can let people in a fund can be leveraged. There are credit facilities. While
it will help out a fund, it can also be a detriment to the fund if you have the
wrong type of credit environment. So you know what, we're going to talk about
fund leverage at another time because this is going to be much longer that it's
just a much longer story.
memorandum, the subscription booklet, because the subscription booklet also
acts as an operating agreement. When you get into any fund, you are becoming a
member of an LLC, right? And you own a piece of that LLC. So that operating
agreement is part of the operating agreement for the LLC. Um, if you have a tax
advisor, an investment advisor, an attorney, make sure you look it over because
those documents are going to describe everything about that fund, what they
invest in, what their longterm strategy is, what the waterfall is. And the
waterfall means in the event of a wind down or some kind of catastrophic event,
how everybody gets paid. Is there going to be leverage in the fund? We talked
earlier about having a tax consequence of having your IRA leverage. Well, you
can let people in a fund can be leveraged. There are credit facilities. While
it will help out a fund, it can also be a detriment to the fund if you have the
wrong type of credit environment. So you know what, we're going to talk about
fund leverage at another time because this is going to be much longer that it's
just a much longer story.
I know some people have to eat dinner now, but the PPMS
are very important to read because it has vital information. Oh, the
management, how the fund is set up, the strategies, how everyone gets paid.
That's important. It's basically telling you 40 different reasons why you
should not invest in the fund. That's true too, but you have to know all the
consequences involved and when you invest in a fund, you're trusting that the
managers know what they're doing. You have to do your due diligence and the
first part of that is reading that PPM right, not just skimming through it,
making sure you've gone through. Absolutely. So I know we started off with how
do you put money in and we ended up doing something else. Wow, that was important.
But that's typically how we roll. We never stay on topic. We just move along.
Squirrel.
are very important to read because it has vital information. Oh, the
management, how the fund is set up, the strategies, how everyone gets paid.
That's important. It's basically telling you 40 different reasons why you
should not invest in the fund. That's true too, but you have to know all the
consequences involved and when you invest in a fund, you're trusting that the
managers know what they're doing. You have to do your due diligence and the
first part of that is reading that PPM right, not just skimming through it,
making sure you've gone through. Absolutely. So I know we started off with how
do you put money in and we ended up doing something else. Wow, that was important.
But that's typically how we roll. We never stay on topic. We just move along.
Squirrel.
So thank you so much for joining us. On our next show,
we're going to show you how to use guard rails so we don't go down any rabbit
trails and show that would last forever. Don't forget to subscribe like us.
Follow us, all of those. Yeah, so our website, CarolinaHardMoney.com if you
have any questions and you're able to get to all of our investment material,
just click on the investor tab. Yeah, we'd love to share it with you. Thanks
again. Talk to you soon. Thank you so much for joining us again. Really had an
awesome time. I know Wendy did as well, so if you like what you heard and you
want to see more,
we're going to show you how to use guard rails so we don't go down any rabbit
trails and show that would last forever. Don't forget to subscribe like us.
Follow us, all of those. Yeah, so our website, CarolinaHardMoney.com if you
have any questions and you're able to get to all of our investment material,
just click on the investor tab. Yeah, we'd love to share it with you. Thanks
again. Talk to you soon. Thank you so much for joining us again. Really had an
awesome time. I know Wendy did as well, so if you like what you heard and you
want to see more,
what do we do? You can hit one of these. I feel like the
hippy dippy weather girl, because we've got a green screen going on so we could
have a cold front moving in from Virginia or right. Oh, come on. That's funny.
I don't care who you are, so you can pick any of these other shows. We have
some here. We have some here. We have some here. Just pick one. Test it out,
right? Yeah. Also subscribe like, and our website is easy. W, w. w, w. w.
that's a lot of W's. CarolinaHardMoney.com. Tell all your friends. Thanks.
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Podcast:
http://thealternativeinvestor.libsyn.com/how-to-add-money-to-a-hard-money-fund-7
Visit:
https://redirect.viperseotools.com/r/iframe?key=Pkbn9kpWlAOJ
hippy dippy weather girl, because we've got a green screen going on so we could
have a cold front moving in from Virginia or right. Oh, come on. That's funny.
I don't care who you are, so you can pick any of these other shows. We have
some here. We have some here. We have some here. Just pick one. Test it out,
right? Yeah. Also subscribe like, and our website is easy. W, w. w, w. w.
that's a lot of W's. CarolinaHardMoney.com. Tell all your friends. Thanks.
--------------------------------------------------------------------------
Podcast:
http://thealternativeinvestor.libsyn.com/how-to-add-money-to-a-hard-money-fund-7
Visit:
https://redirect.viperseotools.com/r/iframe?key=Pkbn9kpWlAOJ
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