P2P Real Estate Investing – Part 2
We are working now on a database website that will be central in the management of a P2P real estate investment opportunity. A discussion of the site structure is also a discussion of the opportunity structure, and we will lay out both together below.
The site will be a credential log-in port where potential investors first make pledges of monetary amounts in support of the project. Of course, it would be hard to support something that was not well defined, so the project page will care for that.
On the project page, we have pictures of the raw land, and drawings of the structure we are proposing to build, along with cost draw downs and basic ROI projections. These include schedule estimations for the construction phase and the subsequent sale of the property. Simply selling the land provides a clean exit strategy, and a termination of any obligations connected to the land.
Once a potential investor has examined the prospect, he or she can then simply decide how much they feel inclined to pledge. Returns will be guaranteed at 10% per year, secured with the property. So risk is much lower than with other P2P investment options, and the return is not variable, but fixed.
In the pledge phase, no money transacts. There is a need to get pledges all the way up to a level that will fully fund the entire project before ending the pledge phase, and opening the funding phase. Before we fund however, there has to be a final confirmation of pledges.
The data listing page of the site will have the name, email address, and pledged amount of every investor in the system. It will also show prominently the target amount for the project, and the current total of funds already pledged. No pledge confirmation button will appear until AFTER the time when the total funds pledged meets or exceeds the target amount for the project. At that point however, we will request all pledged investors either to confirm their pledge or withdraw it.
Clearly, there are two potential outcomes at that point. If some investors opt not to confirm and to pull out of their pledge at the last minute so that the confirmed pledges fall again, below the required project target, the project will remain in the pledge phase until such time that the total funds pledged rises again to meet or exceed the target project amount. Then, rinse and repeat until the necessary amount of pledges are ultimately confirmed.
Once all the pledges are confirmed, the pledging phase will end, and all parties will transact their pledges, funding the project, and the investment clock will start.
The webpage will then show the interest accrual for each investor in the system. The display will look something like this:
John Doe — $5,000.00 Invstd — $500.00 Tot ROI — Day3/$4.10 Intrst Ernd
In other words, a running tally of earnings on the investment will be displayed and updated real time every day.
General updates on the project itself will also be provided on a regular basis, occurring weekly unless there is some reason to do so more often. Streaming webcam of the site will be available 24/7 and image archives will be updated and saved for all investors to browse through.
Another process that will be occurring involves the promotion and sale of the property. There is no reason to wait for construction completion to begin that process, and relevant news about progress in that area will be made available to the entire family of investors.
Of course we wish to keep the ball rolling after the first project is complete, and we will depend on our social network to get more capital into the system. Whether an investor wishes to pledge $5.00 or $50,000.00 is no difference for us. That is the power of P2P. And we suggest that both high and low commitment investors will recommend the opportunity to all their friends and family.
I intend to pledge $10,000.00 into the first project, just to get the process moving. Here is how I see the project shaping up.
Duplex Family Residence Building
Land Cost – $40,000.00
Materials and Professional Services – $50,000.00
Construction Labor Costs (Contractors) – $60,000.00
Debt Service (2 years) – $30,000.00
Total Investment – $180,000.00
Priced Low for Easy Sale – $195,000.00
We will notify our readers when the website is ready and we are prepared to begin the pledge phase of the program.