How will interest rates affect DLP Capital and our returns?
An increase in rates would actually be a positive for DLP Capital in many ways. First of all – when it comes to Direct Lending Partners – higher interest rates charged by banks would make it easier to charge the typical 13-15% interest rates by Direct Lending Partner. In addition, typically rising rates are a sign of a strong real estate market which, of course, is good news for DLP Capital Partners. Lastly, and maybe most importantly, is that we expect when rates rise, many investors are going to be in trouble as their fixed rate periods end and we expect an increased volume of distressed opportunities. Many investors right now are purchasing multi-family properties at 6% cap rates. You can generate an 8-9% return when you have a 4% interest rate, but when rates go up to say 6% all of a sudden these investments no longer make sense, and we expect banks to end up taking back a good volume of assets that we will, in turn, pick up at big discounts. We focus on buying at the north of 9 cap rate at stabilization which puts us in a strong cash flow position. Also, most of our debt has fixed terms of 4-6 years remaining or more. Also in June, Morgan Stanley strategists predicted no increase in interest rates until 2018.
If 2008 happens again, how will that affect DLP Capital and will our principle be at risk?
Two key factors that led to the 2008 real estate collapse were loose lending practices that failed to verify the income of Borrowers, and high LTV terms which allowed Borrowers to purchase real estate without contributing much equity into the acquisition. DLP Capital and Direct Lending Partners follow a strict underwriting process that evaluates the cash flow and repayment capacity of all Borrowers and restricts lending amounts to 65% of ARV of the real estate. The low LTV nature of DLP Capital loans allows an additional level of security in the event that the real estate market is too slow/decline. In addition, DLP Capital Partners focuses on owning cash flow positive assets. So if there was a market collapse, and property values saw a steep decline, DLP would not be “under the gun” to sell its assets at lower prices, as the assets will produce strong cash flow which will be for the most part unaffected by the decrease in property values that a “2008” collapse would bring. Also, a collapse like 2008 would create tremendous investment opportunities for DLP to capitalize on.n.
Can interest be compounded?
Investors have the option of taking monthly distributions or letting interest compound and grow. You can switch at any time and/or do a combination (e.g., take a $1000 distribution each month and allow the remainder of your returns to compound).
Are there any hidden fees in your stated return rates?
Our return rates indicate exactly what you will earn, with no hidden costs. DLP Capital Partners takes care of any fees.
Do I need $50,000 or $100,000 of additional capital to add to my investment?
You may add any amount of money to your existing investment at any time, in $1,000 increments. So as an example, if you have $10,000 free – you can add that to your current investment at any time, or in most cases even invest that money into a different fund or note time frame if you choose.oose.
If I invest in more than one Fund, does the minimum investment apply to each account?
Investments are considered collectively so that you can split your minimum investments between accounts (e.g., $100,000 in a Note Fund and $150,000 in an Equity Fund to satisfy a $250,000 minimum.
Why do flippers borrow from you if rates at banks are lower?
Securing funding through banks is often a challenge for flippers since banks typically only fund 75% of the purchase price of a property, while the borrower needs money to cover the purchase AND rehab. Direct Lending Partners uses a common sense approach in addition to the same underwriting standards banks follow to grant loans based on the speculative value of the property after repairs. Also, the typical loan duration for Direct Lending Partners is only six months, so higher interest rates aren’t a big factor for borrowers.