FAQ
How many Investors can be in The Fund?
The Fund could have hundreds of Limited Partners. However, it is likely that when The Fund reaches its $100,000,000 maximum there will be less Limited Partners as some Partners will own several units. Keep in mind, the number of Partners doesn’t affect your return, as your earnings are based on the percentage of The Fund you own.
What is my financial commitment?
The minimum commitment is $50,000. The maximum is $100,000,000.
When do I deposit my funds?
Funds are accepted at the time you execute the Subscription Agreement. It should be noted that, while your investment may have been deposited, it won’t move from a non-interest-bearing “subscription account” to The Fund until the General Partner has accepted your Subscription Agreement by counter-signing.
How many different loans secured by real estate will The Fund own?
It depends. The General Partner will seek to buy promissory notes secured by trust deeds up to the current subscribed amount of The Fund, ultimately up to $100,000,000. The average loan amount is roughly $450,000. Keep in mind that is just an average. Some loans will far exceed that average and others may be significantly less.
What will my return be?
The return to the Limited Partners is dependent on the interest rate and payment performance on the loans acquired by The Fund. The General Partner’s goal is to maximize returns while protecting the Limited Partners’ principal investment. The General Partner expects to acquire loans in the 10-13% range, as an annual percentage rate, which represents about 8-10.25% to The Fund after fees. This assumes no loss or defaults, which may occur. It should be noted that, while there may be higher interest rate notes available to purchase, they often carry more risk than the General Partner would accept.
Who picks what loans The Fund buys?
The General Partner, who also is a Limited Partner in The Fund.
How do the General Partner and Precision Capital, the servicing company, get compensated for their work?
The General Partner receives 10% of the interest collected as consideration for managing The Fund’s business operations. For servicing the loan, Precision Capital, a company owned by the General Partner’s principal, retains 10% of the interest collected on a monthly basis.
Therefore, a loan with an annual interest rate to the borrower of 12%, nets The Fund 9.6% after fees to the General Partner and Precision Capital.
The General Partner and Precision Capital only get paid when the Limited Partners get paid.
The origination and processing fees for loans which are originated by Precision Capital are paid by the borrower, not The Fund.
When do I get the earnings on my investment?
Limited Partner distributions occur on a monthly basis. You will receive a direct deposit into your bank account unless you direct the General Partner to reinvest your earnings automatically, as most do. You can make this selection on the Subscription Agreement.
When it comes time to file my taxes for the year, what documentation will I get?
The General Partner will facilitate having the Partnership’s tax return completed by an outside accounting firm. Once the return is ready, each Limited Partner will receive a K-1 form, showing their income, by March 15th following each calendar year. It’s important to note that, consistent with IRS rules, the K-1 will show your total earnings, whether you received them as a deposit into your bank account or chose to reinvest your earnings in The Fund.
You mention a “loss reserve.” What is this?
As with any company, The Fund will set aside reserves to cover unplanned expenses. The General Partner will establish a loss reserve with some of The Fund’s earnings. The amount of the reserve is determined by the General Partner considering the current financial market and The Fund analytics. The anticipated reserve amount is 2-3% of The Fund’s balance. The amount of cash allocated to reserves out of earnings is reported on each Limited Partner’s K-1, based on their percentage of ownership.
Can I sell my investments or gift it to a family member?
Yes, however any transfer is subject to the restrictions detailed in the offering documents and must be approved by the General Partner, as detailed in the Limited Partnership Agreement. Your ownership interest can only be transferred to other Accredited Investors.
What is my security?
When you invest in The Fund, your money is being used to purchase promissory notes secured by real estate. This security is documented through a Trust Deed on the property, and recorded in the real property records of the county where the property is located. In instances where there are liquid funds on deposit pending a Note purchase, the money is held in an FDIC insured, non-interest bearing subscription account.
Can I use my IRA to invest in the Pac One Fund?
Yes, and many do, using a custodial company or an IRA LLC. Check with your custodial company for their individual requirements. We are happy to provide a list of custodial companies for your review.
If you have other questions and would like a private consultation, please contact us at 541-284-8056 or investments@paconefund.com.
