The term private money is typically associated with conservative non-traditional financing provided by a borrower’s family and friends. The term hard money is typically associated with high interest rate asset-based lenders. The term bridge money is typically associated with non-traditional temporary loans provided by banks. Zeus CrowdFunding is a unique alternative due to our very fast funding process, low interest rates and fees, our conservative risk-adverse standards, and participation by individual Z-Crowd investors in our program.
Yes and no. Our clients have an average score above 700. Credit scores and credit history are great tools for assessing the likelihood of repayment, but unlike a traditional bank, we consider the following additional factors that may offset less than perfect credit:
1. What is the overall quality (location and LTV) of the property in question?
2. Will the borrower be pledging any other real estate as collateral or protection?
3. How much liquid cash does the borrower have?
4. How much money is the borrower going to contribute to the transaction?
We consider these factors before making a final determination for any borrower, regardless of credit score and credit history. We do not finance solely against the property or solely against the borrower, and we take an overall common sense approach to both.
Most banks and hard/private money lenders are unable to finance these projects because of regulatory or guideline restrictions and insufficient processes. Zeus CrowdFunding is not a mortgage banking entity or a depository, so they are excluded from these requirements. In fact, banks and mortgage lenders are a key source of referrals to Zeus CrowdFunding.
We have a third party provider assess the value and condition of the property prior to funding. The value is typically underwritten a second time internally prior to pre-funding. This is one of our keys to maintaining more than adequate leverage.
Zeus CrowdFunding is provided as real estate financing collateralized against the quick-sale value of the property in question. These transactions are funded in the 1st-lien position, meaning that in the event of a default, the Z-Crowd members are the first creditors to receive remuneration. Zeus CrowdFunding is based on a percentage of the quick-sale value of the subject property. This is called the Loan-to-Value or LTV ratio and is typically between 60-70% of the value of the property. For the purposes of determining an LTV, the word “value” is defined as the value of the property after the necessary renovations to market the property at its highest and best use. This is often referred to as the After-Repair-Value or ARV.
Typically we fund between 60% and 75% of the ARV (After Repair Value) of the subject property for existing structures. The average for builders is 50%. With a higher ARV, you may pay higher points.
This practice protects you from possible lapses. Also, most insurance companies will refund you a portion of what you paid or give it to you as a credit.
The benefit is to be able to use “other people’s money” while keeping your money as free working capital. Speak to your CPA about possible tax benefits of borrowing for repairs and renovations.
No. However, if you plan to keep the property, you will need to show 6 months of reserves for the PITI (Principle Interest Taxes and Insurance) for all investment properties as well as 6 months of HOA fees for all properties. If you have more than 4 properties financed, you will also need to have a credit score above 720.
No problem. There are no prepayment penalties. Additionally, you will only be charged interest on money you actually borrowed; so you would not be charged interest on any renovation money you have not drawn.
Typically, the cost of the required inspection is approximately $150. Although you may request draws as frequently as you wish, you may want to consider batching draw requests and submitting less frequently so as to incur fewer inspection charges.
Actually only a copy of your license and bank statements is required. However, the prefunded amount will likely be less and the cost to borrow higher. The more information you can provide, the easier it is to provide you with the very best deal.
Yes. If you need financing on your next purchase while waiting on the sale of your property, our Crowdfunding specialists can help you arrange the necessary bridge funding.
Yes. Of course it will depend on the deal itself, proper identification, and verifiable assets. ARV for foreign nationals will likely be about 50% to 60%.
Preparation and organization is the key to Fast Track funding. To get Fast Track funding, you need to have the following in place the day you request Fast Track: 1. An existing survey done within the past 7 years 2. Clear Title paperwork 3. All requested client docs uploaded by the day you ask for Fast Track funding. 4. An expedited appraisal request to your Borrower Specialist (requires an extra fee). Be sure your Borrower Specialist knows up front that Fast Track is your goal.
There are 2 things you need to buy property an auction if you aren’t paying cash. First, the auction needs to allow for financing by Hard Money. Second, you need a Proof of Funds letter from Zeus CrowdFunding. Simply ask a Borrower Specialist at Zeus CrowdFunding for a Proof of Funds letter for the amount you’re willing to spend on the bid. It’s that easy!
If the money you need (Acquisition Price + Repair Costs + Fees) equals or is less than the money you qualify for (Funding Amount based on the percent of the property’s appraised after repair value) you essentially get 100% of your project financed!
Blended interest rates as low as 6.87% are possible on Buy & Hold combo projects (short term financing for the acquisition and repairs converting to long term financing). For the very best terms one would need :
• A credit score greater than 720 • 75% of the project costs or $100,000 in reserves after closing (whichever is greater) • A maximum loan amount of $400,000 • Acquisition cost, repairs costs, and closing costs not exceeding 70% of the appraised value.
Our founding company, Zeus Mortgage Bank, is ranked as one of the fastest growing companies in the United States by Inc. Magazine and the Houston Business Journal. We have been working with borrowers and investors for over a decade and have funded over $150M in offline crowdfunding transactions. Now with Zeus CrowdFunding, we are bringing that vast experience and expertise online. We’re using the latest technology, and we’re making those advantages available to even more borrowers and investors.
That rarely happens. Zeus CrowdFunding primarily funds in the first lien position between 50%-75% of the property’s “quick-sale-value” and only funds to very well or uniquely qualified borrowers. However, if a non-performing asset is acquired, it will be immediately stabilized and marketed for resale. The excess equity typically offsets the investment, return, and costs. In many cases, these resale opportunities can create additional unexpected returns. In the very rare occurrence of a shortfall, Zeus CrowdFunding uses reserves to close the transaction for the individual investors who selected the guaranteed investment option at the time of investment. The guaranteed investment option guarantees the investor protection from loss of principal.
Guaranteed Investments pay a lower rate of return, but guarantee the investor protection from loss of principal. Non-Guaranteed investments pay a higher rate of return, but the principal is more at risk. That said, Zeus CrowdFunding primarily funds in the first lien position and is very thorough in their due diligence. After all, we fund every project before we offer it to the investors, and we don’t receive any origination fees until investors are paid.
The investor should anticipate a 12-60 month holding period based on their selected investment. An Investor may request withdrawal of all or a portion of the Investor’s investment prior to maturity. Zeus Crowdfunding will use commercially reasonable efforts to accommodate the Investor’s request within 90 days of such a request. Some restrictions apply and include a processing fee of $850 per note and the reduction of funds equal to any funding bonuses.
Each investor is paired directly to a single borrower and a single property, and is not part of a pool. The investor’s funds are used for a specific transaction (i.e., a specific borrower and a specific property) and their funds are never pooled and shared with other investor funds on multiple projects.
We do the investing for you, so you don’t have too. Investors who see the value in diversification, leverage, and real estate, but are not prepared or trained to locate, underwrite, and service their own private loans, align with Zeus CrowdFunding for the concierge investment experience. We underwrite and prefund every project so our investors can enjoy true semi-liquid passive returns on their investments.
Accredited investors (investors who make a minimum of $200,000 per year or have $1M in assets) can invest as little as $5000 per project up to the total amount being funded.
If you are not yet accredited, you may see a small charge for accreditation processing. Other than that, there is NO CHARGE to the Z-Crowd Investors! Simply invest as little as $5000 in the project(s) of your choice and start earning interest payments right away!
Investors who invest $50,000 or more in a single transaction on one property are eligible for a funding bonus.
If you invest $50,000 to $99,999 in that single transaction, you receive a bonus equal to 0.5% of the amount you invested. For example: If you invest $70,000 in a single transaction on one property, your bonus would be $350.
If you invest $100,000 or more in that single transaction on one property, you receive 1% of the amount you invested as a bonus. For example: If you invest $150,000 in a single transaction on one property, your bonus would be $1,500.
The Funding Bonus is paid when the project is completed and you receive your principal payoff.
PCI stands for Payment Cards Industry (PCI) and refers to all those business associated with providing and processing credit cards, including debit and pre-paid cards. The PCI Security Standards Council (PCI SSC) is an assembly of the major credit card providers that organized in 2006 to set global standards for accepting and processing credit card information. The PCI SSC put forth a set of requirements designed to provide a consistent set of security measures for all merchants to follow when they are handling card transactions. Zeus CrowdFunding does not store or pass information for credit card processing through the Zeus CrowdFunding site, itself. Zeus CrowdFunding uses well-regarded PCI compliant 3rd party processors to ensure the utmost security of your data.
Anti-Money Laundering (AML) rules associated with the Bank Secrecy Act (BSA) are specifically for PORTALS (an intermediary that doesn’t hold funds) and BROKER DEALERS (an entity that engages in the business of trading securities for its own account or on behalf of its customers). Zeus CrowdFunding is neither but an ISSUER (entity that develops, registers, and sells securities.) In that regard, the AML obligation processes required by the BSA do not apply. You can rest assured that Zeus CrowdFunding rigorously follows regulation developments as they continue to evolve and complies with all applicable Federal and State requirements.
Zeus CrowdFunding is a direct lender, not just a broker or “investment matchmaking portal.” Zeus CrowdFunding funds projects directly and then keeps a small portion of the interest a Borrower pays while paying the bulk of the interest to the project’s Z-Crowd Investors. As with any lender, Zeus CrowdFunding charges an origination fee; but unlike any other lender, Zeus CrowdFunding collects the origination fee AFTER the project is complete and the Borrower pays off the loan.
This unique arrangement means that: 1) it takes less cash upfront for the Borrower to close, 2) the Borrower doesn’t have to wait on Investors to get funded and can get started on their project right away, 3) Z-Crowd Investors don’t have to wait for a project to be fully funded by other investors to start earning on their investment, and 4) Zeus CrowdFunding doesn’t get paid their fee until Z-Crowd Investors are repaid their principal. That’s how much Zeus CrowdFunding is invested in the success of both the Borrowers and the Investors.
A
Abatement
The act of reducing something such as a taxes or rent for some period of time or of eliminating something permanently.
Absorption
An estimate of the new occupancy, or amount of inventory that is being “absorbed,” of a particular type of land use.
Gross absorption is a measure of the total square feet leased over a specified period with no consideration given to space vacated in the same geographic area during the same time period.
Acceleration Clause
A term in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions. In the absence of such a clause, then a default on one payment would be just that: only one payment in default. Acceleration clauses make the full amount of principal due (immediately, or after a short grace period) upon the default as specified in the loan documents.
Accredited (Investor)
An accredited investor is a term used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by certain government filings. Accredited investors include individuals, banks, insurance companies, employee benefit plans, and trusts. As per federal law, a natural person with either $1,000,000 or more in net worth (excluding primary residence) or $200,000 annual income (or $300,000 with spouse) for past two years and reasonable expectation of same for current year.
Accrue
Accrue is a benefit or sum of money being received by someone in regular or increasing amounts over time: In finance, “accrue” is most commonly used when referring to interest, income and expenses of an individual or business.
Adjustable-Rate Mortgage (ARM)
Adjustable-Rate Mortgage in short ARM is a mortgage on which the interest rate is not fixed for the entire life of the loan. The rate is fixed for a period at the beginning, called the “initial rate period,” but after that it may change based on movements in an interest rate index.
Adjusted Tax Basis
The net cost of an asset after adjusting for various tax-related items and such reduced and adjusted basis is referred as Adjusted Tax Basis. In real estate terms, this is generally the original cost of property (the original tax basis) less any depreciation deductions plus any capital expenditures. The adjusted tax basis is important when determining final taxes (and tax rates) upon the sale of a property.
Amortization
Amortization is the paying off of debt with a fixed repayment schedule in regular installments over a period of time. Each repayment installment of an amortizing loan consists of both principal and interest.
Anchor Tenant
Anchor tenant is a major or key tenant is one of the larger stores in a shopping mall or shopping center. These stores are “destination” stores and provide exposure to smaller, satellite stores
Ancillary Tenant
A shopping center tenant that occupies a smaller space and is less of a draw than an anchor tenant. Ancillary Tenants typically pay higher rents relative to anchor tenants.
Angel (Investor)
An Angel investor is a prosperous individual who provides capital for a business start-up, usually in exchange for an equity ownership interest. The term “angel” arose in the entertainment industry, where investors would bankroll a production for a share of the profits.
Appreciation
An increase in an asset value is referred to as “appreciation”.
Appraisal
An estimate of value, generally made by a professional appraiser who uses their knowledge of the local area and recent sales in that area and concludes to provide a guide as to the price that might be obtained for a particular property. An appraisal of a property might be made not only to determine a reasonable offering price in a sale, but also to determine an appropriate loan size of a loan, to allocate a purchase price between land and building (improvements), to determine an appropriate amount of hazard insurance, or for estate tax purposes at the owner’s death.
As Is
Without Guarantees as to condition, as in a sale. May signal a problem in condition, or may merely indicate that the seller is not in a position to attest as to the property’s condition (as in a sheriff’s sale following a foreclosure). Premises must be accepted by a buyer or tenant as they are, including physical defects (other than hidden — or latent — defects).
Assumable Loan
A mortgage loan that allows a new purchaser to undertake the obligation of the loan with no change in loan terms. This is generally true of loans without due-on-sale clauses. Most FHA and VA mortgages are assumable.
Audit
An audit is a professional and independent examination of a company’s financial statements and accounting documents following generally accepted accounting principles (GAAP). Under the JOBS Act, companies that look to raise over $500,000 must have audited financial statements. This is not like an audit from the IRS, which by contrast, is an examination of a taxpayer’s return to verify whether the proper amounts of taxes have been paid.
B
Balance
The amount left over after subtracting the amount owed (on a loan) or the amount remaining (in an account).
Balloon Payment
A balloon payment mortgage is a mortgage which does not fully amortize over the term of the note, thus leaving a balance due at maturity.
Example: A debt requires interest-only payments annually for five (5) years, at the end of which time the principal balance (a balloon payment) becomes due.
Basis (Tax)
The point from which gains, losses, and depreciation deductions are computed. Generally the cost, or purchase price, of an asset.
Basis Point
A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. A basis point (bps) is a unit that is equal to 1/100th of 1%, in other words one basis point is equal to 0.01%, and similarly a 1% change is equal to a 100 basis point change.
Blind Pool
An investment program in which funds are invested into an entity without investors knowing which properties will be purchased.
Bridge Loan
A bridge loan is a type of short-term loan, typically taken out for a period of 2 weeks to 3 years pending the arrangement of larger loan or longer-term financing.
Broker Price Opinion
The estimated value of a property as determined by a real estate broker or other qualified individual or firm. A broker price opinion is based on the characteristics of the property being considered.. A fee may be charged for this service, but it may not be represented as an appraisal. While lenders typically require an appraisal for mortgage lending purposes, some (particularly in the asset-based lending sector) may be content with a broker’s price opinion.
Broker-Dealer
A broker-dealer is a person or company that is in the business of buying and selling securities—stocks, bonds, mutual funds, and certain other investment products—on behalf of its customers (as broker), for its own account (as dealer). In reference to “Crowdfunding,” one of the two types of “Intermediaries” (“Portals” being the other) authorized by the “JOBS Act” to handle the sale of crowd-funded securities (i.e. equity or debt instruments) by an “issuing company”. Broker-dealers are regulated by the federal Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) (a “Self-Regulatory Organization” or “SRO”), and sometimes the various states.
Buy and Hold
In real estate, Buy and Hold is an investment strategy whereby an investor purchase and property and holds it for a long period of time, typically using the property for rental income. “Buy and hold” investments can be contrasted to “fix and flip” purchases, where investors seek only to make some basic repairs or improvements and then to sell the property as quickly as possible.
Buy-Sell Clause
An agreement among partners, LLC members, or stockholders in which some partners / members / stockholders agree to buy the interests of others, upon some event.
Blue Sky Laws
State specific regulations in the United States meant to protect investors from fraud. These laws vary from state to state, but in general they require the registration of all securities offerings and sales with each state’s appropriate regulatory agency. Some SEC registration exemptions, such as Registration A Tier 2 offerings, pre-empt blue sky laws. That means if a securities offering adheres to the SECs requirements it does not have to register and comply with different blue sky laws in every state.
C
Capital
Capital is any financial asset or the value of an asset.
Capitalization (Cap) Rate
Cap Rates measure a property’s yield (return) in a one-year time frame.
Capital Call
A request made to existing equity owners for additional money in order to fund deficits due to construction or operating costs.
Capital Gain
Gain on the sale of a capital asset like real property. Capital gains enjoyed on assets held for a long term (generally at least one year) often enjoy lower tax rates than ordinary income.
Cash Flow
Periodic payments available after deducting all other expenses applicable to rental income, including operating and financing expenses. Can be contrasted with net operating income, which deducts from gross rental income the various operating expenses, but which does not also factor in the effect of financing expenses.
Cash on Cash Return
The cash on cash return is a simple ratio measurement of an investor’s return in relation to the cash actually invested. The cash on cash ratio is determined by dividing the before-tax cash flow (net operating income less debt payments) and dividing it by the initial equity investment.
Commercial Property
Property designed for uses other than personal residential purposes, often times related to business activity. Commercial property includes (among other things) retail shopping centers, multi-family apartment buildings, office buildings, hotels and motels, and self-storage facilities.
Comparative or Competitive Market Analysis
An estimate of the value of a property using some indicators taken from sales of comparable properties (such as price per square foot). These value estimates, similar to a broker’s price opinion, are not appraisals and do not meet the standards of appraisal as defined by regulatory bodies.
Compound Interest
Interest paid on the original principal and also on any accumulated (accrued) and unpaid interest.
Each year, interest is received on previously earned but undistributed interest, so interest compounds.
Credit Report
The report is a record that contains the detailed information on a person’s financial history, and an evaluation of a person’s capacity of debt repayment. Generally available for individuals from credit repayment histories and similar institutionally reported data.
Credit Score
Credit score refers to FICO score, which is created and calculated by the Fair Isaac Corporation and it is a measure of an individual’s creditworthiness. This number predicts the probability that a person will repay a loan. The score is estimated from information contained in the individual’s credit report. The higher the score, the better the risk.
Crowdfunding
Crowdfunding is the process of raising financial support for a venture via smaller amounts from multiple investors (“the crowd”).
Crowdfunding without the expectation of financial return, or with the promise of a specific good or service, are termed “donation-based” or “reward-based” crowdfunding, are in the nature of charitable solicitation or business marketing.
Soliciting funds in return for an ownership interest or the expectation of repayment are termed “equity-based” or “debt-based” crowdfunding (together grouped as “securities-based” crowdfunding), and until recently effectively prevented by federal and state securities law. One of the most significant parts (Title III) of the federal Jumpstart Our Business Startups, or JOBS Act of 2012 specifically enabled and legalized “security-based crowdfunding,” subject to a variety of regulations and restrictions.
Crowdsourcing / Crowd Sourcing: Crowdsourcing is the practice of engaging a ‘crowd’ or group for a common goal — often innovation, problem solving, or efficiency. Participants collectively contribute ideas, time, expertise, or funds to a project or cause.
D
Distributions
Payments made to investors periodically, typically over the course a calendar year, either from profits or interest payments.
Debt
An amount of money (obligation) owed by one party (the debtor) to another party (the creditor).
Debt Crowdfunding
Obtaining a loan from multiple lenders, often private individuals. The loan money must be repaid with a fixed interest rate in an agreed upon amount of time.
Deed
A written document properly signed and delivered that conveys a title to real property. There are different types of deeds that provide different levels of assurance about the extent of the title being conveyed.
Deed of Trust
A legal instrument used in many states in lieu of a mortgage, where legal title to a property is vested in one or more trustees to secure the repayment of a loan. A deed of trust is an arrangement among three parties: the borrower, the lender, and an impartial trustee
Default
Failure to perform a task or fulfill an obligation, especially failure to meet a financial obligation.
Deficiency
In mortgage finance, a shortfall of funds recovered through the sale of property securing a foreclosed loan compared to the amount of debt, accrued interest, foreclosure expenses, and damages incurred by the lender.
Delinquent
Failure to repay an obligation when due or as agreed. Normally delinquency occurs before a default is declared.
Demographics
The statistical data of a population, especially those showing average age, income, education, etc
Depreciation
Depreciation is permanent and continuing diminution in the quality, quantity or value of an asset. Depreciation refers mainly to tangible assets.
Depreciation Recapture
Depreciation recapture is the gain received from the sale of depreciable capital property that must be reported as income. Depreciation recapture is assessed when the tax basis of an asset exceeds the sale price.
Discounted Cash Flow
A method of investment analysis in which anticipated future cash income from an investment is estimated and converted into a rate of return (generally the internal rate of return, or IRR) based on the time value of money. Alternatively, when a rate of return is specified, a net present value of an investment can be estimated.
Donation Crowdfunding
Donation-based crowdfunding is a way to source money for a project by asking a large number of individuals and businesses to donate a small amount to it. Often donation crowdfunding is most successful among charities and non-profits.
Due Diligence
Due diligence is an investigation or audit of a potential investment. In real estate, this usually refers to the inquiries made in advance of a purchase or investment in a property. Due diligence considers the physical, financial, legal, and social characteristics of a property and its expected investment performance.
E
Encumbrance
A burden, obstruction, or impediment on property that lessens its value or makes it less marketable
Entity
The legal form under which property is owned
Equity
Ownership of a piece of a company as an investment.
Equity Crowdfunding
Funding projects and businesses through investments by people who then receive equity ownership shares in the resulting company, product, or property.
Escrow
A contract, deed, bond, or other written agreement deposited with a third person, by whom it is to be delivered to the grantee or promisee only upon fulfillment of a condition.
F
Fair Market Value
The price that two parties are willing to pay for an asset or liability. The fair market value is the theoretical highest price that a buyer would pay, and the lowest price a seller would accept, assuming that both parties were willing but not compelled to act.
FICO Score
A FICO score, created and calculated by the Fair Isaac Corporation, is a measure of an individual’s creditworthiness. It is a mathematical summary of the information on a person’s credit report.
First Lien (Mortgage or Deed of Trust)
A lien (often a deed of trust or a mortgage) that has priority over all other liens. In cases of foreclosure, the first mortgage will be satisfied before other mortgages.
Fix and Flip
A type of real estate investment strategy in which an investor purchases properties requiring some immediate repairs, which when made will hopefully translate into a more valuable property that can quickly be re-sold at a profit.
This strategy can be contrasted to a “buy and hold” approach where the property is held for a longer period.
Foreclosure
Legal process by which a lender forecloses a borrower’s right of redemption of the mortgaged property.
Free Cash Flow (FCF)
Free cash flow is a measure of a property’s ability to generate cash after setting aside reserves for capital expenditures such as future development, tenant improvements, and leasing commissions.
G
General Solicitation
The practice of advertising to potential investors outside of one’s current network with the intent of fundraising, as is now allowed by the SEC for private issuers under particular registration exemptions enabled in the JOBS act
General Partner
A member or partner in a partnership who has unlimited liability and is liable for his portion of all partnership debts. All partners in an ordinary partnership are general partners, while in a limited partnership most members enjoy limited liability (although one partner must still be a general partner).
Green Building
A building that is built or developed specifically to minimize utility costs or to maximize positive environmental considerations (i.e. to reduce damage to the environment).
Gross Amount
Gross refers to the total amount before anything is deducted. When deductions are taken, the amount is net.
Ground Lease
A long-term lease of land in which the tenant will erect improvements at its own expense.
Guaranteed Investment
As defined by Zeus CrowdFunding: Guaranteed Investments pay a lower rate of return, but guarantee the investor protection from loss of principle. All Zeus Crowdfunding investments are protected by first liens and personal guarantees. Contrast to Non-guaranteed Investment.
Guaranty
An assurance provided by one party that another party will perform under a contract.
H
Hard Asset
Hard assets often refer to items such as buildings, cash or other tangible and tradable assets. Hard assets are considered particularly valuable because they can be used to produce, purchase, or trade for other goods or services.
Holdback (Reserve)
Money not paid until certain events have occurred, such as a retained amount on a loan involving construction work.
I
Investment Crowdfunding
Investing in a company or project via crowdfunding in exchange for equity ownership, debt payments, a convertible note, or some other financial return.
Intermediary
Either a “Broker-Dealer” or a “Portal,” both allowed by the JOBS Act to consummate a securities-based crowdfunding transaction.
Illiquid Asset
Illiquid describes an asset or security that cannot be sold quickly due to a shortage of interested buyers or a lack of an established trading market. Illiquid assets cannot be easily converted into cash without potential for losing a significant percentage of their value.
Improvements
Additions to raw land that tend to increase the property’s value; similar to developments. Improvements include not only buildings but also public enhancements such as streets and sewers.
In-Fill Development
Improvements on a land adjacent or between existing developments. A way to accommodate increased population in an area without spreading the outer boundaries of development.
Income Property
Real estate developed or bought for the purposes of generating income (usually rental income). Multi-family apartment buildings, retail shopping centers, office buildings, industrial properties, resort and recreational properties, self-storage facilities, and hotels are all considered income properties.
Industrial Property
Industrial properties include manufacturing facilities, warehouses, distribution centers, and research & development space. Manufacturing and R&D properties tend to be build-to-suit buildings that can be difficult to “re-tenant” without extensive modifications, while warehouses and distribution centers can be more generic buildings. Industrial properties tend to have long leased terms.
Inflation
A loss in the purchasing power of money; an increase in the general price level. Generally they are measured by the Consumer Price Index (CPI), a statistic published by the U.S. Bureau of Labor Statistics.
Intrastate Crowdfunding
While the Securities and Exchange Commission regulates public securities on a national level, each state also has its own regulatory entity serving a similar function. Since the passage of the JOBS Act, advocates of crowdfunding have moved to legalize intrastate – or in state – crowdfunding.
Internal Rate of Return (IRR)
Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero. Internal rate of return is used to evaluate the attractiveness of a project or investment
Issuer
The term issuer refers to a legal entity, i.e., government, corporation, or investment trust that develops, registers, and sells securities to the investing public in order to finance its own operations.
J
JOBS Act:
The JOBS Act (Jumpstart Our Business Startups Act) is legislation that eases regulatory restrictions for new businesses to make it easier for startups to get established.
Judicial Foreclosure
A foreclosure which results from a court action rather than from the power of sale given to a trustee. Judicial foreclosures occur when a trust deed or mortgage deed does not have a power of sale clause, thus compelling the lender to take the borrower to court.
KL
Letter of Intent (LOI)
A letter from between parties acknowledging a willingness and ability to do business.
Limited Liability
Limited liability is where a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership.
Limited Liability Company (LLC)
A limited liability company is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The “owners” of an LLC are referred to as “members.” Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations, or other LLCs.
Limited Partnership
A special type of partnership which is very common when people need funding for a business, or when they are putting together an investment in a real estate development. A limited partnership requires a written agreement between the business management, who is the general partner, and all of the limited partners.
Liquidity
The ease with which assets may be converted into cash.
Loan-to-Value Ratio (LTV)
A Loan to value ratio of how much is being borrowed to the value of the property.
Loan-to-Cost Ratio (LTC)
The loan-to-cost ratio is defined as the ratio of the construction loan to the total cost of a construction project.
M
Market Area
A market area is the geographic region where a specific good or service is offered for sale. The market area, or trade zone, differs from business to business based on demand, sales goals, and marketing techniques
Maturity
The due date of a loan.
Mezzanine Debt vs. Preferred Equity
Mezzanine Debt is generally a loan that is secured by a property and senior to any equity, but junior to the senior loan on the property. Preferred Equity, on the other hand, is an equity investment in the property-owning entity. It is not secured by the property but rather by an interest in the entity investing in (or owning) the property.
Mezzanine Financing
High-yield debt issued in connection with a leveraged buyout. Mezzanine Financing is listed on a company’s balance sheet as an asset. Some companies use mezzanine financing because it makes it easier for them to obtain financing from other sources.
Multi-Family Housing
A building or structure that is designed to house several different families in separate housing units. The most common type of multifamily housing is an apartment building. Duplexes, quadruples, and some townhomes also qualify as multifamily housing.
N
Net Operating Income
Net operating income (NOI) is a calculation used to analyze real estate investments that generate income. Net operating income equals all revenue from the property minus all reasonably necessary operating expenses.
Net Worth
Net worth is the difference between the assets and the liability of an individual or a company.
Non-guaranteed Invesment
As defined by Zeus CrowdFunding: Non-guaranteed Investments pay a higher rate of return, but the principle is more at risk. All Zeus Crowdfunding investments are protected by first liens and personal guarantees. Contrast to Guaranteed Investment.
Nonrecourse
Nonrecourse debt or a nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable.
Note
Sometimes referred to as a promissory note, a note is a written document that evidences a debt and a promise to pay. The note is usually a separate document from the mortgage (or deed of trust), which pledges the designated property as security for the debt.
O
Occupancy Rate
The percentage of total units that are currently rented.
Office Building
A structure used primarily for the conduct of business relating to administration, clerical services, consulting, and other client services not related to retail sales. Office buildings can hold single or multiple firms.
Operating Expenses
An expense incurred in carrying out an organization’s day-to-day activities, but not directly associated with production.
Opportunistic
An aggressive (or more risky) investment strategy that in real estate generally signifies investing in properties that require a high degree of rehabilitation in order to eventually earn “market” rental rates. Properties requiring a greater amount of repairs, or rehabilitation, are generally considered “high risk,” because the property has not yet proven whether it can indeed earn the rents that are forecast for it when it will be improved to the desired state.
Ordinary Income
Ordinary income is income that is taxed at ordinary income tax rates and does not qualify for capital gains tax treatment. It’s important to understand the difference between ordinary income and capital gain income because, generally, ordinary income tax rates are higher than capital gains tax rates. Income such as salaries, interest payments, dividends, and many other items are considered ordinary income.
Origination Fees
A fee charged by a lender to a borrower on initiation of a loan, often as a percentage of the total principal.
P
Partition
The division of real property between those who earlier owned it together with an undivided interest.
Pre-Sales Crowdfunding
Pre-Sales Crowdfunding is an offset of rewards Crowdfunding. It is most associated for a new product or invention where the company looking for funds will promise the contributor a sample of the product on completion in exchange for a minimum payment.
Peer to Peer (P2P) Lending
Peer-to-peer lending (P2P) is a method of debt financing that enables individuals to borrow and lend money – without the use of an official financial institution as an intermediary
Personal Liability
An individual’s responsibility for a debt. Most mortgage loans on real estate are recourse, meaning that the lender can look to the property and to the borrower for repayment. This can be contrasted to nonrecourse loans, where a lender can only look to the security (the pledged property) for repayment
Portfolio
A group of investment assets.
PIPR (Private Issuer Publicly Raising)
A company raising money from investors taking advantage of Regulation D Rule 506(c) which allows general solicitation to the public.
Portfolio Diversification
Portfolio diversification is the means by which investors minimize or eliminate their exposure to company-specific risk, minimize or reduce systematic risk and moderate the short-term effects of individual asset class performance on portfolio value.
Private Offering
An offering of a real estate security that is exempt from registration with state or federal regulatory agencies because it does not involve a public offering. It’s typically made to a small group of investors. Private offerings must adhere to the rules of any one of several SEC registration exemptions.
Prepayment
The payment of a debt in full before it is due. Prepayment is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest.
Prepayment Penalty
A prepayment penalty, also known as a “prepay” in the industry, is an agreement between a borrower and a bank or mortgage lender that regulates the terms in connection with a prepayment.
Principal
The amount of money raised by a mortgage or other loan that still remains after some of that amount may have been amortized by earlier payments. Principal can be contrasted to the interest paid on the loan.
Priority
Legal precedence having preferred status. Generally, upon foreclosure, lenders are repaid according to priority.
Pro-Forma
A financial model often used in real estate to predict future cash flows and total investment returns.
Promissory Note
Another term for note. A legal document that evidences a debt, specifying how much money is being borrowed and the terms and conditions under which it is to be repaid.
QR
Real Estate Crowdfunding
Real estate crowdfunding involves using equity and debt funding to finance real estate purchases using multiple investors.
Recorder
An officer (usually of the local county) appointed or elected to keep records of deeds or other official papers concerning real property that are used to show evidence of title. Sometimes known as the registrar or county clerk.
Recording
The act of entering in a book of public records the legal documents that affect the title to a piece of real property. Recording in this manner gives notice to the world of the facts recorded.
Recourse
The ability of a lender to claim money from a borrower who is in default in addition to the property pledged as collateral.
Refinance
To replace an existing loan(s) with a new loan(s).
Regulation D
Regulation D permits raises of unlimited amounts from accredited investors without registering a public sale through the SEC, as it’ is assumed that accredited investors are financially able to bear the burden of investment decisions without a review by the SEC.
Regulation A+
Regulation A+ is the SEC’s proposed revision of the current Regulation A, which was mandated by the JOBS Act in 2012.
Regulation A
Regulation A allows unaccredited investors to purchase small offerings of securities that do not exceed $5 million in a 12-month period.
Redemption
In the event of back taxes or unpaid liens, a borrower who pays off those debts may reclaim their property, preventing foreclosure or the auctioning of their property.
Real Estate
Real estate includes a parcel of land and any of its permanent structures (buildings, parking lots, etc.).
REIT
A REIT, or Real Estate Investment Trust, is a company that owns or finances income-producing real estate. Modeled after mutual funds, REITs provide investors of all types regular income streams, diversification and long-term capital appreciation.
Retail Property
Retail property is a classification of zoning for property that is used for a store, shopping center or service business. The retail sector includes everything from smaller neighborhood shopping centers (encompassing, for example, a small grocery, pharmacy and a few restaurants or clothing stores) to large “super-regional” malls that have entertainment activities and can draw shoppers from a great distance.
Risk
Uncertainty or variability; the possibility that returns from an investment will be less than forecast, or that invested principal might be lost.
Risk vs. Return
The risk-return tradeoff is the principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with low potential returns, whereas high levels of uncertainty (high-risk) are associated with high potential returns.
Reward
Something given to investors in exchange for their funds while crowdfunding, either the first run of an actual product, or a shirt, sticker, or small object related to the project or company being funded, or even just a “thank you” acknowledgement.
Rewards Crowdfunding
Rewards based crowdfunding is a collective effort involving a group of people (the crowd, contributors, backers) and a project creator (project owner or campaign manager) to fund a specific venture.
ROI
Return on investment (ROI) measures the gain or loss generated on an investment relative to the amount of money invested.
S
S.E.C. Securities and Exchange Commission.
The part of the United States government that regulates investment and finance, including startups and the various forms of crowdfunding.
Securities
Securities include stocks, bonds, and certificates. These serve as financial and/or investment instruments that hold certain values and that can be bought, sold, and exchanged.
Securities Law
Securities regulation in the United States is the field of U.S. law that covers transactions and other dealings with securities. Generally, Securities Laws are the laws by the federal government (mostly through the SEC) or by each state.
Semi-Liquid Withdrawal Option™
Zeus Crowdfunding offering. Investors should anticipate a 12 – 60 month holding period based on the their selected investment. Should an investor require, they can cash-out or withdraw their full or partial investment at anytime with our Semi-Liquid Withdrawal Option™ Zeus Crowdfunding will use commercially reasonable efforts to accommodate the Investor’s request within 90 days of such a request, but shall not be required to borrow money or dispose of assets to fund such a request or take any other action that would, in the sole discretion of the Zeus CrowdFunding, be adverse to the interests of the Company or its other clients. When an Investor requests a withdrawal of all or a portion of the Investor’s investment prior to maturity, based on the provisions in this section, then Zeus CrowdFunding may charge a processing fee of no less than $850 per note and reduce the amount returned to the Investor by an amount equal to all the Funding Bonuses paid to the Investor on those funds in the preceding twelve months.
Single Family Residence
In real estate, generally refers to a stand-alone property intended to house one family. Individual apartment or condominium units are usually thought of as being part of a multi-family building, even though individual units are usually occupied by a single family.
Statutory Foreclosure
The foreclosure of a lien on property without using a lawsuit but is based on existing statute. A foreclosure proceeding is not conducted under court supervision; contrast with judicial foreclosure.
Subordination
Moving to a lower priority, as a lien would if it changes from a first mortgage to a second mortgage.
Syndication
The formation of a group of investors, organized by a sponsor, that pools the investors’ capital together in order to make an investment. In real estate, such pools (or syndicates) are often formed because even a single property can require substantial capital, usually beyond the means of a single investor.
T
Tenancy in Common (TIC)
Tenancy in common is a way for two or more people to have equal ownership interests in a property. Each owner has the right to leave his or her share of the property to any beneficiary upon the owner’s death.
Tenancy / Occupancy
Occupancy is generally referred to as a percentage of the total square feet or units leased – it is a building’s revenue source.
Term
The lifespan of a given asset or liability.
Title
In Property Law, a comprehensive term referring to the legal basis of the ownership of property, encompassing real and Personal Property and intangible interests therein.
Title Insurance
Title Insurance covers the loss of an interest in a property due to legal defects and is required if the property is under mortgage. Most title insurance is lender’s title insurance, which is paid for by the borrower but protects the lender.
Transparency
In finance, a manner of doing business such that activities are fully disclosed and reported to investors. Such policies make it possible for potential investors to adequately estimate the risk, and to forecast the income, from investing.
U
Unaccredited Investor
An investor who does not meet the wealth requirements of an accredited investor set forth by the SEC.
Underwrite
Underwriting is the process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities.
Undivided Interest
Ownership claim of property or assets commonly owned with restricted claims but no one has an exclusive claim.
V
Vacancy Rate
The percentage of all units or space that is unoccupied or not rented.
Value-Add
A real estate property categorization, or investment “style,” that refers to properties requiring some degree of improvements to gain increased returns. “Value-add” generally refers to a property that is currently in less than stellar condition and in need of improvements that are of somewhat higher risk, such as performing more-than-usual renovations like upgrading exteriors and interiors and curing deferred maintenance.
WXY
Yield
Another term for the internal rate of return (IRR), a measure of an investment’s return rate that takes account of the time value of money.
Z
Zoning
A legal mechanism for local governments to regulate the use of privately owned real property by applying their power to prevent conflicting land uses and promote orderly development. Designated zones limit the type and intensity of permitted development.
Zeus CrowdFunding
A debt-based real estate crowdfunding platform comprised of proven real estate financing professionals over a decade of success. Zeus CrowdFunding pre-funds all qualified projects and specializes in: Quick Closings, Fix & Flip Real Estate Projects, Fix & Hold Real Estate Projects, Non-Traditional Borrowers, Distressed Properties, Transactional/Gap Financing, Foreclosure/Trustee Sales, Auctioned Properties, Probate Properties Needing Repairs, Refinancing, Temporary to Permanent Financing, any Opportunistic Acquisitions.
