Adam Fountain вЂ“ Go ahead.
Adam Hooper вЂ“ when you take on leverage, if you raise a $200 million fund, you might lever that to $400 million of capacity if you raise a $200 million fund, you have $200 million of capacity, where youвЂ™re saying.
Adam Fountain вЂ“ Right. And where in fact the issue may appear is, letвЂ™s assume you will be making a million buck loan. YouвЂ™ve raised $500,000 from investors, after which you borrowed $500,000 from the bank to help make that loan to that particular builder or designer. Now, if that loans goes laterally for you, along with to just take that home right back, the lender will probably desire its cash. And from now on you have got, that you borrowed from if itвЂ™s a construction loan, you have a half finished project, and you have to give $500,000 back to the bank. To make certain that can eat into any type of equity pillow pretty quickly. While in an investment like ours, weвЂ™re financing at a 65% loan to value ratio, if we simply just take a house straight back, the theory is that, weвЂ™re no greater than 65% associated with initial assessment value. Therefore we preserve that equity pillow. Continue reading