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Feel Good Returns: A New Postgreen Long-Term Investment Model

by Nic Darling last modified Jan 04, 2012 02:33 AM
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by Nic Darling last modified Nov 05, 2010

If you have any long terms savings or investments including stock, IRAs, annuities, etc., than this post is for you. In fact, if you think you might someday have some sort of long term investment plan than you will probably be interested. Heck, even the broke and opinionated will probably enjoy this discussion, so why [...]



If you have any long terms savings or investments including stock, IRAs, annuities, etc., than this post is for you. In fact, if you think you might someday have some sort of long term investment plan than you will probably be interested. Heck, even the broke and opinionated will probably enjoy this discussion, so why doesn’t everybody just stick with me as I lay out our new investment option.

Basically, we are looking to move into building some rental and commercial properties that we can maintain control over long-term. We think that rental units are a strong part of any developing neighborhood, and that we have an opportunity to introduce a better way of approaching this type of building. We have also seen excellent performance from rental properties in the neighborhoods we like. You will definitely be hearing a lot more about that as we get into the real design work, but today I want to talk about how this type of project potentially changes our investment model.

Our model we use right now for our “for sale” development is, as most of you know, intended to expand the real estate investment opportunity to a broader range of people. We have had investors coming into projects with amounts as low as $10k and we feel this approach has worked very well for everyone. We have already paid out 8 investors using this model and they all seemed pretty pleased with the return. The terms for this type of investment look like this:

“For Sale” Model
Investment Levels: $10k and up
Term: 1 year (with a possible 6-12 month extension)
Return: 10%-12% Annually (depending on investment level)
Security: Unsecured Note
Position: Second (after bank, before Postgreen)
Repayment: Paid Immediately After Completed Sale of Project

This is a very basic model that has served us well so far. Unfortunately, it doesn’t exactly translate to a project which we don’t intend to sell. The rental style projects require a slightly longer term investment. This usually means additional security and a slightly different repayment plan. This additional complexity also ups the barrier to entry a little, but we still hope to make it an accessible opportunity for as many people as possible. Right now our thinking looks like this:

“Long Term” Model
Investment Level: $25K and up
Term: 5+ years (with an option to repay in 3 years)
Return: 10% Annually (depending on investment level)
Security: Secured Note (note is secured by real estate)
Position: Second (after bank, before Postgreen)
Repayment: Interest paid yearly. At the end of term principle and last year’s interest paid.

This is a guaranteed interest payment that is paid regardless of project disposition. It is not tied to rental rates, construction schedule or any other external factor. For example, a $50k investor would see a guaranteed return of $5k a year for 5 years. That would be a total return of $25k over the 5 year term of the investment. Compare this to other rates (for the sake of a simple comparison I am going to assume that you pull your interest out rather than let it compound):

Mattress: 0% ($0 over 5 years)
Savings: 1.75% ($4,375 over 5 years)
Treasury Bonds: 2.5% ($6,250 over 5 years)
IRA: 3% ($7,500 over 5 years)
Stock Market: 6% ($15,000 over 5 years . . . if you remain lucky)

These numbers are obviously very rough estimates based on conditions that are constantly changing, but the fact is, most people don’t see more than a 5% annual return on their money and those that do are working for it. The 10% base return we are offering seems to look pretty good in comparison.

Many of you will point out that there is a certain level of risk undertaken when investing in a real estate project. This is true. Investing in our projects requires a certain level of faith in what we are doing, but compared to the stock market over the last few years I don’t think it’s all that much of a leap. The investment is secured by real estate, and in rentals we are working in a robust, proven market. In the end, each individual project has to be evaluated on it’s particular merits but we hope the overall offering looks pretty good.

Lastly, I’ll mention the less tangible benefits of this investment. While we all understand that an investment is, first and foremost, a money making proposition, it doesn’t hurt to invest in something that matters to you or at the very least, something that doesn’t make you physically ill. Now, I would never suggest that what we do is charitable or even particularly altruistic, but we think it beats investing in companies that are building new and inventive ways to injure people or ones that seem to be intent on inflicting as much environmental damage as possible. It has got to be better than putting your money in a place where it might be used to lobby against your very well-being and that of your children. And frankly, while I paint a comic-book evil version of this scenario, it is hard (not impossible but hard) to find a place to put your money that isn’t at least tangentially related to the types of companies you wouldn’t tell your friends you support. Investing in a Postgreen Project will, at the very least, off-set a significant amount of carbon as all of our buildings are designed to operate on half the energy of a standard building, and we hope it will make you feel just a little better about where your money is spending it’s time.

Much like the “for sale” investment program, we will be creating a list of qualified investors who will receive project proposals as they become available. To be added to this list you should have at least $25k available to invest. This post should generate a lot of discussion on this program, but if you are already pretty sure you like it you can sign up for the list now by using the unattractive form below.

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So, there’s the idea. Now, we need to hear your thoughts. What works here and what doesn’t? Did I miss any important information about the investment model? Are there other models out there that you like?

Put your words in the comments.




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