Things to consider when you particpate a lending project.

Recently, I was introduced to a real estate developing company around the area I lived. This developer is looking to build a 300+ high rise condo building in the downtown area. As far as I know, the developer already have a option fee to purchase the land. All they need right now is to raise funding to do a rezone of the land from residential to commercial so they can put a high rise building on it. They're looking to raise 4Million plus from investor and they offer excellent 50% return guaranteed by the company's trust to investor in 12 months. The minimum contribution is $100,000. This is definitely sound very attractive. If you lend them $100,000, after 12 months, they will return you $150,00. Once the rezone is done and approved by city, the developer plan to get a construction loan to pay back the investor principle plus interest. I'm reviewing their contract to consider this investment opportunity. These are some risk to consider:
1)What if the rezoning fail for some reason, the land cannot be rezone to build high rise building?
If the developer fail get the rezone approved, they obviously cannot get the loan to pay back the investor. As a investor, we have to check how strong and experienced the company and their team has done this kind of project before to weight the risk.
2)What if the builder don't pay back investor?
Well, according to the contract, investor's principle and interest is guaranteed by the company's trust. If the builder fail to get rezoned approved, they must liquefy their assets to pay back investor. The builder can show their financial statement to investor. As a investor, we need to check their financial strength (ie, how much networth the trust has)
3) What if the builder bankrupt?
That's obviously the biggest risk to consider! If the company do bankrupt, investor could potentially lose all the investment and need to file ligation to claim the return of money. Again, as an investor, we need to weight how reputable and likelihood the company may bankrupt.

50% cash on cash annual return is definitely attractive. But there is risk involved. I will have to do more research, meet with the officials of the company, check their financial strength by looking at their financial statement, check their previous works and references, to decide whether to go for the lending opportunity. Any one has experience of involving in any lending project in the past? Any insight to share?

Rule of money. Rule of 72

To become a successful investor, we must be constantly thinking how to compound our money so it can keep growing, growing and growing to create wealth for us. One very very powerful and simple rule to calculate how fast the money compound is called RULE of 72, or I call it rule of money. This rule is invented by the greatest scientist all time. Mr Albert Einstein. I think this rule is even more profound than E=MC^2!

Here's how it works,

Let's say you invest 1000 dollar into a investment account that earn you annual 4% of interest, you wonder how long it will takes for the initial capital to double? Rule of 72 can help you determine it quickly. You use 72 divided by 4, you get 18. This means that after 18 years from the time you invest, your initial capital will double! In our example, after 18 years, your money will become 2000. Please note that we assume we pay no tax and we reinvest our interest each year.
Now, look at the case on the top of this post. Imagine a person have 10,000 to invest at age 30, he put in some kind of tax deferred account which allow money to grow without paying tax until he reach 66 for retirement. Can you see how the small increase of the of annual interest can product A BIG BIG BIG difference over a long period of time? This is the power of compound interest! What if the annual interest is 18%, can you figure how much money will that be at age 66?

3 simple steps to win our money game

Tonight, I want to share the 3 simple steps I used five years ago that help me to get ahead money game. I believe you can achieve if you can keep this 3 simple steps in mind to build your wealth.

Step 1) Define my dream (as specific as possible)
Step 2) Know where I'm (how much money and time I have, what is my strength and my weakness, what do I enjoy to do)
Step 3) Find a Vehicle(s) to make it happen. (Real Easter, Stock, network marketing business, etc)

It's like getting a map to travel. First, you need to know where is your destination. Next, you need to know where you are. And Finally, find a vehicle to take you where you 're to where you want to go.