Direct Loans to House Projects or the Syndikat
Once a house association and the Syndikat have established a new house LLC, the share capital does not have to be saved for a rainy day; it is of course used for the purchase of the house. However, in most regions of Germany you cannot get very far with 25,000 Euros, which is why a project usually needs loans often amounting to hundreds of thousands of euros.
“Money is available at all good banks and savings and loan associations.” But: first, the interest on bank loans pushes up the rent. Second, the bank usually lends only a part of investment costs, assuming that the remaining part is present in the form of equity, and not merely the meager 25,000 euros of share capital.
A shortcut provides a way out of this dilemma: the direct loan. People who know the project and find it deserving of support, can deposit and park their savings directly in the house LLC – without a detour via a bank that wants to recoup its costs and turn a profit. Although this does not usually eliminate the need for a bank loan, it does bridge the funding gap and keeps the rent at a bearable level.
Direct loans are subordinated loans with a qualified postponement of priority clause. On the one hand, the clause says that no money must be paid back to the direct lenders if this endangers the solvency of the recipient (house LLC or Mietshäuser Syndikat LLC). On the other hand, in case of insolvency, the bank loan and all other non-subordinated creditors must be paid out first, and only subsequently the direct lenders.
The lender and the house project draw up a loan agreement clearly regulating the credit amount, interest rate, period of notice, loan period, and a qualified postponement of priority clause.
Conditions for a direct loan to the Mietshäuser Syndikat LLC are as follows:
- credit amount: 1,000 euros minimum
- interest rates: five different rates ranging up to 1,1 % p.a. max. (as of 2016-01-01)
- period of notice: 6 months minimum
- qualified postponement of priority clause
The Investment Products Law regulating financial assets, such as direct loans to the Mietshäuser Syndikat LLC, applies only from January 1, 2016. We draw your attention to this fact in accordance with § 32, paragraph 10 (Transitional Provisions).
Since January 1, 2016, pursuant to the Investment Products Law, the Mietshäuser Syndikat LLC has been offering diverse new asset investments, which consist of the acceptance of subordinated loans with respectively varied interest rates.
Within the framework of the new asset investments, no more than 100,000 euros will be accepted within 12 months. Consequently, a prospectus requirement as specified by the Investment Products Law does not apply. The conditions for a direct loan must be requested from the respective house project.
“… it’s better to have 1000 friends backing you than a bank on your back.”