Category 4 – Hawthorne Capital

What if ranchette buyers/borrowers stop paying on their loans? (2 of 2)

3. The fund then issues a new loan against the land at a maximum amount equal to what we have invested in the ranchette (purchase + improvements) or 65% of its projected sales price, whichever is lower. 4. We are typically able to sell the ranchette again on owner financing within two to […]

Can the fund manager be removed if necessary?

The fund is managed by Hawthorne Income Fund Manager, LLC, which is owed by Doug Smith. The manager can be removed and replaced by a two-thirds vote of investors (by number) and investor interests (by investment amount). This is a lower threshold than is typically seen with private equity funds and is therefore pro-investor. […]

How have some people lost money in private equity investments?

People are making money in the vast majority of private equity investments that we have seen. There is an occasional fund or investment that that ends badly, and these are the ones that are widely discussed and/or covered in the news. It is very rare, but a fund manager could have a business […]

Could funds be mismanaged or squandered?

Any fund manager could mismanage or squander funds. Fortunately, this is fairly rare because most managers are seasoned professionals who wish to 1) maintain a solid reputation, 2) avoid legal problems, and 3) secure repeat investors and referrals so that they can do more deals. Mismanagement of this fund is largely prevented by […]

What happens if you go out of business?

Investor capital goes into the fund. The fund is an entity known as Hawthorne Income Fund. It could not go out of business or file for bankruptcy because it is not operating as a business in the traditional sense. Instead, it is an entity that owns assets and has no debt. The borrowers […]

What happens if HL and HI stop paying the fund?

The fund lends to Doug Smith’s entities, which are primarily Hawthorne Land (HL) and Hawthorne Interests (HI). It collects monthly payments in return. In the “flow of funds” FAQ, you can see that HL receives ample liquid capital each time it sells a ranchette. This capital, along with capital already available in HL […]

What happens if the fund, its borrowers, or Doug Smith get sued?

In this country, anyone can get sued for any reason, regardless of the merit of the claim(s). If it was wrong for the person or entity to have been named as a defendant in the first place, it can still take weeks, months or even longer to remove them from the case. The […]

What if Doug passes away?

Doug is in excellent health, but the fund and business have structures, systems and processes in place that should remain in place if Doug passes away. Current team members are capable of rising up to fill his shoes, and a new but seasoned executive could even be hired. If the team does well, […]

What if ranchette buyers/borrowers stop paying on their loans? (1 of 2)

It is important that we choose our buyers wisely when selling on owner financing. This provides the fund with solid collateral on its loan against such notes, and it leads to a steady stream of payments coming into Hawthorne Interests over time. Those payments provide the cash flow that service the associated loans made […]