Many investors find it important that the sponsor, Doug Smith in this case, have a vested financial interest in the fund. This “skin in the game” is being provided in various ways:
Doug is currently paying over $200K per month in interest to the fund via his entities that borrow from it.
He is spending over $100K per month on payroll and general overhead (office, equipment, advertising, etc.) through his entities that buy, improve and sell the land.
He fronts the money for improvements. Invoices can add up to over $100K at times.
He has invested up to $1.4M in the first two funds, and much of his net worth is allocated to land deals.
He was the sole investor for the first 2+ years of the business.
His business reputation is tied to Hawthorne Capital. He protects that and his investors above all else.