Risk Disclosure
Private real estate lending is not risk-free. This page describes, in plain English, what could go wrong on a private first-lien real estate loan originated through Charlotte Private Equity™ and how we have structured the program to mitigate each risk. Nothing here is a guarantee.
1. This Is A Loan, Not A Security
You are making a loan secured by real estate. You receive a promissory note and a recorded first-lien deed of trust. You are not buying an investment contract, a partnership interest, a fund share, or any other security. No offering or sale of securities is being made through this site.
2. Borrower Non-Payment
Risk: The borrower may fail to make monthly interest payments or fail to repay principal at maturity.
Mitigation: The closing attorney initiates foreclosure on your behalf. Because you hold a first-lien deed of trust at or below 80% LTV, the equity cushion in the property is your margin of safety. On the current representative deal, that cushion is approximately $55,000.
3. Property Value Decline
Risk: The value of the collateral property may decline between origination and payoff.
Mitigation: Conservative LTV at origination. On the current deal, the North Carolina single-family housing market would need to decline more than approximately 23% before your principal would be at risk. We do not lend at thin cushions.
4. Title Defect
Risk: A previously-undiscovered lien, claim, or encumbrance on title could reduce or eliminate your security interest.
Mitigation: A title commitment is obtained from a Charlotte-area title company and a lender's title insurance policy names you as a loss payee. The closing attorney verifies clean title before disbursement.
5. Operator Fraud Or Misuse Of Funds
Risk: In any private transaction, an operator could misappropriate funds.
Mitigation: Funds never flow to the operator directly. You wire into the trust account of a licensed North Carolina closing attorney. Wire instructions are verified by phone. The attorney records the deed of trust and only then disburses to the project.
6. Illiquidity
Risk: Private notes are not traded on any exchange. You cannot sell your position the way you sell a listed bond. Your capital is generally committed until maturity, early payoff, or refinance.
Mitigation: Maximum term is 36 months. Interest-only structure means principal returns intact at payoff. Early prepayment is possible (see note terms).
7. Concentration Risk
Risk: A single note against a single property concentrates your loan in one asset.
Mitigation: We deliberately keep each note small enough ($25k, $50k, or $75k slices) that a lender can spread across multiple notes or retain reserves. We do not recommend lending your emergency fund or retirement minimum.
8. Interest-Rate And Opportunity-Cost Risk
Risk: If prevailing rates rise after origination, your 15% note could underperform newly originated notes.
Mitigation: Short maximum term (36 months) limits duration exposure. The monthly interest payment structure provides current cashflow rather than locking value into a zero-coupon instrument.
9. Legal And Regulatory Risk
Risk: North Carolina real estate, lending, and foreclosure laws may change. Tax treatment of your interest payments may change.
Mitigation: The closing attorney handles all regulatory and recording compliance. You should consult your own tax advisor about how interest payments will be treated in your particular situation, including self-directed IRA and UBTI considerations.
10. If You Cannot Accept Loss, Do Not Lend
No real estate loan is guaranteed. The mitigations above are designed to make a total loss of principal unlikely, but they do not eliminate that possibility. If you cannot accept any scenario in which your principal is partially or entirely at risk, do not submit an inquiry and do not lend.
11. Independent Review Encouraged
Before wiring any funds, we encourage you to have your own attorney and tax advisor review the collateral file, the draft note, and the draft deed of trust. We expect lenders to do this. No one on our side will rush you.
This disclosure is not a substitute for the representations and terms contained in the promissory note, deed of trust, and closing documents prepared by the closing attorney. In case of any conflict, those documents control.