Someone Offered Me More — How to Compare Returns Across Private Placements

How do you compare returns across private placements? This is a conversation I've had many times. An investor has found us, done their research, and is seriously considering FreedomNotes. And then they tell me, "Someone else is offering 16% or 18% or 20%." And they want to know, "Why would I invest with you at 12% when I can get 16% somewhere else?" It's a fair question, and I want to give you a fair answer. The stated return is the beginning of the analysis, not the end of it. Every private investment has 3 things that matter: what the return is, what backs it, and who is responsible for delivering it. Most investors focus almost entirely on the first. The investors who've been doing this for a long time weight all 3 equally. Let me give you a framework for evaluating the full picture. Because it applies whether you're looking at our offering or anyone else's. When someone offers you 16%, the first question to ask is, what kind of investment is this? Is it debt or equity? If it's equity, your 16% is a projected return, meaning it's what the operator expects to produce if things go according to plan. A projection is not a contractual obligation. If the deal performs below expectations, the return adjusts. If it's debt, your return is contractually defined. You are owed a specific amount at a specific rate. The operator cannot unilaterally reduce your return because the deal underperformed. FreedomNotes is debt. The return is not a projection. It's a note, a legal obligation. That distinction matters more than most investors realize. Higher returns exist for a reason. They compensate for higher risk. The question is whether you understand exactly what that risk is. Development deals, ground-up construction, can project high returns because the upside is significant if everything goes right. But development involves timeline risk, cost overrun risk, lease-up risk, and exit risk. A lot of things have to go right, and in the current environment, Many have not. Deals with heavy leverage, high loan-to-value ratios, can project higher returns because leverage amplifies gains, but leverage amplifies losses too. A deal at 80 or 85% LTV has very little buffer before the equity is wiped out. We target conservative LTV ranges and avoid development risk within FreedomNotes. Our returns are lower than the top of the market because our risk profile is also lower. That's not a compromise. It's a deliberate choice. A projected 16% return from an operator who has never navigated a down cycle is a very different thing from an 8 to 14% return from a team with 18 years and over 1,000 transactions across multiple market cycles. Ask the operator to tell you about their worst deal. Ask how they communicate when things go wrong. Ask to speak to investors who've been with them through a difficult period. Anyone can show you a spreadsheet. The question is whether they've actually delivered and what they did when delivering was hard. Our track record shows that we have paid every investor what was owed them across 18 years of operating through 2008, COVID, and 2022. That's not a promise about what will happen next. It's a history you can evaluate. Here's how I would frame it for any investor doing this comparison. Take the two stated returns, then ask, what is each return compensating me for? A 12% return backed by conservative debt structure, needs-based assets, and an 18-year track record is compensating you for a modest amount of risk. A 16% projected equity return in a development deal is compensating you for significantly more. Neither is automatically wrong. The question is whether you understand what you're accepting and whether that risk profile fits your actual situation. Some investors are in a position to take more risk for more potential upside. Others are in a position where they need income they can count on, and giving up 4% to have that certainty is not a cost, it's a feature. Know which investor you are. If you found us while you're in the middle of that comparison, if you're trying to figure out whether FreedomNotes makes sense alongside something else you're considering, go to chatwithfreedom.com. We'll give you a straight answer and help you figure out which options may be best for you. I hope this was helpful, and I hope we have the opportunity to work together.