So, I spent the morning with a genius, Investor/Hotelier. During this meeting discussed the use of Industrial Revenue Bonds.
I have placed Industrial Revenue Bonds for local Industrial clients, but never
heard of using them in the manner that was explained to me this morning.
My client said they have used the Industrial Revenue Bonds with their own
funds, in essence they put up, let’s say $10,000,000.00 cash through a shell
Those funds are used to setup the bond that is then borrowed by a second
entity (the developer) then the interest associated with the Bond is tax free.
Here is the interesting/confusing part, the development entity then defaults
on the bond which then triggers a default rate of 18% which accumulates as tax free interest.
Has anyone here had any experience with this? I should have asked more questions, but like most investors he was speaking in a “matter of fact” manner, and I just nodded and took it all in.
I plan on asking more about this when we meet again, to look at a development parcel, but before I do I would like to be more informed.
Any help will be apprecited.
I didn’t find the right solution from the Internet.
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