RDMO II, LLC – Investor FAQ
Expanded & Complete
This FAQ is for informational purposes only and does not constitute an offer to sell or a solicitation to buy securities. The Private Placement Memorandum (PPM), subscription agreement, and governing documents are available upon request.
Fund Overview
Understanding RDMO II
What is RDMO II, LLC?
RDMO II is a private equity fund focused on acquiring and managing distressed residential mortgage assets such as non-performing loans (NPLs), REOs, and structured real estate opportunities. It is the second fund in the series—RDMO I successfully closed in May 2025. Track record is available upon request.
Will RDMO II follow the same acquisition and workout strategy as RDMO I?
Yes. RDMO II is a duplicate fund and is designed to follow the same core acquisition and workout strategies as RDMO I.
What are the main differences between RDMO I and RDMO II?
The main difference is the terms offered to early investors, which provide a slightly better deal.
Additionally, RDMO II may consider short-term bridge financing, holding select assets for rental, and seller carryback financing.
Regulatory Structure
What is a Reg D 506(c) Fund?
A Regulation D Rule 506(c) fund is a private investment vehicle that allows general solicitation while restricting participation to accredited investors who must verify their accredited status. Public marketing is permitted, no SEC registration is required (a Form D is filed after capital is raised), and there is no cap on capital that can be raised.
Who qualifies as an accredited investor?
An accredited investor is an individual or entity that meets SEC-defined financial criteria. Common qualifications include annual income of at least $200,000 ($300,000 if married) for the past two years with expectation to continue, or net worth exceeding $1 million excluding the primary residence. Certain entities, trusts, and institutions may also qualify.
Informational only. All investments involve risk, including possible loss of principal. Refer to the PPM and governing documents, which control in all cases. Page 1
Fund Operations & Strategy
How RDMO II Operates
HECMs
Purchasing Home Equity Conversion Mortgages also known as Reverse Mortgages is the main strategy of the fund. PEMCO Capital Management has participated in the last 8 auctions successfully. This is a highly popular product within the aging demographic of the United States.
Bridge Loans & Seller Carryback Financing
The fund is prepared to originate short term bridge loans ranging from 6 months to 12 months through our PEMCO Lending arm. These opportunities should be plentiful in the current economic environment.
California's SB 1079 Law
The fund may utilize Senate Bill 1079. The fund pre-qualifies the buyer for takeout financing, provides bridge financing to acquire the property, and manages the asset through the eviction process until a long-term loan refinances the bridge loan.
How will the fund decide which assets to hold for rental?
Assets are analyzed on a case-by-case basis. Rental holds are expected to be a smaller portion of the portfolio and may be considered however the over all strategy is to buy low and sell high within the shortest time frames.
What is the expected deployment timeline for capital in RDMO II?
The fund will deploy funds once the first milestone is hit. At the latest, the fund is on track to hit the $1 million mark by February 2026, in time for the next HUD Auction.
Redemption & Fund Duration
Will RDMO II have any redemption caps, gates, or manager discretion similar to RDMO I?
The redemption process and terms are intended to be similar to RDMO I. There is a two-year lockup. After that, investors may be able to pull cash out, but doing so may result in reduced upside at the end of the fund and potentially small penalties.
Informational only. All investments involve risk, including possible loss of principal. Refer to the PPM and governing documents, which control in all cases. Page 2
Fund Duration & Capital Structure
Terms, Leverage & Fees
1
Can the fund's five-year horizon be extended?
Extending the five-year fund horizon would require an amendment to the Private Placement Memorandum (PPM). The practical intent discussed is to roll funds into a successor fund (e.g., RDMO III), as that is often the easiest approach.
2
Are there any scenarios where the fund would be extended instead of creating a new one?
An amendment to the PPM would require all investors to sign it. If 100% of investors do not agree to the extension, a new fund would need to be started.
3
Can investors in RDMO I roll their capital into RDMO II?
Yes. The fund has discussed rolling some cash from RDMO I (which is expected to wrap up in about a year) into RDMO II for interested investors. Of the 30 investors in RDMO I, approximately 12 to 15 have been considering a rollover.
4
Can investors reinvest their dividends?
Yes. Investors can reinvest dividends to keep their money compounding for the full five years, which can also help with taxes.
Capital Structure, Leverage & Fees
How are the profit splits between the investor and the fund structured?
The standard terms discussed are a 9% preferred return to investors, with a 70/30 split above the preferred return (meaning 70% of the profit goes to the investor). For early investors who invest before the end of the year (December 31st), the terms discussed are a 10% preferred return and an 80/20 split.
Did RDMO I use leverage, and if so, what was the typical leverage ratio?
Leverage depends on the deal. The fund typically leverages bulk transactions, such as HUD's Reverse Mortgage Defaulted Auctions (HECM deals). The fund has used a line with Sterns Bank, which previously advanced 80% and more recently reduced the advance rate to 65%. For one-off foreclosure sales, cash is typically used initially, with a decision made later about whether to leverage that specific asset.
What is the Loan-to-Value (LTV) for the bank's exposure?
The fund's average acquisition price has been discussed as roughly 68% to 70% of LTV. If the bank leverages 65% of that acquisition price, the bank's exposure may be quite small—potentially around 35% to 40% LTV—placing the lender in a strong position.
Did RDMO target a maximum leverage ratio or a debt-to-equity limit?
The fund doe not focus heavily on a strict debt-to-equity limit because assets were already purchased at a discount. The emphasis was more on the advance rate and the interest rate.
What are the fees associated with the fund?
Fees discussed include an acquisition fee of 1.5%, an annualized management fee of 2%, and a disposition fee of 1%. Other fund-level expenses can include fund platform, legal, taxes, and audits. Deal-level costs can include servicing, taxes, insurance, and property preservation. Investor relations compensation discussed includes a 1% capital incentive fee for raising capital.
Is there a performance fee aside from the profit split?
No. There are no other hidden fees or performance fees beyond the preferred split and the stated fees.
How to Invest
01
Create an account through the investor portal
02
Review the PPM and fund materials
03
Verify accredited investor status
04
Complete and sign legal documents (including subscription documents)
05
Commit capital via ACH, or wire.
06
Monitor performance and updates through the portal
What is the minimum investment amount?
Each unit in the fund is $250,000. A special exception has been made for NAPNATION members allowing a minimum investment of $50,000. The Manager reserves the right to accept smaller amounts at their discretion.
Can I invest through a Self-Directed IRA or retirement account?
Yes. Investments can be made through Self-Directed IRAs (SDIRAs) using an approved custodian, such as Equity Trust Company or other qualified providers, subject to custodian requirements.
Returns & Distributions
What returns can investors expect?
The fund targets a 12–15% internal rate of return (IRR), with a preferred return paid quarterly, subject to available cash. Actual results may vary and are not guaranteed; the PPM governs.
Informational only. All investments involve risk, including possible loss of principal. Refer to the PPM and governing documents, which control in all cases. Page 4
Returns & Distributions
Distributions & Reporting
How are distributions handled?
Distributions are made quarterly based on performance and available liquidity. Investors receive their preferred return before any profit-sharing. Preferred returns align with each investor's funding date. Carried interest and profit splits are allocated per the governing documents.
What happens with the preferred return during the first 2–3 quarters before investors begin receiving the 10% quarterly distribution?
In the early stages of the fund, cash flow may be deferred as assets are acquired and stabilized. During this period, preferred returns still accrue to investors at the 10% annualized rate. Once distributions begin, the Manager may handle deferred preferred returns in one of three ways:
End-of-Fund Payout
Accrued but unpaid preferred returns are distributed at the conclusion of the fund
Reinvestment
Preferred returns are rolled into the investor's capital account to compound until distributions begin
Catch-Up Distribution
Once distributions start (often in the 4th or 5th quarter), deferred preferred returns may be paid out in a lump sum to bring investors current
The approach is determined by the Manager based on performance and liquidity.
$10K
Annual Return
At a 10% annual preferred return on a $100,000 investment
$2.5K
Quarterly
With quarterly distributions
$50K
Five-Year Total
In preferred returns, assuming consistent accrual and payment
Investor Reporting & Communications
What ongoing communication can investors expect?
The fund utilizes the AppFolio investment portal for onboarding, contributions, distributions, and communication. Investors receive quarterly updates including:
- Portfolio performance summaries
- Market and asset updates
- Disposition strategies
- Financial statements
- Annual K-1 tax documentation
A dedicated Investor Relations team is available through the NAP Private Equity Club at 855-541-6683. The NAP Private Equity Club also hosts monthly online calls for Limited Partners for fund updates and discussion of current events.
Informational only. All investments involve risk, including possible loss of principal. Refer to the PPM and governing documents, which control in all cases. Page 5
Risk Management & Operations
Risk, Reserves & Administrative Updates
When will K-1s be sent out by Sagelight?
Sagelight targets delivery before March 15th of each year. If an IRS filing extension is required, K-1s will be issued by the extended deadline. K-1s are delivered via the investor portal and/or email on file. For updates to contact information, investors should notify Investor Relations.
Risk Management & Reserves
How does the fund manage risk?
The fund employs a disciplined risk management approach, including acquiring assets below market value to create a margin of safety, diversifying across multiple states, and using leverage selectively. The team monitors market conditions (including the Case-Shiller index when needed) and adjusts execution as needed based on portfolio performance and liquidity.
What is the projected or target cash reserve percentage for the fund?
The fund does not maintain a fixed or pre-set cash reserve percentage. Distributions are made subject to cash available. Reserves are held and adjusted dynamically at the Manager's discretion based on portfolio needs, operating expenses, asset-level costs, timing of cash flows, and market conditions.
Anticipated Operational Changes
Are there any anticipated operational or administrative changes investors should be aware of?
As RDMO II continues to scale and mature, the fund is planning a future transition to Verivest for fund administration and Agora for the investor technology and reporting platform.
An institutional-grade fund administrator specializing in real estate and private equity funds, offering enhanced back-office support, compliance oversight, and investor reporting capabilities.
A real estate investment management platform designed to streamline investor onboarding, capital tracking, reporting, and communications.
These transitions are being evaluated with the goal of improving operational efficiency, reporting transparency, and long-term scalability as the fund grows. Any costs associated with these changes have not yet been finalized. All material updates related to timing, implementation, or costs will be communicated in advance to Limited Partners.