I put the theories learned here to another test earlier this week. The wife and I were offered the opportunity to "invest" in a local wine club that is opening a new location. We know the owner, have been members in his other wine clubs in the past, and were invited to a dinner where the new opportunity was floated.
Basically the investment was setup as a no recourse loan, 10% interest paid on the loan, and wine club benefits such as purchases at 10% above cost during the life of the loan.
That is all fine and dandy, but being no recourse I looked hard at the chances the loan will actually be repaid and I jumped back to Greg's rule about how I feel about the actual business. We dropped our membership in his other "club" because the personal feel of the establishment had gone away, a couple of the partners had a falling out and just an overall feeling of not being wanted when visiting the establishment.
If I stopped paying my membership fee in his other club because I didn't like the direction it was heading...why would I loan him a large sum of money to start the same thing only different in another spot?
Thanks Greg!!