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My WordPress blog has now been incorporated into my WordPress-powered website which can be found at www.PacificPrivateMoney.com.

Capitalism – My Love Story…

I’m a capitalist. I help create wealth. I own a small business—one that will be hiring in 2010. I read that small business will drive the recovery. Someone should tell that to our elected officials.

As an originator of private money (aka hard money) loans, I and brokers like me are doing our part to stoke the flames of economic recovery. And we’re doing it while government passes new regulations making it harder to loan money and while the banks sit idly by allowing loan applications to wither and die.

In the wreckage of the real estate market I seek opportunity and bring parties together for the economic benefit of all. I simultaneously market for borrowers and investor-lenders, then work my skills to find the right fit. I search for borrowers such as experienced real estate investors in need of more capital to acquire distressed real estate to either fix & flip or fix & hold. I search for investors whose savings languish in stocks or bank accounts and show them how they can earn 8-11% annual returns safely and securely.

Experienced real estate investors know how to make money in this market. To them, borrowing at 10-12% rates makes sense because they stand to make much higher returns using their skills. With the added capital I help them obtain, they are able to acquire more distressed property and turn them into buying opportunities for homebuyers.

I take idle or under-performing capital from the savings of regular people and turn it into a high monthly income stream for them; in turn their private loan helps real estate investors create profits that they spend and/or reinvest; and I earn fees by bringing these parties together. Capitalism working its magic!

God bless America and may 2010 be a prosperous year for you as well.

Returns that are “too good” to be true…

I network with a lot of other private money brokers in the Bay Area.  We see each other at various seminars and lender conferences.  I like to compare notes and talk about our growing industry.  Most of us agree that much of the public remains unaware of trust deed investing, even though a lot of us are advertising in the newspapers.  One of the most common reactions from prospective investor-clients is that the returns we advertise sound “too good to be true”.  In fact, many of my colleagues have lowered the rates they advertise because too many people equate double-digit returns with high risk!

The fact is that savvy investors have been enjoying double-digit returns on their savings for years through trust deed investing.  There’s no magic to it, and it’s easy to become familiar with the fundamentals. Like everything nowadays, the information is out there on the internet, and many websites offer articles teaching the ABC’s of trust deed investing.  Is it risky?  If done properly, the risks are highly manageable.  It’s certainly not as “risky”, in my opinion, as investing in the stock market.

Trust deed-secured notes offer high monthly income on your savings.  You can use your trust or self-directed IRA to invest for tax-free or tax-deferred growth.  You choose the note that’s right for you.  It’s not unusual for an investor to choose loans only in certain neighborhoods or on certain types of property.  You have access to all the information we have on the applicant.  Everything is transparent.

My associate and I are currently preparing a series of seminars we will host throughout the Bay Area to talk about trust deed investing.  Let me know if you’d like to be on our mailing list.

Taking the Road Less Traveled

Sometimes, taking the road less traveled can truly make a difference, especially when it comes to investing for retirement.  You might ask yourself, “should I continue to invest in stocks and mutual funds in this uncertain market, or are there alternatives that can help me to better achieve my goals?”

Despite unimpressive overall stock market returns over the last ten years, stock market advice abounds.  When was the last time you heard a financial guru talk about alternative investment strategies for income or asset growth? I listen to a lot of talk radio, and I rarely hear mention of investing in real estate trust deeds and mortgages, yet these remain among the most powerful tools for securing high monthly income and double-digit yields.

Today I heard a nationally-syndicated talk show host tell a 40-year old listener that he should have 60% of his savings in the stock market.  Really? To me, that seems to be good advice only if you plan to retire broke or die early.  In my opinion, investing in securities is playing Russian roulette with your savings.   Why would you do that?

Investing in a note secured by a deed of trust offers better security and true transparency, neither of which you’ll find in stocks.  Are there risks? Of course!  But those risks are manageable and quantifiable.  Investigate for yourself the opportunities to earn anywhere from 8% to 12% annual fixed yields on your savings.  Whether you invest through me or through any number of local, trustworthy private loan originators, you owe it to yourself to learn the facts.

Tired of low yields? Real estate secured notes may be right for you…

Of all the income-producing investment alternatives, few are more transparent than trust deed-secured notes.  Investing in a secured note that is originated through a reputable and experienced broker can provide high monthly income with easily understood and quantifiable risk factors.

Consider the fact that you have the individual borrower(s), whose credibility you can assess through credit reports, income verification, bank statements and even tax returns.  Second, you have the real estate that acts as security for the loan, and which provides protective equity that acts as insurance against loss of principal.  A reputable independent appraiser verifies the likely resale value of the property.

The combination of these two factors creates a transparency that allows the individual investor the ability to assess risk and opportunity.  Can you do that with stocks or mutual funds?

As for those who fear that we may not yet be through the worst of the real estate market “correction”, let me say this:  There are segments of the real estate market that have bottomed out and are already trending upward.  Entry-level housing in California was among the hardest hit by the price collapse, and investors have been snapping up foreclosed entry-level homes like crazy since the Spring of 2008.  There is a stable market of sales to first time home buyers of remodeled, formerly bank-owned homes, and this has firmed prices in this segment.  We make loans to investors who are holding these remodeled homes for rental income and future appreciation, and the ratios of rents versus loan payments on these properties make for very attractive note investments.

Trust deed investing has been called one of the best kept investment secrets.  In my opinion, when done correctly, no other investment vehicle can offer the safety, security, and returns of trust deed investments.

Private Money Loan Rates are Trending Down

Nature abhors a vacuum.  As conventional financing sources dried up over the past two years, private lenders have stepped up to fill the void.  And with that has come competitive market forces that are driving private note yields south.  Many new mortgage pools have been formed this year, and some are offering loan rates on “vanilla” deals as low as 8%.

For years, sophisticated private money lenders have been enjoying rates of 12% (or more) on their secured notes.  Today, a borrower with one or more compelling factors will find there’s competition for their business.  While there still seems to be more loan requests than ready capital to fill demand, the truth is that there’s a lot of private money looking for “good” loan opportunities.  I know, because I’m getting calls every week from associates in the industry looking for referrals.

“Compelling factors” include:

• A strong borrower
• Higher quality collateral
• Strong debt service coverage
• Lower LTV’s (below 60%)

Any one of these factors can result in more favorable loan terms.

The good news for the savvy investor is that, competition notwithstanding, there are still niches in the private lending sector that command more traditional yields.  I’ll ignore for the moment land, condos, seconds and development deals (the market for these loans is very rough).  For example, we’re writing loans with investor yields of 10-11% secured by cash flowing residential rental property in strong rental markets such as the Sacramento Valley and Contra Costa County.  These properties are not in rough neighborhoods, and the debt service coverage ratios are anywhere from 1.5 to 2.5!

These loans tend to be smaller – many are in the $50,000 to $150,000 range – but with solid comparables thanks to brisk “fix & flip” sales activity, the target LTV ratios are reliable.  And again, rents generally far exceed the monthly interest payment even at 12%!

We have a constant stream of cash-out loan applications secured by fully remodeled and rented homes.  These loans are paying investor yields from 10-11%.  Contact us for a current list of loan opportunities in our pipeline.

Grow your real estate portfolio using the IRA money of people you know

I originate private money loans. The source of my funds are individuals through their savings and IRA’s.  Here’s the thing:  More than likely you know people who have self-directed IRA’s. They may or may not know that they can invest that money in high-yield notes secured by real estate.  So here’s what you do:  Ask them to loan you money. Seriously!  Look, you’ve identified a real estate opportunity that requires capital.  You approach your friend or relative who has savings or an IRA and suggest that they can achieve a high-interest return on their savings by loaning money to you secured by a first position deed of trust on real property.  If their savings is in a self-directed IRA the income is either tax deferred or tax free.

You negotiate an interest rate that motivates them (be generous), and then you call a professional like me to legally and properly paper the deal. Now, why would you want to call me? What do I bring to the party?  How about a third-party professional opinion as to the viability of your plan, along with an unbiased opinion of value?  Moreover, I will open escrow and prepare all of the proper loan documents and disclosures in order to establish an arms-length transaction that will give your lender comfort.  I will make sure the loan is properly serviced by a leading loan servicing company, who will send you a monthly bill and electronically deposit the interest into your investors account.  I’ll bring credibility to your deal and make sure that the loan is properly structured and properly set up so that it complies with IRA investment guidelines and regulations.  You find the money and I make it legit. You bring your source of capital to the table and I’ll close the deal.  My fee:  $995 plus title and escrow.  On larger loans and/or deals that require more due diligence I may need to add ½% – 1% of the loan amount.

There’s plenty of money out there.  You just need to know where to look and how to ask.  For more information call or email me and I’ll help you get started.

Trust Deed Investing in 2009

In my October 5 post I shared why I thought that it was a great time to consider Trust Deed investing.  Throughout the horrible 4th quarter where we saw real estate values continue their plunge, our company continued to write loans, but with a marked difference.  We wrote almost no “equity-only” loans, and requested full documentation on virtually every application.  This is a major shift in private lending.

The private money lending industry was founded on the principal of equity lending, basing the decision to lend largely on the asset, with sometimes scant attention paid to the borrower or his ability to service the loan.  In this new market, we are no longer ignoring or overlooking the borrower.  Much to the chagrin of recent applicants, we are now insisting on detailed financial information including pay stubs, W-2’s, bank statements and tax returns.  In addition, we always pull credit and conduct a background check.

Previously, a borrower would typically object by saying “If you’re going to make me provide all that information I may as well get a conventional loan.”  In today’s tight credit environment, the banks are not presently an option.  In fact, many of our loan applications today come by referral from mortgage brokers who can’t place their client’s loan, and the application comes already fully documented!

Private lending in 2009 will look markedly different than in previous years.  The quality of the loans is already much higher due to the continuing scarcity of conventional financing for the investor.  Additionally, on every loan we analyze these three key areas:

1.    What is the true value of the property?
2.    What is the borrowers’ capacity to service the debt?
3.    How sound is the exit strategy?

Stricter underwriting guidelines, coupled with lower LTV ratios, result in an investment product that has more safety factors than in previous years.

It’s time to supercharge our retirement savings

“Most Americans are simply not prepared to fund twenty years of retirement.”  That’s a direct quote from Tom Anderson, founder and president of PENSCO Trust, one of the nations leading self-directed IRA custodians.

And this was before the recent meltdown in the stock market.

Many, if not most, are not on track to retire successfully.  Through their savings and retirement plans, they are not earning sufficiently high yields on a consistent basis that will allow them to afford the retirement lifestyle they desire.

Traditional investments have been delivering inconsistent and inadequate yields, frustrating the average investor seeking reliable growth.  Financial planners are often unaware or unwilling to recommend “non-traditional” investments to their clients, despite the fact that high, consistent yields can be achieved safely and securely.

Real estate-secured Deeds of Trust and Mortgage Pools have been helping investors achieve consistently high rates of return, typically between 9-13% annually.

With the downturn in the real estate market, the volatility in the securities markets and the uncertainty in the financial and mortgage markets, many investors find themselves ill-equipped to properly analyze the many opportunities to achieve higher rates of savings growth. They are not alone.

Today, everyone needs to take charge of their retirement plans in order that they may grow their savings more effectively and thus allow them to retire comfortably.  Real estate-secured financial investments can be the best way to achieve that goal.

We help people stay on track to retire wealthy. Through our years of real estate investment experience and our background in finance, accounting and mortgage origination we bring a unique competence to our program of real estate-secured investments.   To help you better understand what we can do to supercharge your savings and retirement plans, we offer complimentary consultation to learn your goals, experience and risk tolerance.   Then we can show you how we can help you to participate in what many financial writers have called the “best kept investment secret” – high-yield notes secured by Deeds of Trust.

Why NOW may be the best time to invest in Trust Deed-secured notes

The present banking and financial crisis is creating a growing demand for alternative financing sources. Banks are particularly bearish toward real estate investors, many of whom are seeking financing to leverage their acquisition of bank-owned properties. Of those banks who are still considering investor loans, many won’t loan to you if you own more than four leveraged investment properties.

The result is that we in the private money lending business are seeing higher quality loan applications. People with strong credit, experience and cash are turning to private lenders in order to take advantage of the best buying opportunities in a generation.

When you add to this the fact that valuations have significantly “normalized”, and that we currently underwrite to more conservative valuations, what you have is a market where your Trust Deed investments are not only backed with more reliable protective equity, but your borrowers in many instances are now stronger and more creditworthy.

We’re writing loans to investors who are negotiating purchases of homes in certain Northern CA markets at 20% of 2005 valuations. That’s an 80% devaluation from the high-water mark. At these prices, the homes will cash flow even when leveraged at 65% using a private money loan.

Instead of sitting on the sidelines, smart Trust Deed investors are taking advantage of these new market conditions and funding loans that have more safety factors than have existed in years.