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.

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.