These days–with uncertain markets—tools and resources which provide us with information and data are more crucial than quite possibly ever before.

I am always trying to find more resources that will be of use to both me and readers of this blog. Here are a few items that have popped up lately.

ALTOSResearch offers this wonderful site, offering “real-time real estate data.” I haven’t fully researched the treasures on this site, but have been quite impressed by their market specific data (just click on the “Take me to the data” tab off the main page.” It is free to use at a basic level and offers a very useful set of analytics giving you invaluable data on the current state of various real estate markets. The section for Portland looks like this. It actually offers some promise for the future of this market as we move into 2012.

I came across an interesting article at CNNMoney: Housing markets: Best recovery bets. This article begins, “Home prices are poised to fall in most markets this year, but 2012 will bring a rebound. Here are the 10 large metro areas that will record the largest price gains.” Thus more hope for 2012.

I am particularly excited to see that Tacoma, Washington is #1 on the list and that Seattle is #6. Since Oregon and Washington tend to move together, I think this bodes quite well for the chances of recovery in the Pacific Northwest—our core region.

One of our readers, Devin Schumacher, was kind enough to offer the the last two items. Thank you Devin!

First of all, I have long searched for a good beginning text book on private money investing and private money loans. Devin found something that might be pretty good.

Devin says, “The first book I just finished might be worth referencing on your blog.  It is a very basic intro to how the business works, and how a person would go about setting one up.  It reads almost like an intro to private money lending textbook might read if there was a class on the subject.  But nonetheless, probably a good starting point for a lot of people to get an understanding of how it works on a very fundamental level.”

The book is, Private Mortgage Investing by Terri B Clark & Matthew Stewart Tabacchi. You can find it here on Amazon.com (where it gets good ratings, by the way).

And then this last juicy little morsel, a novel apparently built around the financial realm of hard money. You will find it here on Amazon.com. I haven’t read it and neither has Devin, so it is hard to say for sure that they mean Hard Money as in the sense of Private Money. If anyone ventures to read it, please let us know.

And with that, my well is dry for now. If you know of any other resources that might be of interest to the readers of this blog, please share them with us either via the comment section or in a direct mail to me (so that I may in turn share in a future post).

Here’s to a good finish to 2011 and a better year in 2012!

– Clay (sparkman@lendicom.com, 503-476-2909 or 800-971-1858)

Clay is Vice President of Fairfield Financial, a primary source for private money loans since 1964.  Fairfield works with a broad range of private money investors, in a broker capacity, finding, underwriting, presenting, closing, servicing, and when necessary, assisting in the workout of difficult loans.

Most private money investors choose to work with brokers.  However it is a decision that each private money investor must make independently and with great care—to use or not to use a broker.

The essence of the matter I think is this.  If you want a full-time job (and some investors certainly do) then you may well decide to go it alone (without a broker), and essentially setup your own office geared toward managing the various aspects of investing in private money loans and hard money loans secured by trust deeds and real property (including promotion, underwriting, risk assessment, loan servicing, and workout/recovery).

If you don’t want a full-time job and are interested primarily in hands-on investing (in my opinion there is no such thing as hands-off investing in this niche), then you will want to shop for and eventually select a qualified broker to “partner up” with.

This post will be primarily of use to the former type of investor–as the first step in the process of placing trust deed secured loans is finding quality borrowers that meet your criteria.  This is not an easy thing.  At Fairfield, we receive about 300 loan requests per month these days and of those we end up pursuing maybe ten in a typical month.  On average maybe six of those will survive our underwriting process, be presented to one or more of our investors, and ultimately be closed through escrow and thus actualized as an investment.

If you are faced with this challenge, a web based tool known as Lendicom.com may be of interest to you.  The site is geared toward commercial lending, and allows borrowers and brokers to sign up and submit specific loan proposals to lenders who have also signed up online.  The lenders may be institutional or they may be singular individual investors.

If you are a hard money lender looking directly for commercial loans to fund, you may sign up as a lender and create an account that allows you to specify detailed criteria regarding the specific types of loans that you would be interested in and your particular criteria.  Then from time to time borrower proposals that meet your criteria will be submitted to you.  You may choose to either decline or pursue these proposals.  Ultimately if you place a loan which came to you through Lendicom, you pay 25 basis points to Lendicom (or a quarter of a point).  Otherwise you pay nothing for the use of this service.

In the interest of full disclosure, I am an officer and a part owner of the company that offers this site.  So consider me biased.

Still, I recommend that you check it out at the link below and see what you think.

www.lendicom.com

– Clay (clay@privatemoneysource.com, 503-476-2909 or 800-971-1858)

Clay is Vice President of Fairfield Financial, a primary source for private money loans since 1964.  Fairfield works with a broad range of private money investors, in a broker capacity, finding, underwriting, presenting, closing, servicing, and when necessary, assisting in the workout of difficult loans.

I am frequently asked by private money investors:  “… so how do we get started investing in private money loans?”  You know, there is no simple answer to this question.  I tell them that it is kind of like dating.  If we are going to do this as an investor/broker team, then they need to get to know me and how I work and I need to get to know them and how they work.  We both need to develop a degree of trust, which generally requires the passage of time and developing a sense of familiarity.  And frequently the investor (if they are not immensely experienced) needs to learn more about how private money lending works—from A to Z and back again: they need to know everything they can possibly know in order to make good choices and feel comfortable with this type of investing.

Generally this process takes some combination of phone calls, e-mails, and from time to time, a personal meeting.  It has always been my opinion that we are seeking compatibility in two areas:  (1) we are attempting to determine if we are functionally compatible.  That is, we would like to assess whether or not we offer a good fit in terms of our specific needs and, at the same time, what we can offer to one another, and (2) we are attempting to assess our stylistic compatibility.  In other words, we are attempting to determine whether we have similar values and whether we tend to function well together as a team.

I encourage “new” investors not to rush the process of getting to know me and getting to know how this type of investing works.  They are invited to ask as many questions of me as they like or need in order to reach a point of comfort, and to do so for as long as they need to.

Potential investors can learn quite a bit about private money by studying our web site and following my blogs.  And certainly, the web site is a place where they can get to know us better as an organization.

We have strong convictions with regard to the nature and integrity of the investor-broker relationship. Our basic principals may be summarized as follows:

1. We believe that fixed return instruments (Deeds of Trust and contracts) secured by real property are an excellent investment alternative.  They combine a high degree of safety and predictability with the larger returns usually associated with equity style investments.  However, as is true with all investing, it is important for the investor to move forward with a clear mind and open eyes.
2. We believe that it is our job to attempt to discover and provide to our investors all the relevant information pertaining to a particular investment offering.
3. We will NEVER pressure our investors. Our job is to provide information and provide assistance with the analysis, but not to otherwise influence the investor’s decision-making process.
4. We will not abandon our investors after a particular loan is closed. For the full life cycle of the loan, we will be available to assist our investors with the process.
5. We are not interested in one-time loans from investors, but rather in building ongoing investor relationships. We do not require an exclusive relationship with our investors, but DO ask that they engage in a relationship of mutual respect, and ask for–as well as offer–the benefit of clear and honest communication.

In addition, investors are encouraged to know and understand the following with regard to what we offer:

• We broker loans secured by beneficial interest positions in deeds of trust.  We do not pool funds.  With each investment, our investors directly hold a beneficial interest position in real estate.
• We perform rigorous screening of all loans, and present investors with a detailed packet of information designed to assist the investor in making a solid decision on whether or not to invest in a particular loan.
• The interest rates on our loans range from 11% to 15%.  This is paid straight through to the investors.  (We generally do not receive a portion of the interest for brokering or servicing the loan.)
• The investor does not pay a loan servicing fee.  (This fee is paid by the borrower.)
• We provide turnkey servicing of investor loans that we place.  We mail out payment coupons, receive and mail or direct-deposit borrower payments and perform a full range of collection accounting services, including payoff quotations, verification of mortgage and mortgage history reporting, and 1098/1099 reporting.
• If a payment is late or any other default situation occurs, we contact the borrower directly and report to the investor regarding the results of our communication.
• If a workout is required to get a non-performing loan back on track, we attempt to assist in the discovery and negotiation and documentation associated with the process.
• In the event of a potential lapse of insurance coverage, we are prepared to force place insurance using our provider, to protect the investor collateral.
• If legal action is required due to a default situation, we provide advice and guidance to our lenders and assist in leading them through the legal process—if they wish—using our legal representatives.

Ultimately serious investors will be invited to speak to one or more of my existing investors—so as to hear from those who have already been down this path with Fairfield.

Also, I have a series of questions that I always make sure to ask before I make a decision to begin working with an investor.  These include the following (at a minimum).

1. What state do you reside in?
2. We currently broker loans on real property secured by transactions in 14 states.  Would you be willing to consider trust deed investments in a variety of regions?
3. Do you want to inspect each property yourself or are you okay generally with utilizing our inspection?
4. How much money are you looking into putting into trust deeds at this point?
5. What would your optimal investment amount be per loan?  What would your maximum loan amount be?
6. How much experience do you have investing in deeds of trust?
7. Are you an accredited investor?  (Generally speaking this means that you make $200k or more per year OR otherwise have a net worth in excess of 1M.)
8. Will you consider taking a fractional share of a beneficial interest?  This means that you are a partial lender on a loan.  You take a direct position on the loan, but only a percentage share and a handful of other individuals share a position on the loan with you.)
9. What is your target rate of return?
10. Do you charge any fees or points?
11. Are you okay with having us (or in certain cases our attorney) draw the documents?
12. How fast can you generally move to make a decision on a loan?
13. Do you have any types of real estate secured loans that you particularly prefer (with regard to property types)?
14. Do you have any types of real estate secured loans that you will not do?
15. What is your own personal maximum LTV?
16. Our minimum investment into a loan is $50,000 is that acceptable to you?

Finally we reach a point where all the questions have been asked and we need to make a decision about working together.  It may take two weeks to get to this point or it may take 6 months.  Sometimes it takes a year or longer.  Remember, we are dating.  We are getting to know each other.  And we are both seeking a long-term relationship.  So we want to get to know each other well.

Once we decide that we are pretty sure we like the way things are going, we roll up our sleeves and begin working together.  At the end of the day, this is what it really takes to get to know each other and to get to know the private money investing process.  This starts with me bringing fully vetted and live loan packets to the investor, one at a time, as I finish vetting those that may be a good fit for that particular investor.  The investor is able to examine these packets in detail, ask questions relevant to the decision process, and request additional vetting or discovery if she feels such is needed.

An investor is encouraged to always say “no” if they are not comfortable with a particular offering.  But at the same time, they are expected to be timely in their response and to examine the offerings carefully and with rigor.  At the very least this is a superb learning process and in most cases, it leads to our first loan together.  And I have found that once we have done the first loan together, the rest are a whole bunch easier, and we are likely to do many more in the years to come.

– Clay (clay@privatemoneysource.com, 503-476-2909 or 800-971-1858)

Clay is Vice President of Fairfield Financial, a primary source for private money loans since 1964.  Fairfield works with a broad range of private money investors, in a broker capacity, finding, underwriting, presenting, closing, servicing, and when necessary, assisting in the workout of difficult loans.

First off, I’d like to point you to a list of 37 private money investment tips posted by Brad Evans of Brad Evans Real Estate Loans.  This list has been circulating on the net for quite a few years now.  It is one of the more thoughtful comprehensive items that I have come across and so I thought I would share it with you.  Though I agree with a lot of what Brad has to say, I don’t agree with all of it.  I will utilize a future post to give my own input/comments on each of the points given on Brad’s list.

http://www.bradevans.com/37pointchecklist.html

For today’s post, I spent some time looking at You-tube videos that came up under a search of “private money lending”.  To the negative, as with content in general regarding private money investing, I didn’t (yet) find a whole lot of substance in these videos for the most part.  However, to the plus side, I have to say that I really had a good time with this.  There is some very interesting and entertaining stuff out there.  And I find it quite useful to see what people are saying about private money: how it works and how to obtain it in particular.  When I have more time I’m going to go much deeper as I just really scratched the surface.

At any rate, here is a representative cross section of what I found out there in cyber-video-landia.

On making massive montly income

Our narrator is a representative of http://www.askaexpertwholesaler.com/.  I went to the homepage but didn’t actually enter because you have to enter your e-mail address (and I wasn’t so inclined), but the entry page compels with the question, “Who Else Wants to Discover the Astonishing Secrets of How to Make Massive Monthly Income with Real Estate in 2008 By Asking an Expert Wholesaler”

This is one in a series of “quick tips” to real estate investors on how to find private money lenders

http://www.youtube.com/watch?v=0-frYFdYJw4

My comment: It’s hard to argue with “run your mouth.”

The discovery of iced coffee

Patrick Riddle of http://www.privatemoneyblueprint.com on “How to Convert Wannabe REIs into Private Money Lenders.”

http://www.youtube.com/watch?v=B2VfCnCgibM

My comment: I love this guy.  He has a bunch of videos out there and I wanted to watch every one of them.  He definitely has a certain charisma that keeps you watching.  Will his plan work?  Maybe one time in ten thousand, I suspect.  Most of the people who attend those meetings haven’t made their fortune yet—and don’t really have cash to invest.  And hey, that is just a tough road to go down anyway.  I don’t try to sell anyone on trust deed investing, but if I did, it certainly wouldn’t be the inexperienced, uneducated, and uninitiated.  There is too much to know before you can be ready for this kind of investing.  At any rate, I’m glad Patrick discovered iced coffee.

How to avoid talking to investors about the things you need to talk to investors about

Here is another one from Patrick Riddle at http://www.privatemoneyblueprint.com called “How to explain the “Worst Case Scenario” to a Private Money Lending Prospect.”

http://www.youtube.com/watch?v=Ps0Cv6QSC18

My comment: Okay, this one somewhat disturbs me.  It might be more appropriately titled, “How to avoid talking to investors about the things you need to talk to investors about.”  I do like his description of the workout process.  Basically:  You are a lender and then you become an owner and we all live happily ever after.  I guess he didn’t want to muck up the conversation with tedious details like how to choose between a judicial foreclosure and a non-judicial foreclosure, what happens if the borrower contests a judicial foreclosure, the potential impact of a bankruptcy, taking back a property that is distressed or an unfinished project, the potential impact of market changes and/or a protracted foreclosure process on your equity position, how to go about marketing the property, and how to obtain and collect on a deficiency judgment, if need be in order to fully recover.

Would you like to vacation in paradise?

This is Cash Money Quick’s (http://www.CashMoneyQuick.com) video ad for a “New FREE Ebook – How to Find MILLIONS in Private Money.”

http://www.youtube.com/watch?v=Sua7AqOzgCA

My comment: Well I haven’t read the e-book, but the guy comes off nice enough and I like the palm tree in the background, suggestive of … long tropical vacations perhaps?

On drawing legal documents like a real attorney

Dmitry Mikhaylov (http://www.komelot.com) putting on a boot-camp, Attorney at Low, on how to prepare private money lenders documents.  “Find out from attorney what documents you will need to get Private money lenders money for your real estate needs.”

http://www.youtube.com/watch?v=MBFcGD7LSbI

My comment: I like the “Attorney at Low” part.  There might be just a little bit more to the document process, but you get the general idea.

On self-directed IRAs

Self-Directed IRA’s are explained by Trent Dalrymple, Director of Investor Relations at Metro Mortgage Investments LLC, a private mortgage lender in Huntington Woods, Michigan. More info at www.metro-mi.com

http://www.youtube.com/watch?v=jrdBlOU7nZA

My comment: This one I actually thought was quite good.  I have no wise-guy remarks.

Am I still in the real estate lending section?

This is an ad, for what I’m not sure but I enjoyed it.  The YouTube text states:  “Get private money, cash loans from lenders. Private individuals have money to give away today. Online. Instant cash now. Bad Credit ok. Lenders MUST give away cash now. Hurry. Money for real estat…”

http://www.youtube.com/watch?v=WIAUVgMRUnE

My comment: Va va voom!

Subliminal advertising

This is another ad:  “EASY LOAN TO BUY FORECLOSURES Hard Money can be a quick way to fund everything from residential property, to industrial facilities to new home construction.”

http://www.youtube.com/watch?v=rjsMc3ExY2M

My comment: Did you notice the subtly placed images of cash and money–almost subliminal.  You might want to play it back again in slow motion.

And thus concludes your private money through the looking glass tour for today.  I sincerely hope that I have not come off as too terribly condescending.  (In general, these videos can’t be easy to do.)  I only wish that I could find better resources out there—text, video, and otherwise—that could be helpful to all of us in this complex realm of trust deed and private money investing.  And so the search goes on.  Please do share whatever you may have, whatever you may know, and whatever you may find.

– Clay (clay@privatemoneysource.com)

As I continue my search for resources that might be useful to those who invest in real estate secured loans, I become increasingly convinced that our particular niche field is somewhat of an intellectual/informational wasteland.  Every time I stumble upon an article or site that looks like it might be of interest, it turns out to be a blatant plug for some specific product or company.  And the stuff that isn’t blatantly biased, quite often seems to be hack work, badly lacking in quality and perspective.  It would be as though I were searching for articles and blogs on gourmet food only to find that all of them had been written by employees of McDonald’s, Burger King, and Taco Bell.  (Hopefully I won’t get sued for this.  I did not mean to disparage the great corporate food powers in any way, shape, or form.)  My real point is: if I see one more article entitled “Hard Money Made EZ” or if I see “hard money” refereed to as “hard $$$” one more time, I’m outa here.

Moving on, I turned up a few items of interest in my lap around the internet this morning.  The following article is quite dated, but still might be of interest for those looking to expand geographically (and into a very large target market).

http://www.danwei.org/front_page_of_the_day/private_money_lending_business.php

I also stumbled onto this site/book by Paul Wells who claims to hold the secrets of private money.  I hope indeed he does, as we could use a good text book in this field.  I have asked him for a review copy, and if he is obliged to comply with my request, I will make a point to read/review it here.

http://www.paulwellsauthor.com/mortgageinvesting.html

I couldn’t help but be amused by this post by Leonard Rosen in August of 2007.

“America’s hard money expert shares his views on real estate investing. There are many different types of investing strategies that are available to the novice and sophisticated investor.

However, I do not know a safer investment strategy coupled with a higher rate of return than real estate. Unlike the equity markets, real estate has proven to be a safe haven for many investors. Over the past 40 years, real estate has risen in value in literally every major market in the United States.”

Oh well.  The full text is here:

http://www.americanchronicle.com/articles/view/35089

And here is another book on the topic, specific to California (but that is a pretty good starting point for talking about the basics of private money lending nationwide), and with five of five stars on five reviews.  I can’t figure out how to ask for a free review copy, so if anyone knows the book please weigh in here.

http://www.amazon.com/Smart-Trust-Deed-Investment-California/dp/0934581010

About.com defines private money pretty much the same way as most outsiders do:

http://www.answers.com/topic/hard-money-loan

At least they hedge the “last resort” part with the “short-term bridge” bit.  However, I am beside myself with how many people who should know better claim–I see this over and over again–that the borrower (credit/income/net worth and such) is irrelevant to the private money lending process.  Why would anyone make a private money loan and disregard readily available information about the financial status of the borrower?  It is beyond me.

Please oh please … if you know where the goodies are hiding out there, please share them with the rest of us.  That after all is what this blog is all about: sharing quality information and resources with like-minded folks who care about private money investing.  (Oh yes:  and promoting me and my company; but NOT BLATANTLY MIND YOU … good lord no … not blatantly.)

– Clay (clay@privatemoneysource.com)

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