INVESTOR INFORMATION AND RESOURCES
Why Trust Deed Investing?
Most individual investors today are looking for opportunities to earn more monthly income while maintaining a secure, diversified portfolio. For almost all investment and lending options there are pros and cons. The Fixed versus Variable income investment is a classic example.
While virtually all investors understand the benefits of a balanced portfolio, there are times when one type of investment is more preferable than the other.
Fixed Income Investments are an important part of a well-diversified portfolio. Fixed income investments pay interest at specified times in fixed amounts, and are usually issued by a corporation, municipality, or government sponsored agency.
There are two primary reasons investors may want to include fixed income investments in their portfolio:
- Regular Income - Fixed income investments provide a stable and regular stream of income.
- Diversification - Fixed income investments are essential to the performance of an individual investor's portfolio.
A Trust Deed Investment is considered to be a fixed income security. Trust deeds (TD's) secured by tangible real property, when professionally underwritten and managed, have become a good investment alternative for the income-producing portion of an investment portfolio.
Diversification
Trust Deed investing offers many investors, particularly retirees - another method of diversification to help reduce volatility in their portfolio and a way to generate additional income.
Historically, trust deeds have outperformed cash investments (bank deposits, CDs, money market instruments and US Treasury bills), and exhibited less volatility than stocks, although stocks and mutual funds can offer high returns, they have greater risks. Furthermore, the return on TD's has often offset the negative return on stocks during periods of market downturn. As a result, adding TD investments to an all-stock portfolio generally increase's overall return and lowers the overall risk of your portfolio.
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Trust Deeds
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CDs
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Stocks
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Bonds
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Interest
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8-11%
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1-3%
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Variable
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4-5%
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Risk
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Low
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Low
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Moderate-High
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Low - Moderate
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Secured by
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Real Estate
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FDIC
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Paper
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Municipalities
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Liquidity
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Yes with Penalty
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Yes with Penalty
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Yes
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Yes
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Commissions
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None
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None
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Always
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Always
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Income
Fixed-income investments involve loaning money for a period of time in exchange for periodic interest. A Trust Deed Investment can generate additional income to supplement existing income sources.
Predictability
Most fixed-income investments also provide a predictable stream of income. This can be an advantage for current or near retirees who seek regular income to supplement a pension and/or Social Security.
Tax Advantage
The interest income generated by some fixed income investments are tax deferred or tax exempt from federal and/or state income taxes. The Tax-Exempt Fixed Income Model invests your IRA, family trust, or pension funds in Secured Loans (Trust Deeds / Mortgage Notes).
Additional Benefits of Trust Deed Investing:
- No Load Investment - there are no fees for investing
- Higher Fixed Yield - historically exceeding the Dow Jones average
- Higher Liquidity - short term loans typically written for sixty (60) months
- Security - trust deeds backed by California real estate
- Stability - interest stays constant throughout the term of the loan
- Fixed Principle - principal value of investment does NOT vary... unlike stocks and bonds
Single Notes | Fractionalized Notes | Mortgage Pool | Real Estate Syndications
Single Notes
Investors can purchase single whole notes secured by real property. The investor owns the entire note and the borrower pays the investor monthly mortgage payments which are collected by a servicing agent and distributed to the investor every month.
Fractionalized Notes
Fractional notes are single whole notes secured by real property that are owned by 2 to 10 investors. Each investor owns an undivided interest in the note and receives a pro rata share of the monthly mortgage interest that is collected by a servicing agent and distributed to the investors every month.
Mortgage Pool
A Mortgage Pool is a real estate partnership that offers investors participation as a limited partner, in a pool of trust deeds. Partners receive income generated from mortgage interest which is typically distributed monthly or quarterly. Mortgage pools allow investors greater diversification through the ability to participate in a larger number of trust deeds rather than a select few as in single or fractionalized notes. The mortgage pool is managed by Bridgelock Capital. Please contact Investor Relations if you have any questions regarding subscriptions, dividends, withdrawals or deposits info the Mortgage Pool.
Real Estate Syndications
Real estate syndications offer investors an opportunity to participate through limited partnership shares in unique real estate investments. Larger and often complicated real estate financing requires the formation of real estate syndications to protect investor interests and to provide for preferred and often attractive investment returns.
IRA, Trusts, & Pension Funds
Invest your IRA, family trust, or pension funds in trust deeds.
You may be able to invest your IRA, family trust, or pension funds in Secured Loans (Trust Deeds/Mortgage Notes). Or, if you're leaving your employer, you can roll your 401k into an IRA and invest in trust deeds. If your administrator, custodian or CPA is unable to approve this for you, contact us for names of firms that will allow you to invest your funds in secured trust deed investments.
Using a Self Directed IRA for Real Estate Investments
Self-Directed IRA
A self-directed IRA is legally no different from any other IRA. It indicates that you the client choose your IRA investments. The rules governing IRA investments types are exclusive - not inclusive. Therefore, you can invest your IRA funds in a virtually unlimited set of investments, except for those specifically excluded by law. The only assets excluded by the IRS are life insurance contracts, collectibles, and capital stock in an "S" Corporation. You can verify that it's legal to invest your IRA in trust deeds by going to www.IRS.gov and searching for Publication 590. Pages 40-41 define what cannot be held in an IRA.
Is this New?
No. You've been able to buy real estate and trust deeds within your IRA since IRA's were created over 30 years ago. Many financial professionals are unfamiliar with this, and continue to recommend bond and mutual funds for IRA investments. Also, some institutions limit investment choices to funds and products for which they'll earn a commission.
Getting Started
To invest in trust deeds with your IRA funds, you must first transfer your account to a third party "custodian" which will act as your intermediary. This is known as a "self directed" IRA. Once your account has been opened, you can then direct those funds to be used as capital to fund trust deed investments.
First, verify that your current IRA custodian permits you to purchase trust deeds. If not, contact us for information on custodians that will allow you to place your IRA funds in any legal investment. In additional to IRA or SEP IRA funds, you can also transfer existing pension plans (e.g. 401k, 403b, ESOP or 457 plan) to a custodian.
IRA Investments in Trust Deeds
Once your funds are transferred, notify us of how much you'd like to invest in trust deeds, and hold the funds at your custodian in a short-term investment that can be easily liquidated. When we have a trust deed available that meets your investment objectives, we'll send you information on the investment so that you can decide whether it's right for you. If it is, we'll send you the appropriate documents for signature, and give you instructions to give your IRA custodian on how to transfer funds to the title company holding the escrow for your deed of trust
Using a Pension Plan for Real Estate Investments (Tax-Exempt Fixed Income "Investment" Model)
Trust Deed (or mortgage) Investments
Putting mortgages into retirement plans can be an excellent pension investment for both tax considerations and basic investment fundamentals:
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1.
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Tax: Interest income is usually tax deferred or, in the case of Roth IRAs, tax-free. Many smart investors understand this concept so they diversify by putting their high-yield, interest-bearing investments into their pension programs so they escape paying current taxes. Putting safe mortgage investments into a retirement plan and getting the benefits of tax deferral or tax exemption is getting the best of both worlds.
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2.
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Lower Yields Can Still Result in Greater Amounts of After-Tax Interest: Frequently, because of their tax-free status, tax-exempt fixed income investments offer lower yields. However, depending on your tax bracket, they may actually generate more income on an after tax basis than higher yielding taxable investments.
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3.
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Stability: interest stays constant throughout the term of the loan, principal value of investment does NOT vary.
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4.
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Security: a conservative interest-bearing investment is more secure than an equity/volatile investment and pension programs should generally restrict themselves to relatively “safe” activities.
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Investment Prerequisites
Investment rudiments to consider before including mortgages into a pension plan portfolio:
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1.
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Diversification: The investor is committed to the concept of diversity and he or she has both, pension funds and non-pension funds (or personal funds portfolios / personal money) to invest.
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2.
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Strategy: Which investments should be placed into pension plans and which investments should be allocated to non-pension portfolios investments.
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- Non-pension portfolios - Equity investments such as real estate, stocks and mutual funds, as well as anything volatile or risky.
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- Pension portfolios - High yielding “interest-bearing investments” (including mortgages).
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3.
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Investment Principle – Yield vs. Security: Investors dealing with pension funds have a different mentality than non-pension investors. The pension investor's motivation is to keep the money working and to do so safely, whereas the non-pension investor's motivation is to secure the highest rate of return (yield) on his or her investment.
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ERISA Laws - Investors should also become knowledgeable or aware of various ERISA laws that have an impact on the investment activities of pension funds:
The Employee Retirement Income Security Act (ERISA) was enacted to ensure that employees receive the pension and other benefits promised by their employers. ERISA also incorporates and is tied to Internal Revenue Code (IRC) provisions designed to encourage employers to provide retirement and other benefits to their employees. Most provisions of ERISA and the IRC are intended to ensure that tax-favored pension plans do not favor the highest-paid employees over rank-and-file employees. ERISA has a complex series of rules that cover pension, profit-sharing, stock bonus, and most "welfare benefit plans," such as health and life insurance. ERISA has created a single federal standard for employee benefits, and it supersedes almost all state laws that affect employee benefit plans. An employer's responsibilities under ERISA vary depending on the type of plan involved.
We recommend that new investors retain a competent and experienced real estate attorney prior to investing in CA trust deeds.
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Investment Philosophy
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Hands on due diligence, rigorous underwriting, senior management involvement and proactive management through the entire investment cycle provides for attractive returns on partnership investments. Our style aims to provide our investors with superior risk-adjusted results and consistent cash flow over time.
We finance trust deed investments in various states on behalf of our investors and invest in real estate in which the loan does not exceed 70% of the property value (70% LTV).
Our borrower clients are in need of hard money loans for both the purchase and refinance of owner-occupied and investment properties, as well as commercial properties and land loans. All client and property credentials are carefully screened and processed to ensure your utmost confidence. At this time, we are currently only investing in 1st Trust Deeds.
There are numerous scenarios and reasons for our borrower clients need for private money. Any available cross-collateralization of other real estate is presented and considered, as are liquid and hard assets which may be pledged as collateral for loans.
Our Typical Loan Investment Profiles
Bridgelock Capital targets borrowers in need of fast, non-conforming loans secured by 1st and 2nd Trust Deeds Only.
Property Types Loaned Against:
- Single Family Residential and 1 – 4 units, both owner-occupied and investment properties
- 5-unit to 100-unit apartment buildings
- Income Producing Commercial: office, retail, manufacturing, warehousing
- Residential and commercial construction lending (with pre-scheduled disbursements according to work progress)
Yields
- 8.00-18.00% (plus pre-payment penalty, when applicable) depending on property type, use, and applicable laws.
Loan Amounts
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