Our Industry: Private Money Investments
The private money investment industry is not well publicized and is largely centered in California, several Western states, and New York.
Lenders are predominantly small, highly specialized mortgage brokers familiar with residential and commercial real estate lending. Loans come to us through a network of mortgage brokers and real estate agents needing an alternative for their client, as well as directly from advertising and word of mouth.
Investors almost primarily come through client referral, as we have worked hard to earn a reputation of professionalism, offering our clients highly personalized services tailored to their investment goals.
If you’d like more information about investing with Excel Trust Deed Investments or would like to discuss opportunities with a broker, email us at invest@exceltdi.com
Private Money Investors
Trust Deed Investors come from all sectors of the community and professional fields including but not limited to high tech, financial services, medical, legal, and hospitality. Simply stated, a private money investor can be anyone with money looking to diversify their investments. Investors are attracted to trust deed investments due to their stable, competitive returns delivered in the form of a monthly check.
Our clients can choose to be as “hands-on” as they like in making approval decisions and can feel secure in knowing their investment is secured by a tangible, insured asset with an approved loan-to-value ratio giving plenty of equity protection.
Investors can choose to invest personally or through self-directed IRA accounts and can direct their loan payments to be sent directly to them or to their investment accounts.
Methods of Investments
Private Mortgage Investment generally takes three primary forms:
- Direct Mortgage Investments
- Fractional Investments
- Mortgage Fund Investments
For many reasons, we at Excel TDI have chosen to exclusively offer only Direct and Fractional Investments. Investments can be wired directly to escrow or handled through our escrow services in check form.
Direct Mortgage Investments
With Direct Investments, a single investor/lender agrees to loan money and secures the obligation by way of a Promissory Note and Deed of Trust. Investments are additionally secured by a Lender’s Policy of Title Insurance.
Excel Trust Deed Investments arranges the loan by presenting and confirming the pertinent loan and borrower details, prepares the loan documents and submits them to escrow for signature, and secures funding from the investor to escrow.
In addition, nearly all investors opt to utilize our professional loan servicing to collect payments and disburse to the investor. Please note that a single investor “entity” can be a more than just an individual. For example, a couple, a family trust, a business, or an IRA investment can be recognized as a single investor.
Fractional Investments
A Fractional Investment is a “pooled or syndicated” method for multiple investors to extend loans to borrowers. A limited number of investors (no more than 10 by law in California) secure a loan made to a borrower. Often investors choose to fund a loan along with a family or friend group. Though 10 is the max, generally the average is 2-3 per loan, depending on the loan amount and your individual investment goals.
Again, Excel Trust Deed Investments is often then secured to act as Servicing Agent, collecting payments and disbursing to investors according to their percentage of ownership of the loan.
Mortgage Fund Investments
Mortgage Funds (also known as “Mortgage Pools”) resemble equity mutual funds, funds composed of a wide selection of stocks.
Investors deposit money in a fund and the fund is managed by mortgage brokers or mortgage bankers certified by the State. Money within the fund is lent to borrowers and is secured by First (or Second or Third) Deeds of Trust naming the FUND as the holder, rather than individual investors. By purchasing shares in a mortgage fund, and as interest is earned from monthly mortgage payments, the fund generates income.
Excel Trust Deed Investments is NOT offering Mortgage Fund Investments at this time.
The Lending Process
A borrower seeking funds approaches a real estate agent or mortgage broker in our network or comes to us directly and describes his borrowing needs. These include:
- The amount of money sought
- The value of the property that is being pledged as security, or collateral
- A description of the property
- The use of funds.
Excel Trust Deed Investments (or the mortgage broker) then assesses the proposed loan, focusing on the value of the property being offered as collateral. The maximum amount that may be borrowed is determined by establishing the amount of “protective equity” existing in the property.
Protective equity is calculated by taking the value of the property and then subtracting any outstanding debt related to the property in the form of existing loans or tax liens on the property. This equity provides the cushion for the risk taken in extending a loan. In the event the borrower defaults on the loan, investors recoup their capital by assuming the borrower’s equity.
This protective equity amount is then compared to a Loan to Value (“LTV”) ratio. The ratio, established by the lender, represents the maximum amount that the lender will lend a borrower. It is expressed as a percentage of the total loan amount, divided by the value of the property.
If it is determined that the value of the property and equity falls within acceptable limits, a loan package is prepared, summarizing the underlying details. If a broker is not involved, we perform these functions in-house.
The borrower is advised as to an approximate amount of funds that may be borrowed and is provided with disclosures outlining the interest rate, terms, and loan fees that may be anticipated. If the borrower agrees to these figures, we turn to our lending portfolio to match the investment with the appropriate investor based on their lending parameters and preferences outlined in advance.
Underwriting
Following receipt of a complete loan package, Excel Trust Deed Investments performs a review of the property and underlying financing and title issues, confirms the value of the subject property, and assess the financial standing of the borrower.
This due diligence process includes ordering an appraisal or performing an appraisal review of an existing report, inspections of the property and file review of supporting documentation related to the property and borrower.
An important part of our approval process is confirming our borrower’s “exit strategy” detailing how they plan to pay off the proposed loan (through sale, refinance, or other means) so that we can determine the appropriate loan term and product.
Escrow & Funding
Once final approval is reached, Excel Trust Deed Investments prepares loan documents and submits them to escrow for processing. The borrower signs in the presence of a notary public and funding is then submitted by prepared loan documents wire or our escrow services. The title/escrow company handles all aspects of closing and disbursement of funds.
Loan Servicing
Nearly all our clients elect to take advantage of our loan servicing expertise and experience.
We handle all communications with the borrower including monthly billing and collections, disbursement of payments to investors, yearly tax reporting, monitoring of insurance and property tax payments, payoff and reconveyances.
If necessary, we work directly with the substituted trustee in the event of a foreclosure to mitigate losses and have an excellent track record in doing so for the benefit of our investors.
For these reasons, we have forged long-term relationships with our investors based on trust and the professional handling of their concerns.