Joke Du Jour:
When I was a boy, I had a disease that required me to eat dirt three times a day in order to survive. It's a good thing my older brother told me about it.
Trust Deeds:
You've seen our advertisements for first trust deed investments yielding 10% to 11% interest. Perhaps you found the idea of receiving your interest monthly to be particularly attractive.
But where do trust deeds come from? Who would borrow from a hard money lender? How do borrowers even find Blackburne & Sons?
Here is a common scenario: A borrower owns a printing company that historically has specialized in printing catalogs. Along comes the internet and Amazon which start to replace catalog sales.
Each year, the catalog printing company suffers declining sales, until the company is losing $200,000 every year. Fortunately, the owner has a plan. He intends to shift over to printing postcards and restaurant menus.
The move will require some new printing equipment, so our borrower approaches his bank for a loan. "I'm sorry, Mr. Printer, but we cannot make a commercial loan to a company losing money."
All is not lost. The company owns its industrial building free-and-clear because, in the good years, the company paid off the mortgage. "The building is free-and-clear, and its worth $1 million," thinks Mr. Printer. "Someone should be willing to loan us $500,000."
The bank gives Mr. Printer the telephone number of a commercial mortgage broker. Blackburne & Sons has been marketing to commercial mortgage brokers for 43 years, so the mortgage broker brings Mr. Painter's loan to us.
We make Mr. Painter a $500,000 loan based primarily on the value of the building and the fact that Mr. Painter's credit is not terrible. He has become a slow-pay, but that's simply because his company is struggling. He is not a flake.
Three or four years later, Mr. Painter's company has returned to profitability. A hungry bank refinances our loan at a much lower rate, and we get paid off. [Sob] But for that three or four years, our investors earned a handsome 10% or 11% annual return. That was good.
"But, George, don't you have to foreclose on a lot of buildings?" You would think so, but in real life, we foreclose on only a handful of buildings annually. Next to their homes, the last thing our borrowers want to lose is the building that houses their business.
Now some adult talk. Investing in first trust deeds involves substantial risk. A large and prolonged decline in real estate values is possible. All foreclosed properties need to be renovated, so be sure to maintain some liquidity.
Lastly, be sure to carefully read the Risk Factors section of the Private Placement Memorandum before investing. This is not an offer to sell a first trust deed. Such an offer is only made when accompanied by a Private Placement Memorandum
Please click here for more information about our 10% to 11% first trust deeds.