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Blog
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How to Use the Web to Grow your Life
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Posted By: Tobias Preston on Wednesday, February 08, 2012
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If you wish to learn more about myself, please go to my Linked In connection at http://www.linkedin.com/in/tobiaspreston. The world is growing, our networks and increasing and a key to success here is using a site called Linked In. Enjoy!
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Is Fixed Income Broken? Yes unless you know First Trust Deed Investing!
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Posted By: Tobias Preston on Wednesday, February 01, 2012
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The past 4 years taught investors one thing---beware of international investing where the risk is shared by everyone (so no one is responsible)! The new opportunity for investors is to NOT go global BUT rather local. Main street need small loans, credit since many banks are also broken in addition to Wall Street and the bankrupt government agencies FNMA and Freddie Mac (FHA is not far behind!)
The key to local lending, which i call Back Yard Banking is to match investor capital with borrower needs. Also called private loans or seller financing, it fills the gap when regular lending isn't working.
The way to Fix Income for investors is to find quality loans and fund them with the help of experienced, licensed private mortgage brokers.
Returns are secured by real estate equity (since ALL loans are 1st position). Also, returns are high, starting at ~8%.
Go local to find high yielding income.
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The Worlds Best Investment--First Trust Deeds
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Posted By: Tobias Preston on Friday, January 20, 2012
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Where can investors enjoy Peace of Mind and consistent profits from small investments in their own cities and counties across America?
Called First Trust Deeds, investors with 10,000 or more can learn how to invest for stable, real estate secured income to build their legacy and investment portfolio. Contact us today at 9077832277 or 5302410977 to learn more!
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How to Be a Backyard Banker
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Posted By: Tobias Preston on Wednesday, January 04, 2012
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America has changes in the past 4 years. Banking and investing are no exceptions to the "new normal". For investors willing to learn, there is an investment available in very town across the USA that offers less risk and higher control and returns than most others.
It's called private lending. Even the Wall Street Journal article from July 21, 2011 entitled "Investors Who Do a Few Mortgages on the Side" overviews details:
1-12% returns
2-tiny slice of total mortgages originated (about 1%)
3-enjoys equity
Since Banks are in trouble overall and there is less loan demand, learning to lend in the private loan arena can offer many benefits:
1--cash flow
2--high returns
3--security of real estate.
Investing isn't liquid and of course, either knowing how to invest or working with a licensed and experienced broker is key.
Back yard banking can be a lucrative niche for certain investors!
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How to Invest in Private Notes, Trust Deeds and Mortgages
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Posted By: Tobias Preston on Monday, January 02, 2012
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First Trust deed and Mortgage investments carry a default risk. Success rests on one area--Protective Equity-- ASSUMING THE FOLLOWING:
1--honest paperwork
2--thorough payer review
3--geography acceptable where the realty resides
How much is enough Protective Equity? This of equity as insurance---you want to have a low loan to value when you invest today since there are declining values in many parts of the USA.
In my experience, 40% is the MINIMUM about of equity to guard against losses and here is why...
1--20% is lost since defaulting borrowers don't leave clean properties. This is the standard reason banks in good times only lend to 80% LTV without PMI.
2--20 to 30% additional "loss" do to declining values.
For example we lent 100K on a new Palm Spgs CA house in 2009. Value of realty then was 180K.
When we foreclosed in Fall 2011, Value dropped significantly to 100K.
Though some are not as bad as this example, it could be even worse in the hard hit markets like Las Vegas, Reno or even N CA.
Bottom line? Safeguard your investment dollars with very conservative Loan to Values...50% is a rule of thumb currently...
Until Next Time
Tobias (Toby) J Preston, President.
Ca Tel 5302410977
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Investors Who Do a Few Mortgages on the Side
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Posted By: Tobias Preston on Tuesday, July 26, 2011
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The Wall Street Journal did an article in late July 2011 about private investors who put capital to work at double digit returns locally. Although these are hard money or asset loans and not seller financed or discounted notes, the article shared how individuals enjoy high returns by giving borrowers a First mortgage or trust deed again the borrowers property. The key is equity (at least 40%) and high interest. The lowest risk is lending where one has the most knowledge typically, the home town or region family to an investor.
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Where there is good news (even in the Housing Market!)
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Posted By: Tobias Preston on Tuesday, June 07, 2011
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Greetings
Time for Good News since for the past 3 years or more it’sbeen a lot of “Henny Penny” and the “sky is falling”!
NOTE most of data below is from the Wall Street Journal, articles the past 2 weeks circa late May and June 2011.
1—USworkforce to grow by 11% over next 20 years. Better than Europe (shrinking 5%) and even worse, Japan,contracting by 17%. We make more babiesand have higher immigration, both positive for growth.
2—Household formation (new homes added via renting orbuying) was 2 million a year in 2005. That crashed to 578K in 2008 according to Moody Analytics (and evenshrank by almost 1mm according to other data I possess from Bureau of Labor).
However, it rose to 950K in 2010. Projections for 2011 are 1.2M and with only a3.1mm “overhang” of extra homes currently some regions will see housing reboundin the next 2-4 years (NOT AZ, FL, NV, MI or other super depressedplaces with absorbtion that could take decades).
3—Affordability increasing. Already cheaper to own than rent in Chicago,Cleveland, Detroitand Orlando FL.
4—Employment is growing in certain regions (where buyingprivate loans make more sense than those areas with declining employment) Dallas TX is one such region that added84,000 jobs in the past 12 months.
5—Housing prices rising excluding Distressed Sales in 17States! They include favorites of minesuch as Alaska, Hawaii,Texas, Tennessee,North and South Carolina, Virginiaand Pennsylvania.
6—Coffee and Red Wine (in moderation) are good for your health!
Enough good news. Notdifficult to find problems these days but the above is encouraging since thefuture will look a lot different than most of think today!
Until Next Time,
Tobias J Preston, President.
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How to Sell Your Note for a Fair Price
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Posted By: Tobias Preston on Tuesday, April 12, 2011
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Do you want the very best experience when getting a quote for fair market offers on your seller or owner financed note?
If so, make sure to ask these questions to the note buyer BEFORE you sign any paperwork.
1--how many notes has the company funded (more is preferred)
2--how many years has the company been in business Ditto
3--do they have Letters of Referral or Recommendation? (they should)
4--will they give partial purchase options in addition to a Full If not, move on.
Just like choosing a medical professional, potential sellers of notes need to screen note buyers and the questions above are a good place to begin.
Expert note buyers are like "experts" in any other field--experienced, courteous, fast and professionally focused on one person--YOU!
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Is it Possible to Not Lose Money Investing in First Trust Deeds and Mortgage Notes?
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Posted By: Tobias Preston on Thursday, March 24, 2011
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Although we don't buy private loans to own realty, that is what occurs in a process of default called foreclosure (when payments stop then the realty is taken back in lieu of the defaulted note).
In my experience, though the numbers are "unfair" since they are small (the larger the portfolio of notes owned, the more statictically stable and predictable is the cash flow), 5-10% of First Trust Deeds will go into default.
That means IF you own 100 notes, 5-10 will default. Will these 5-10 foreclose? No! About 3-5 out of 100 will foreclose in my experience and watching millions of dollars invested since 1989.
The challenge is smaller portfolios can be much better (one older investor had nearly 30 notes and never experience foreclosure!) or much worse (my brother in law quit investing with me after his second note also defaulted).
Lesson's i've learned from 22 years of investing?
1--communicate quickly and consistently with your buyers. Relationship is key.
2--be firm but fair. Bernard Baruch quipped "nice guys finish last". Nice lenders also finish last on the borrowers list of vendors to pay when cash is tight.
3--look at private loan investing as "buying realty". That means after you invest in a First Trust Deed, if you have the hassle of default, would you still be "OK" with owning the underlying realty?
4--sell realty quickly that you recover. By investing with equity, the goal if foreclosure occurs is to be able to sell at a fair but fast price relative to the general market. Quick sales mean you get back your income and your return.
Foreclosures are not a big deal. Sure they can be a hassle AND not why we invest.
And we are fortunate. All my Stock and Commodity market losses have been just that...Losses!
All of my defaulted notes have enjoyed valuable realty that i could sell for recover most (if not all and sometimes EVEN MORE then my private loan investment plus costs)
The goal is to win over time. Our private loans do this remarkably well!
Secured lending into private loans gives high returns, control and a simplicity of investing, even if there is a foreclosure, that few if any other investments enjoy long term
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Is it Time to Invest?
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Posted By: Tobias Preston on Monday, February 28, 2011
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Greetings
Do you like to buy when there is a "sale"? Many of us do (as a financial company President, i go to Nordstroms or Brooks Brothers "1/2 yearly sale" every couple of years to up date my business attire--the sale is when i shop!)
The National housing market has just had a large markdown. It will drop more in some areas. According to the Case Shiller Index, all together it is a 31% drop since 2006.
However, the "national" market is just a lot of local markets put together...and increasing, according to a Wall St Journal article from 2/26/11 entitled The Housing Market: Looking beyond the Statistics, "...many markets are safer than they have been in years".
NOTE--look at our Alaska or California markets for example. Some regions in each state have risen in the past year; others, are still falling.
What does this mean for investors of Private Loans like you and i? How can we lower our risk while enjoying our high, secured returns?
1--take a long view. The next 6 months to few years will still be slow to no recovery in many markets.
2--leverage experts. Both McKinley and Alaska Financial invest into core data of job growth, housing statistics and more. Lisa can get you to the right person for any specific questions and we just might have the answer!
3--use the normal "maxim" for good investing into First Trust Deeds--ask this question for every deal--"would i be comfortable owning this realty IF i have to foreclose"? If yes, then invest. If not, ask "at what investment level given the current market price would i be interested in?".
Many times McKinley is dealing with a motivated seller and we can DROP the dollar amount invested via a partial or a smaller sized hard money loan. Remember the have enough equity to cushion your investment, the difference between the principal value of the note funded and the realty's market value. I suggest 30%+ as a rule of thumb.
All investments carry risk. Ours is special since we have a valuable "plan B"---IF the note payments stop, we can recover the underlying Real Estate based on the Security agreement (usually the Deed of Trust).
If we do recover the underlying security via a foreclosure, then the real estate can be sold OR kept for other business or intrinsic reasons.
Just remember, someday 2011 will be "the Good Old Days" for some of us. As recently as about 2006 i remember many investors paying as little as 6-10% for First Trust Deeds that today can be bought for 12%+!!!!
The economy always changes...better then worse and back again. But this time, the sale is deeper and the recovery is longer. It's the "Sale of the Decade Or More"!
Until next time
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How to Sell Realty when Realty isn't Selling
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Posted By: Tobias Preston on Friday, February 18, 2011
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Did you know that every buyer in every market place couldget a loan today? It’s almost true andis possible with a special kind of financing!
When a property seller exchanges the deed to a new buyer forcash and a note payable secured by a mortgage or trust deed, THERE IS NO BANKOR MORTGAGE COMPANY INVOVLED. It islegal under most circumstances, and when the buyer and seller get help fromtrusted professionals like title and escrow, and possibly even an competentattorney, this financing can be done through an escrow in a matter of a fewweeks.
Most real estate deals involve a seller making a buyer go toa bank or mortgage company and bring them the cash for the sales price. The bank or mortgage company then “holds themortgage”, the seller walks away with the cash and the buyer makes monthlypayments to the bank.
Unfortunately in 2011, many buyers cannot qualify undernormal terms. Hence the need for Selleror Owner financing.
With this type, theSeller Becomes the Bank!
In many ways, Seller or Owner financing is the BEST way tosell Real estate for the most benefits to all parties!
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How to Sell Houses when Houses Aren't Selling
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Posted By: Tobias Preston on Tuesday, January 18, 2011
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Sellers of homes and real estate in general have more difficulty in 2011 finding buyers with either cash in hand OR a new loan from a bank or mortgage company. The problem with less cash (either savings or a new loan) is this creates only one other option for many motivated sellers--lower the realty's price.
The dropping realty values trend is bad for many reasons, especially a deflationary attitude that removes wealth from all parties.
What is a solution? Since information is power, it's summed up in 2 words.....Seller financing!
This is when the buyer either can't or won't get all cash via savings or a new loan to give to a seller in exchange for the deed and ownership of the house or realty. In some regions it's named a land contract, a mortgage, or called owner financing.
There are primarily 3 ways buyers can own realty--savings, a new loan or seller financing. By using the latter, it will help greatly in many markets nationwide and above all, assist sellers when their houses are not selling!
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3 Secrets of Successful Trust Deed Investing
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Posted By: Tobias Preston on Tuesday, September 07, 2010
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Greetings
PeterDrucker was a guru for business and economics. A key saying of his was"..management is getting things done right..!"
After 21 years in this private loan business, it strikes me that there are 3keys to investing success (and know by "success" I don't mean youwon't have problems--foreclosures and so forth--reality dictates challengesoccur).
1--capital. This is obvious, since it takes money to make money. NoMcKinley investor is broke (that I know of anyway!).
2--notes. This is what McKinley does for you--it finds and screensand helps you close private loans (i.e. notes) for direct investing. Unless you take time to market, take calls, screen deals, manage escrowclosings and much more, you "hire" McKinley to find investmentquality deals for you.
3--management. Also called servicing or collections, this to me isincreasing the "core competency" of an Investor.
I was very fortunate early on in this business. Having started from mycollege dorm room at University of AK Fairbanks inNovember 1989, the business grew rapidly the next decade. Money and noteswere abundant and one mistake I made initially was being "too soft"as a manager of my portfolio of notes.
Today, the third competency of Note Management is pretty simple. It'sfirm but fair. And as my portfolio grows personally and with thebusiness, being more aggressive is more successful that being lenient toborrowers who are no longer able to make payments.
Wish I could have met Peter Drucker. But one thing I can do now is followhis dictum...."to do things right", and as it relates to managing anote portfolio, that means a daily system that most effectively keeps the cashflowing and returns high!
NOTE--someof you know about and invest with an affiliate company to McKinley---- if youdo not have the skills to manage your notes or do not have the time or otherexpertise, AFC III's secured notes are one good solution to enjoy directinvesting passively (yields are lower at 7-8.25% compared to direct investing's9-13% but you have no direct management). Contacteither Charles or myself for more information about AFC III.
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How to Earn Secure Income from First Trust Deed Investing
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Posted By: Tobias Preston on Friday, September 03, 2010
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PeterDrucker was a guru for business and economics. A key saying of his was"..management is getting things done right..!"
After 21 years in this private loan business, it strikes me that there are 3keys to investing success (and know by "success" I don't mean youwon't have problems--foreclosures and so forth--reality dictates challengesoccur).
1--capital. This is obvious, since it takes money to make money. NoMcKinley investor is broke (that I know of anyway!).
2--notes. This is what McKinley does for you--it finds and screensand helps you close private loans (i.e. notes) for direct investing. Unless you take time to market, take calls, screen deals, manage escrowclosings and much more, you "hire" McKinley to find investmentquality deals for you.
3--management. Also called servicing or collections, this to me isincreasing the "core competency" of an Investor.
I was very fortunate early on in this business. Having started from mycollege dorm room at University of AK Fairbanks inNovember 1989, the business grew rapidly the next decade. Money and noteswere abundant and one mistake I made initially was being "too soft"as a manager of my portfolio of notes.
Today, the third competency of Note Management is pretty simple. It'sfirm but fair. And as my portfolio grows personally and with thebusiness, being more aggressive is more successful than being lenient toborrowers who are no longer able to make payments.
Wish I could have met Peter Drucker. But one thing I can do now is followhis dictum...."to do things right", and as it relates to managing anote portfolio, that means a daily system that most effectively keeps the cashflowing and returns high!
NOTE--someof you know about and invest with an affiliate company to McKinley---- if youdo not have the skills to manage your notes or do not have the time or otherexpertise, AFC III's secured notes are one good solution to enjoy directinvesting passively. Yields are strong though lower than direct investing. Contacteither Charles or myself for more information about AFC III.
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Selling Financing is a Local Business
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Posted By: Tobias Preston on Thursday, August 26, 2010
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The owner finance businessis local. Though a note can be soldlike any other “salable” asset, the buying or selling of both realty and theseller carryback note isn’t usually a national idea. Rather, a seller of property gives title to the realty in exchangefor a cash down payment and an “IOU”---the buyer makes periodic payments untilthe note is paid off.
If a seller who isreceiving payments wishes to get a lump sum of cash, then he contacts a NoteBuyer like McKinley Mortgage. Since eachseller carryback note is different, pricing varies as well.
In today’s market, whetherselling property or selling a note, the highest chance of success occurs when you are working with otherswho have a local focus—that means if you are in Alaska, its more likely anotherAlaskan will do business with you than someone from New York!
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How to Be a Backyard Banker
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Posted By: Tobias Preston on Tuesday, June 22, 2010
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Warren Buffet says this about investing--"Rule number 1. Don't Lose Money. Rule Number 2. NEVER forget Rule Number 1"!
When you invest in secured 1st position private loans (whether discounted notes or hard money loans), you have one of the best chances to follow Buffet's dictum!
I call it "old fashioned private lending". Investor buys a 6-12% first mortgage or trust deed secured by at least 30% equity. Borrower pays investor until loan is either paid off (95% of the time) OR quits paying and investor gets an excellent Plan B--owns the property through foreclosure.
Good banking is one of the best businesses.
Good investing into 1st Trust deeds is one of the best investments since you get high returns and enjoy stable security of the underlying realty.
I call it "How to be a Backyard Banker".
Warren Buffet calls it Rule number One!
Until Next Time
Tobias (Toby) J Preston, President.
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How to Sell Your Note for the Most Cash
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Posted By: Tobias Preston on Thursday, June 03, 2010
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McKinley is a specialist. Property sellers who owner finance carry back a note receivable so a new buyer can purchase the realty. Although payments in the future are nice, peace of mind comes by Cash Now. With 21 years experience and $70,234,311.98 funded, McKinley can help.
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