Tag Archives: brian davison

The Risk of Investing in Unimproved Land
This is sometimes dressed up for investors by calling it; ‘future value investing’ or ‘specific-demand collateral’ this is the highest risk Trust Deed investment available to investors.  The investment is technically secured (investors have a recorded Deed on land with an APN number) but for all practical purposes this is a speculation play and should be treated by all parties as such. In any non-cash flowing property Trust Deed opportunity; investors are recommended to underwrite to the payment ability and reserves of the actual individual borrower, market scarcity (speed to exit) and reasonable value – which is still a guess.  Investors will need to know substantially more about the person behind the loan as there is not any reasonable expectation typically for any cash flow on the property to support the debt (Deed of Trust).  Multiple personal guarantees are a normal part of this type of...
The Risk of Investing in Incomplete Property
These two issues are put together as they appear the most in the same transactions in private lending.  The staged or multiple funding scenarios are most prevalent in new construction and rehab loans – properties that are not ready to market or cash flow.  The Deed of Trust is created by multiple fundings at scheduled times for the borrower.  The borrower doesn’t want to pay interest on the entire loan if they can only use portions at a time to construction schedules.  So, the broker will set up a funding schedule with the borrower based on his needs and use of funds.  The Broker will then have several fundings or opportunities for the investors to get involved.  This scenario is risky as investors are putting their money into property that is not complete, therefore not marketable or sellable which significantly reduces exposure. And if one of...
The Pitfalls of High Fractionalized Investing
A fractionalized Trust Deed is a loan that has many investors who pooled their money for the total principle balance for the borrower.  Typically the interest of the investor is based on what their dollar amount is expressed as a percentage of the total loan amount. A. The more investors and the smaller any one investors stake in a given Trust Deed the less control those investors have. B. When a Trust Deed does go back to the investors those that have more capital to commit end up carrying the cost such as foreclosure filings, attorneys, maintenance, management, taxes and insurance to name a few for those that do not have the funds or will not pay.  In many real life cases; the investors with more to lose (higher principal investments) are more compelled to contribute to keep the asset in good condition. C. Voting is often controlled...
Introduction to Equity Value Investing: EVI 2.0
Equity value investing is the acquisition of fixed assets with significant equity on acquisition that can be quickly converted to cash flowing entities. This significant market equity on acquisition will allow for an additional layer of principle security against market dips or stagnation. EVI execution historically acquires assets at 31% (YR2012) of current value. In the past (2008-2012) these assets were treated as short term transactions (flips or EVI 1.0) as the underlying market fundamentals had not stabilized enough to access if a short term dislocation was part of a longer term value bottom for a buy and hold. Why EVI? Since the financial crash a new paradigm has emerged; fewer Americans are becoming homeowners for a variety of reasons. Of the reasons there are fewer homeowners today, most notable to an asset investor today is that there is not ability for traditional sub-prime lending based on...