I find it very interesting that less than 5% of investors nationwide understand, or perhaps even know about the value of trust deed / private mortgage investing. Yet, more than 50% of non-residential mortgages throughout the U.S. are actually private.  That means that there is a continuing market for our services and products, yet there are so very few individuals, trusts, companies and investor groups that actually participate in such vehicles.

As a result of such a small consortium of informed private equity investors - most of whom keep their investing secrets to themselves - I find myself spending about 80% of my investor farming time in a mode of education.  We are taught from a young age to categorize information in our lives.  Keep business and relationship separate (you know the old saying, "Sorry, but this is business."), keep religion and politics separate, etc.  Investing is another thing we tend to package into a certain mental box.  When something out of the norm comes along, we wrestle with it and if it doesn't fit into the categories already established in our minds, then we discount it as suspicious or disqualified.   We suffer many lost opportunities due to our lack of education, fear of the unknown or just plain laziness.

I've prefaced this entry with the first two paragraphs because as a private equity specialist who is dedicated to the thorough education of my investors (just see my sites at www.TheEquityExperts.com and www.ASafeWay2Invest.com), I am constantly overcoming a couple of common mental hurdles that exist in the categorical mentality of my potential investor clients.

First, a recent and somewhat legitimate ideology:  The mortgage business is in trouble - I don't trust it.

Well, you're right.  However, what we're seeing now is not actually the trouble.  What we saw for 5 years prior to this recent adjustment was the actual trouble.  Now, we're seeing correction and will discover an extremely mature, refined industry that comes out the other end.  Also, we are seeing the results of home-owners who were put into loans that made no economic sense.  In the world of private mortgage / trust deed lending, most of us who are legitimate do not chase foreclosure rescues, or buyer/flippers of homes, or the primary home-owner.  We pursue commercial-based projects with viable borrowers and strong equity positions that protect our investors.  So, in an effort to curb concerns about the mortgage business - the private side of the industry is actually very strong and showing very good returns.

Second, there is an extreme difference in the boutique private equity investment consultancy (like our firm) and the mortgage pools firm.  Boutique consulting firms never touch your funds.  We discover great investment opportunities, perform necessary due diligence and present you with opportunities to participate at the level you feel comfortable with.  Each deal is an investment unto itself and therefore offers diversification by nature of allowing you to enter as many separate lending scenarios as you wish - each of which will hold different fixed return rates, risk ratios and terms.  Contrastingly, the mortgage pool firm requires that you turn over a minimum investment amount to the firm who promises a specific, and same,  flat rate return for every dollar given to them for management.  They then enter your funds into projects that THEY see fit. 

I am not against either of these business models, each has its own place.  I confess that although our business model is more complicated, and demands more administration and investor maintenance, we are very comfortable and satisfied with how we operate our business - as a boutique agency instead of a mortgage pool.

So, if you are investigating the values and benefits of private mortgage investing, please keep in mind the differences between these two options.  Also, keep in mind that even in bad real estate markets, and bad financial markets, many people make millions of dollars through private equity investing vehicles.


Until next time,

Brandon Thienes