1. Who is AAA Private Money?
Clint Muhe, CEO and Founder of AAAPM, has 10+ years of full time experience in the private/hard money lending industry and coming from a family that has made this their expertise you could say he has over 30 years of apprenticeship. We are here to serve our borrowers and investors with some of the most in-depth, knowledge-based, friendly, astute, make-it-happen effort you will find in our field. We strive daily to learn, evolve, refine and generally surpass any private money lender in the industry today.
2. What is a trust deed investor?
A trust deed investor is a person seeking a high rate of return on their investment but with the added security of a first trust deed on real property backing their investment. At the simplest level, trust deed investing is when an individual lends money to a borrower through the services of a broker secured by the Borrower's real property.
The source of this money can be from savings, credit lines, or retirement accounts. The broker finds the borrower who wants the loan, and the private party with the money provides the funding. The broker then arranges for the borrower to sign loan documents and disclosures detailing all terms. The Investment closes with the recording of the Deed of Trust securing the investment through escrow and with title insurance and fire insurance as additional protections. The Note details the loan amount, the interest rate, the monthly payment and all other terms of the loan.
3. How much money do I need to start?
Our typical investor begins with at least $25,000-50,000 as an initial investment. All of our investors must complete an RE870 (Investor Questionnaire) form to demonstrate they are accredited and equipped to invest with us.
4. Can I use IRA funds?
Yes. AAAAPM actively places funds from IRAs, Self Directed IRAs, and Roth IRAs. However, please contact your plan representative as all IRAs have different rules and regulations.
5. What’s the typical property you loan on?
AAAPM lends on non-owner occupied homes, apartments, and commercial properties for business purposes in California.
6. What is the yield?
Annualized yield is in the 8% to 12% range, depending on our negotiations with the Borrower and the caliber of the loan.
7. Do you pool my money with other investors?
We are not a mortgage pool or any type of securitized lender. Each loan is funded one at a time with specific investors funding any given loan. Some of our larger Investors prefer to fund an entire loan by themselves and own it 100% and may even elect to service the loan themselves. Other investors prefer to diversify their investments by spreading their capital over several loans. To accommodate this we do some fractionalized loans, where up to ten investors can participate in the funding of an individual loan. Each Investor then owns a percentage of the loan based on the amount of their investment and receives a copy of the Note and recorded Deed of Trust showing their ownership interest.
8. Once I’ve committed to be a private lender, what should I expect?
A Trust Deed is Presented:
You will receive a package to sign which will include:
- Investment Bulletin
- Purchaser/Lender Disclosure Form
- Loan servicing agreement
- Any other relevant documents required by the Department of Real Estate
Once you commit to an investment and sign all documentations listed above, you can return all paperwork via email or FedEx along with a personal check or Cashier's Check (not required). The transaction closes once escrow closes (deed of trust is recorded at the County's Recorder Office), you will receive a receipt along with copies of the following:
- Original Promissory Note
- Copy of the Recorded Deed of Trust
- Copy of the Title Insurance Policy
Payments Mailed to You:
On a monthly basis, Del Toro Loan Servicing collects the payments from the borrower and sends those funds to you, the trust deed investor.
For more detailed information on the process and the paper work, please call the office at 760-828-8888 and request a free copy of California Trust Deed Investing.
9. Is it safe?
Of course every investment has risk and First Trust Deed investing is no different. However, unlike many other investments, trust deed investing is unique in that a private lender owns a first trust deed on a piece of real estate and holding a loan at 70% of market value at the time of funding can be viewed as having far greater security than owning real estate out right. You don't have the opportunity for market appreciation but you do have the equity cushion to help preserve capital during times of market turbulence while earning a far greater return on investment than can be found in your average savings account.
We recommend that all investors become familiar with trust deed investments prior to investing. Among other materials, the California Bureau of Real Estate has published a booklet on trust deed investing, located HERE.
10. How much do you loan?
AAAPM has brokered loans from $50,000 to over $1,000,000. However, our main focus is on properties where the amount of rent it can generate, be it SFR or commercial, can carry our monthly interest payment. That being said, most of our loans range from $50,000-$500,000. We have also rarely pursued select high quality construction/completion loans. Generally our goal is to find properties where the rent will cover more than the monthly costs of our interest payments, property taxes, and insurance to give our investors the highest chance of success, therefore the loan amount can vary dramatically depending on market and rental conditions in that area.
11. What loan to value (LTV) ratio will you loan on?
AAAPM loans up to 70% of the current market value of the property in first trust deed position.
12. Do you offer 2nd and 3rd trust deeds?
No. AAAPM only offers first trust deeds on all of our investments.
13. What are points?
Points are the fees AAAPM collects from the Borrower for acting as broker in a hard money loan transaction at the time of funding.
14. What does loan servicing entail?
Loan servicing includes the back-office tasks of collecting payments from borrowers, disbursing payments to the investor, mailing required notices and statements, year end tax documents for the IRS and franchise tax board, and coordinating foreclosure proceedings if necessary. You can learn more by going to Del Toro Loan Servicing's website HERE. (http://www.deltoroloanservicing.com)
15. If the borrower defaults, how will AAAPM help me?
In the case of default we will evaluate what options the lenders have and give our opinions as to the best path to take at no charge to the lenders. With our experience we can give you the best options available to give you the highest likelihood of coming out of the foreclosure process with all of your capital in tact. We can also offer liquidation services if it comes to that point.
17. Who in my network might be able to advise me on these types of investments?
Having an excellent team is always important and we suggest you check with your tax adviser, financial or retirement planner, accountant, and/or your attorney. This is a very specialized investment arena and you may have to look around to get knowledgeable input.
18. Where can I find more information about trust deed investments in California?
The California Department of Real Estate has an entire document you can read on the subject HERE.
19. Who can invest in trust deeds?
Private individuals, corporations, pension plans, 401Ks, custodianships, LLCs, retirement funds, IRAs, Roth IRAs, Self-Directed IRAs, and SEP accounts. Some retirement accounts have limits that do not allow first trust deed investment so please check with your custodian or agent. We can refer you to several Pension and IRA administration companies that DO allow self directed IRA and Pension Plan investments in first trust deeds.
20. Do you require fire insurance on the property?
Yes. We require coverage in the amount of the loan or a replacement guarantee.
21. Will I be given a complete profile on the property?
By the time we present the property for funding we've already had an independent appraisal or professional broker opinion of value completed on the property. You will receive that in addition to a list of comparable sales we gather through our title company to verify recent sales values in the local neighborhood of our collateral property. We will always send you a copy of that appraisal or BPO along with the address for you to analyze further, however you see fit. A lot of work goes into qualifying the property and the borrower before the investment is ever presented for investor consideration. That is a major benefit of using a broker.