If you want to know more about the program and Capella Mortgage, read through the text of Corinne Cordon’s story and her discovery of trust deed investing.
In 1996 I attended a real estate seminar so that I could help my husband in his real estate business. In that class I discovered that I could make over 9-12% per year in interest by doing something called trust deed investing, I thought it was impossible. And after I heard about how it works, I thought it made the most sense of any investment I have ever seen or heard about in my life. And this is what most people say when I tell them about it. This is the story of my journey which turned into a career offering trust deed investments to other investors.
If this investment worked like the seminar said it would, then I wouldn’t have to worry about following the stock market and the bond market, and I wouldn’t have to keep on moving my money back and forth just so that I wouldn’t lose any of my principal – I would just make a straight 9-12% return, every month, every year. I wouldn’t have to study the stock market all of the time, and then feel bad when I lost money because I didn’t move my money from stocks to bonds fast enough.
Just being the bank
I found out that trust deed investing is really just being the bank. Since I figured I could do as good of a job figuring out who was a good borrower (years of experience working at Citibank), and I could figure how much I was willing to lend on any certain property, and since I was not supposed to lend more than 75% of what the property costs to buy anyways, then I could go look at a property, and decide if I liked the deal or not, and then let my broker know that I wanted the deal or not. Since I have lived in Las Vegas since 1980, I know what real estate costs, and I know how to check on prices in certain neighborhoods. The way that I found the deals was through a licensed broker. Only mortgage brokers are allowed to do trust deed investments with individual people, not mortgage bankers. So, I lent my money through a broker who did all of the paperwork, checked the credit and the tax returns, and the assets of the borrower. Federal law per the SAFE Act and the Mortgage Investment Disclosure Act require the broker to be licensed and bonded and to provide certain paperwork to the borrowers.
Title insurance and first position in front of everyone else
After I send my money to the title company, they record a ”trust deed” with the Clark County Recorder, which is a way to notify the world that this borrower owes me money. I wondered, “what if the title company misses my trust deed and doesn’t pay me off?”. That is when I found out that the borrower had to pay for a “lender’s title policy” which is insurance that my trust deed is recorded and that I was in the first position. Being in the first position means that I am in front of everyone else – except for property taxes and HOA liens – and I can see this by ordering and reviewing a “preliminary title report” or by checking the recorder’s office records. The title report runs a public records check against the name of the borrower and if any liens or judgments show up, then I don’t do the investment. Since my trust deed is recorded in public records, and I can actually go to the Clark County Recorder’s website myself, and look up the property. If you CLICK HERE, you can also go to the county recorder’s office. I can see my trust deed, and see if anything else is in front of it or comes on behind it. So I can double-check the work the title company that is insuring my trust deed did and then I can check my final title policy when it comes in.
Why would anyone pay a 9-12% interest rate?
Back in the day, I usually only had to put my money out for 12 months, but these days, it is anywhere from 3-61 months, because the laws have changed. Even if the loan is for a longer period, a borrower is only willing to pay this high of an interest rate for a short period of time. He is either going to buy the property, fix it up, and sell it, or he is going to rent it out, and in two years, get conventional financing at the current market rate, which is far cheaper than 9-12%.
And then I wondered, “why on earth would anyone pay that high of an interest rate?” I didn’t think anyone in the world would be willing to pay a 9-12%. But back in 1996, developers were building at a fast rate, and they didn’t have time to wait for bank financing, which took even longer than it does now. I found out that investors have a very hard time getting a loan from a bank. When an investor finds a great deal, and he wants to close quickly, before someone steals the deal from him, then he goes to a trust deed broker and borrows the money in 7 days. As long as he has enough money to pay for the repairs, closing costs and down payment, and he has decent credit, and a decent property, then I will take the deal. Nowadays (post great crash) deals are different than they were before, and the more time that passes, the more the deals change. For example, in 2017 we started following the lead of the big lenders, lending to flippers at 100% of the purchase price of the property, as long at the ARV (after repair value) was less than 70%. Those deals have all worked out very well, and have been very profitable for our investors and ourselves. You must be able to judge the character of the borrower, and honestly, I put more weight into someone’s character, than I do into anything else. A person who is determined to keep their credit rating, barring any great crashes, will do anything in their power to honor their obligations. A person who makes late payments on their utility bills is a person who doesn’t care if their water is turned on or the cell phone works. Therefore, they will not care about a mortgage payment.
Even in 2018, we are still seeing fantastic deals that our investors love. We expanded into 7 states in 2016, so we see deals from all over the southwest US. I never believed in that before, because I thought Nevada had the best real estate in the country (no snowstorms, hurricanes, typhoons, tsunami’s, fires, floods, etc.), but I am finding that Arizona and Texas have some great prices on real estate right now. Additionally, commercial land developers are now starting to develop projects again. After a 12 year hiatus, it is good to see some building starting back up.
Before there were banks, this is how we loaned money
When I first researched this investment, I discovered that the wealthy have been privately lending out their money for centuries – before there were banks. It was the way lending was done, and it is still being done today because there are too many borrowers who want to buy real estate who don’t fit into the bank’s small paper-laden box. This is especially true if the borrower is an investor, or if they are buying a property that needs to be fixed up, or if their credit score is one point too low or if they got turned down by their traditional lender at the last second (usually when they are just about to sign loan documents) because a new purchase showed up on their credit report. Unless the borrower purchased another property without telling us, we usually don’t get too concerned when they buy some furniture or a bed for their new house.
The problem with brokers
During the years since 1996, I have loaned out my money on apartment complexes, office buildings, houses, land, owner-occupied properties, motels – you name it, I’ve loaned on it. In 2001, decided to get my own broker’s license. I figured I could do a better job than the other brokers, as I didn’t like some of the things that they did. The one thing I hated most was that the borrowers would be told one price, and then, when they got to the closing table, they would be charged double. So at my company, we charge one flat fee. The other thing I hated was how late the brokers always were. They didn’t stick to their own timeframes, and the borrower often would scream with frustration because the brokers were not efficient, or courteous, or professional and the borrower would end up missing the close of escrow. When I got my license, I promised myself I wouldn’t be like that and I’ve tried to live up to that goal in every trust deed that I place. If it isn’t a win/win/win deal, then I don’t do it. Nowadays, with Dodd-Frank and the thousands of new laws, we don’t meet close of escrow dates very often. The borrower usually gets an extension, especially if they come to us late in the process. However, we still do everything in our power to close as close to the COE as possible.
I treat my investor’s money better than my own
So, now I am licensed as Capella Commercial Mortgage #456 in Nevada, and #372157 nationally. I have passed the state test and the national test. I am bonded and counting my three years at Citibank, I’ve been lending some form of money from 1992. I remember the first loan I made was for $3000 and I made $300 in one week. It’s a lot different now. The laws are stricter and it takes a lot of studying to stay current on all the things brokers are responsible for. If it is done right, then it is a great business. The only way to do it right is to treat my investor’s money better than I treat my own, and that is exactly what I do. Matthew, my son, is even stricter than I am. I see the gray in a borrower’s life, and he only sees black and white. That is why, when you’ve checked all of the boxes, pulled all of the background checks and court record searches you can, you sit down, talk about it, and go with your gut feeling.
The laws for private trust deeds
In Nevada, trust deed brokers must be audited by the Mortgage Lending Division at least once per year. MLD auditors check everything in the files to make sure they are in order. The borrowers provide documentation to the broker, just like a bank loan. The borrower signs a promissory note, a trust deed, and a personal guaranty and a whole slew of other paperwork. The trust deed must have the investor’s name listed on it, and it must be recorded with the county. I have learned a lot of things in the past 20+ years, and I am willing to teach them to you, if you are a serious investor who wants to make 9-12% return with the least amount of work you will ever have to do.
Investors always ask us, “how do you get paid?” and the answer to that is the borrower pays us an origination fee. It varies on every deal, but that money is always paid to the broker. Nowadays, there are limits on how much we can charge on owner-occupied loans, but investment property loans have no limit. However, when we don’t price a loan correctly, the borrower finds the money somewhere else. That is called a free market!
Every month I get checks and I make a 12% return on investment
I can’t convince anyone about any investment if I don’t believe in my heart that it is a good product. When I shake someone’s hand and give my word, that’s my honor and my reputation at stake. The only reason I can tell you about private trust deeds is that I believe in them to my core. I know, without a doubt, that trust deed investing, done the right way, with the right broker, is an investment that makes a very, very good return, and provides a great opportunity for the ordinary investor. If you would like to know more about this investment, and if you have at least $100,000 available for investing and at least a $250k net worth – not counting your house, you can sign up on this website, or give me a call at 702-214-4700, and I will answer all of your questions.
Ethics, honor, and our line in the sand
If you like the sound of these things, then I may be the right trust deed broker for you. We are an ethical, honorable company. Our investors say their biggest regret is that they didn’t find us sooner. We will let you talk to our investors, we will let you check our record with the Mortgage Lending Division, and we will do our best to be efficient and professional in every aspect of our business. Check us out on the internet, order a book about it, call me, talk to some of my investors – however you need to research it, do it and then try it with a small portion of your investment funds until you see how it works, and until you are comfortable with it. You’ll probably love it as much as I and my investors do.
The best time to invest in when real estate is low or moving up
Investing is learning how to gauge the business cycles and acting accordingly. Real estate is pretty consistent in its cycle. It goes up fairly regularly until something makes it go down. During all phases of the cycle there are opportunities to make money in real estate, and trust deed lending offers the best return with the least amount of work and study. I doubt i will ever invest in anything else.
Step by step
Unlike investments in the stock market or a mutual fund, with trust deed investing, you will know how much you are getting month after month. The payments are deposited directly into your bank account, or sent to you monthly by check. This is not a get rich quick scheme, but it works similarly to a CD in that your money will be invested for a fixed term, such as 12 or 24 months, and at the end of the term you get your principal back.
Time is the enemy of investing, so don’t wait to learn more about it. Sign up now, and start your research, so that when it is time to invest, you will have the knowledge that you need to move forward wisely. Sign up below and get regular newsletters full of valuable information and that showcase trust deeds that are available for investment.
By Corinne Cordon