The chart shows the potential.


The above example assumes all interest is re-invested immediately and no taxes are paid.

Frequently asked questions:

What is the Yield?
Loans are funded at an interest rate of between 10 to 14 %.  A few loans may be at higher rates but come with more risks.  Also there are laws in place to limit rates considered to be too high.

What is the investment term?
The term or length of the loans is short. Loans last on average of from one to five years. Often times payments are impounded to assure the borrower has sufficent time to get their affairs in order.

Is it safe?
Mortgage loans are rated among the SAFEST investments you can make. That’s why home interest rates are so much lower than credit card rates. Private money loans typically are based on the value of the real estate itself, as well as the individual borrower’s credit. Your promissory note is secured by a recorded deed of trust.

Is the investment liquid?
Your mortgage is less liquid than a stocks or bonds. We recommend only investing money you won’t need in a hurry. But if you want to turn your incoming payments to cash, we can possibly sell your loan. There are costs in doing this (discounting a note) but your loan is a marketable asset and could be sold.

How much do you need to invest?
Most loans are from $10,000 to $1,000,000. You decide which loans to invest in and how much to invest along with whether you want to share loans with other lenders/investors.

Is it a hassle?
We recommend that your loan be managed by a company who specializes in the servicing of these types of loans. They collect the funds from the borrower and re-distribute the funds to the investors. They also will notify the borrowers if they are late, start a foreclosure (if necessary) and handle all the paper work. They also send you a 1099-I at the end of the year. They normally charge one half of one percent for this service and it is well worth it.

How about IRA’s and retirement programs?
This is a great investment for your Pension Plan or IRA. The chart at the top is an example of how your money will increase so much faster by just letting it compound at a higher rate. Don’t forget, if you use your Pension Plan or IRA your income is tax deferred and can compound much faster with no taxes to pay (Consult your accountant or tax advisor for details).

What precautions should I take?
Be aware of the meaning of Loan to Value. The greater the LTV, the riskier the loan, other things being equal, LTV is the percentage of the loan or loans to the value of the property. Thus an $80,000 loan against a property worth $100,000 has an 80% LTV. The least risky loans are to homeowners, followed by second homes, rental properties, commercial properties, then vacant land with low LTV's.

How do I know if it is a good loan?
At Code 3 Loans we use guidelines that are used by banks and other private lending institutions in the industry. These guidelines use a combination of factors to underwrite or approve the loan. We have the property appraised by an independent appraiser that is licensed by the State of California. We also run a credit report that uses the three major reporting agencies. A preliminary title report is ordered to begin the process with full title insurance to be a necessary aspect of the loan. We use these things along with a through interview or complete Loan apllication with the borrower to judge his goals and sincerity. Most all investors will review the worthiness of the borrower based on their loan application and/or the borrowers circumstances.  Ultimately the decision to invest is based on the current market value (appraisal) and the equity in the property.  Currently the market has declined so our policy is to advise investors to loan at a much reduced LTV.  Currently wholesale investors and private money investors are investing at a 65% LTV unless ther are extenuating circumstances (11/01/07).

How do I collect my payments?
In the event that you share the loan with other investors, it’s known as a multi beneficiary loan and must by law be serviced by someone other than yourself. When having your loan serviced (something we strongly recommend) you will sign an agreement with a loan-servicing agency to manage your loan. They will collect the funds and after the payment clears they send you a check or mail your deposit to the account of your choice. They manage all contact with the borrower and notify them when they are late, assess late charges, start foreclosure if that should become necessary. Their expertise in these areas makes the whole process more palatable for most investors. You are notified of all actions taken and remain in control of the outcome. You can, for example, delay foreclosure or agree to a modified payment structure. More often than not the most common complaint is that the payments are late. You must remember that the loan is not late until ten days after the due date and then, if paid by personal check, it must be held for ten days to make sure that it has cleared. This means that a payment due on the first of the month may not reach you until the twenty-third day of the month. Alway keep in mind if you need the money to live off of you should NOT invest in private money deeds of trust. This type of investing is for the sophisticated knoledgeble investor who knows the risks and understands they are investing in a market that has it's up and down cycles.  You may have to take a proerty back and pay additional cash to protect your equity position.

Review the Department of California's web link on Deeds of trust investing.

http://www.dre.ca.gov/trust.htm

Summary
As you can see private deeds of trust can be a very good way to invest for income or growth. There are risks, but risk is inherent in all investments, and careful underwriting and analysis can mitigate these risks. We want you to be comfortable in your understanding of this investment. It is our goal to develop and maintain a long-term relationship with you. If you have a question or want more detailed information please give us a call. Trust Deed investments are a great alternative to leaving your money in a savings account which typically pays a low interst rate.

Code 3 Loans makes every attemp to present to the investor the truthfull facts of the file about the investment offered. Investors are encoraged to investigate any/all representations made by the borrower to Code 3 Loans prior to loaning their money.  Including but not limited to consulting their attorney, tax accountant and or other real estate professionals in determining the validity of their return on their investment.

More info can be obtained at the Ca. Dept of Real Estate site link below:

http://www.dre.ca.gov/trust.htm