Thursday, December 16, 2010

How do I become a lender with deeds of trust?

How do I invest in deeds of trust?
One of the best investments you can make is in a trust deed. Simply put, you become the bank for someone looking to put a loan on real estate. Yields to you can range from 7-15% annually and you can even use money gathering dust in your IRA account too. Most commonly interest payments are made monthly creating a nice form of income.

What is the process?
Most investors use a local private lender/broker who already is set up to do deeds of trust or hard money loans. The company will market to borrowers and when a loan comes in, they underwrite the loan just as a bank would. However, instead of the loan being funded by a bank, the lender will use investors like you to obtain financing. What do these brokers look at before deciding to offer a deed of trust to their investors? First of all, they look at both the borrower and the property to see if the loan request makes sense. Here is a short list of items they look at:


Real Estate

Credit Score


Income/Tax returns, W-2s, rents


Assets-Cash , investments, Real Estate

Loan amount vs. value (LTV)

Experience-invested in RE before?

Title- liens currently against property?

Exit Strategy – How will loan be repaid?


Type - Commercial, residential, land, etc.

Income – what is potential rental income?

After the analysis, the broker usually will decide to do the loan and send the borrower an offer sheet outlining the terms of the loan. If the borrower accepts, the broker will then notify his investors there is a new loan to fund and send them an offering.

How do I decide if this loan (deed of trust) is for me? Unless you are making a loan yourself, you are probably putting a lot of faith in the broker who sent you the offering. A few questions to ask yourself and the broker come to mind.
  • What is the loan to value? The higher the loan to value, the riskier the loan because if something should go wrong, there is less equity in the property if you have to foreclose and sell it to get your money back. Typically, 50-65% is the maximum you want to go.
  • Can the borrower make his loan payments?
  • If the borrower cannot pay, could we rent the property?
  • Is the property in a stable market?
  • What is the exit strategy of the loan? This is by far the most overlooked but most important question. After the loan comes due in 1-5 years, how will the borrower pay us off? A few ways are refinancing with another lender or selling the property.
  • Does doing this loan make sense? Why can't the borrower do a regular bank loan? Find out!
So you have decided to make a trust deed investment. Now create your own loan criteria that you can discuss with the borrower or the broker.
Loan size preferred or amount you want to invest?
What areas will you lend within?
What is your interest rate return minimum?
What is your minimum and maximum loan term? Less than 1 year? 1,2,3 or even 5 years?
What is the maximum LTV you will go up to?

Where do I find available trust deed offerings?
We can put you on our mailing list and when new deeds of trust come available, you will receive a deal sheet with everything there is to know about the opportunity.

I still have questions.
We are at your service. Our contact information is below.

Russell Roesner
415 680 3454

Friday, December 3, 2010

Hard Money: What is it and how to get it

Hard Money is a term for a loan product offered by private companies instead of the banks. It is also referred to as Private money, Private lending, and Bridge money. Usually the capital comes from private investors that live locally to where the loans are being made. Although the loan process is similar to a bank, there are distinct differences. First let’s compare bank money with hard money:

Bank Money Drawbacks

Bank Money Benefits

Hard to get

Low interest rates: 4-6%

Takes a long time (45-60 days)

Low Closing Costs: 1-2% of loan amount

Minimum Credit Scores Imposed

Long Term: Up to 40 years

Property must be in good condition

Small down payment: As little as 3%

Only 4-6 loans per person

Available Nationwide

Personal Guarantee is required

Money is always available

Borrower cannot be a company

Hard Money Drawbacks

Hard Money Benefits

High interest rates: 9-15%

Easier to get and to qualify

High closing costs: 4-8%

Quicker to close: 15-30 days

Short Term: 12-60 months

Credit not as big of a factor

Limited Area: Only lend locally

Borrower Can be a company: LLC, Corp

High down payment: Up to 40%

Personal guarantee variable

Property can be in any condition

Why use hard money?

Most borrowers who use hard money do it for the following reasons:

  • They personally cannot qualify or the real estate does not qualify for a regular bank loan.
  • They do not have time to wait for a bank loan to be approved.
  • They want to borrow money with a business entity and/or do not want to personally guarantee a loan

Even though the rates can be high, hard money can be quite useful when an investor has an opportunity to buy a property for a low price and sell it for a profit. Simply put, hard money even with its drawbacks can be a great tool in providing the capital necessary to be a real estate investor.

How do find a private lender and get a hard money loan?

Please review the loan programs section of our website where you can learn more and inquire about a getting a hard money loan. Our contact information is below.

Russell Roesner
Equity Coalition President
San Francisco, CA 94104
415 680 3454
Linkedin Profile

Sunday, June 27, 2010

Self Directed Ira's

There are a million posts about self directed IRA's already online. Most people by now already know what a self directed Ira is, but if you don't, here is a simple definition.

A self directed Ira is by definition an Ira account where you can make investments in non-publicly traded investment vehicles. Instead of being limited to stocks, bonds, mutual funds, etc., you can buy real estate, invest in tax liens, private placements, and much more.

So, what can't you invest in?
The IRS defines a prohibited transaction as follows: "Generally a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary or any disqualified person. Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of lineal descendant)."--Source IRS Publication 590

In other words, you can't make loans to yourself, your family, or buy real estate for personal use.

Why use a self directed IRA?
The number one reason for a self directed Ira is to invest in Real Estate. You can buy rental property, make high yielding loans on real estate to others, (deeds of trust), and of course join the millions of others in America making high returns in the fix and flip market.

How do I choose a self directed IRA company?
Although there are many to choose from in today's crowded market, I still prefer to go with companies that have been doing this the longest and offer the lowest fees. The annual fees and per investment fees can really get you so it is important to do your own research. I've found the following companies to be the best in my experience.

How do I find good investment options for my self directed Ira?
My company offers deeds of trust and we work with a number of successful real estate operators who are looking for partners. Please review our website for more information.

To learn more about self directed Ira's, I suggest going directly to one of the 3 Ira company links I posted above. There you will find lots of explanations and tutorials on self directed Ira's.

To your Wealth!
Russell Roesner
Equity Coalition President
San Francisco, CA 94121

Sunday, February 21, 2010

Raising Money for Structured Real Estate Deals

As I'm sure you know by now, my focus is creating structured bridge financial transactions for real estate investors. This article will attempt to explain common industry terms and how a deal is structured. I can't count how many times I hear the term investor used to describe 3 different players in the same transaction. For example, is the investor the equity participant, is it the lender, or is it the real estate operator setting up the deal? Let's go through it step by step by describing a typical transaction.

Sponsor: The company or individual who is looking to raise money and has identified the real estate to be purchased or improved.
Investor: The money partner, sometimes an individual, sometimes a company, (private equity group) who is putting up the cash above and beyond leveraged or bank money. However, if 100% of the money needed to complete the project is debt, then the term investor might be used to describe the lender or debt partner.
Lender/Debt partner: The institution putting up the loan.
Structured Financial Transaction: Any deal structure where debt and equity are both used together to finance a deal.
Debt: The capital piece structured as a loan. It could be based on a percentage of purchase price (LTV or loan to value basis) , the future value once the project is finished, or it might be based on the cost to purchase in combination with the improvement costs and project expenses (LTC or Loan to cost)

The most asked question I hear is, “What does the equity share partner want in return for their money?” There are an infinite number of ways to structure a deal but I'm going to explain the two most common ways to calculate that number.
Pari Passu: Example 1: $1 million is the total cost projected for a purchase rehabilitation project on a 5 unit apartment building.
Use Of Funds: $595,000 purchase price*$250,000 for rehabilitation*$90,000 for Real Estate Broker Fees*$15,000 for mortgage brokerage fees*$25,000 for interest reserves*$25,000 for legal costs. Let’s say the sponsor has secured a $600,000 loan and put up personal guarantees for that loan. There is now $400,000 still needed to cover the project.
If an investor brought in $200,000 total and the sponsor put in 200k of his own money, then the deal would be split 80/20. 80% going to the sponsor and 20% going to the investor. 600k bank loan credited to sponsor. 200k credited to sponsor. 200k credited to investor = 80% to the sponsor and 20% to the investor.
Pari Passu: Example 2: $1 million is the total cost projected for a purchase rehabilitation project on a 5 unit apartment building.
Use Of Funds: $595,000 purchase price*$250,000 for rehabilitation*$90,000 for Real Estate Broker Fees*$15,000 for mortgage brokerage fees*$25,000 for interest reserves*$25,000 for legal costs. Let’s say the sponsor has secured a $600,000 loan and put up personal guarantees for that loan. There is now $400,000 still needed to cover the project.
If an investor brought in the 200k and the sponsor brought in 200k, the deal would be split 50/50. Why the big discrepancy? Some investors count debt brought into a deal as money contributed by the sponsor while others do not. In this example, the 400k remaining gets 100% of the deal so 200k equals 50% of the deal and the sponsor and investor split the deal 50/50.

Understanding the subtle deal points and perspective of both sides of a deal empower both an investor and a sponsor. If you are providing the service of helping raise capital for your clients, you earn your commission and placement fees by helping structure the transaction through understanding the deal points.
Preferred Return: Many sponsors offer a preferred return to their investors based on an annual percentage. This is the investors guarantee. All profits beyond the preferred return can be sliced and diced based on negotiation. Some sponsors keep 100% of those profits. Some do a split.
There again are many more deal points when structuring a real estate investment but the Pari Passu and Preferred return examples are a great place to start. Remember, if a sponsor is looking for investment capital and is asking for more than a lender will loan, typically more than 60% LTV or LTC, then the investor who brings money to the table to bridge that gap deserves a higher return than the bank. If the sponsor is asking for equity, they will have to pay for it.
To your Wealth!

Russell Roesner
Equity Coalition President
San Francisco, CA 94121

Thursday, February 4, 2010

Speed up your computer-Really!

I'm not a tech blogger but I found something so unbelievably helpful to my business, I had to share it. Up until now, I thought that the speed of my internet connection and ram were the main factors in how fast a web page would load. Friends, this is not so! The browser you choose to use is big factor and some hog more memory than others.

Each browser comes free and with default settings. Just out of the box, here are the rankings from my research. From fastest to slowest on average:
  • Safari
  • Opera
  • Chrome
  • Internet Explorer
  • Firefox
I know there are other browsers out there but these have all the add-on stuff we want and are the most supported. If you are in business online for whatever reason, you need your browser to work quickly. I never knew you could get into the code of your browser and make it faster and customize it easily. Now, here is the tip of the year as far as I'm concerned. The following link will take you the MakeTechEasier website to configure Firefox. I followed their easy directions to make Firefox faster. The result?

After reconfiguring Firefox following the FREE directions, not only does Firefox run 5 times faster, but my entire computer runs faster and so does Internet Explorer. Maybe I just got lucky, but using MakeTechEasier to make one browser faster seemed to speed up all the programs on my computer in general since all browsers take up so much of your operating system resources.

This will take you 10 minutes. As a disclaimer, I do not work for or advertise for any company I promote on my blog. Using their configuration tricks, I've just made my business much more efficient.

I hope this helps you as much as it helped me.

To Your Wealth!

Russell Roesner
Equity Coalition President
San Francisco, CA 94121
415 680 3454
Linkedin Profile

Friday, January 29, 2010


We all should be using business and social networks to be prospecting for investors and clients but once you find someone or they find you, it can be difficult to exchange contact information and tedious to use webmail within the social/business networking system.

Do you find the WEBMAIL interface on Linkedin or other networking sites to be inefficient, the inbox search function to be terrible, find it tedious to constantly ask people for their contact info or give them yours, and just don't have time to add people to your contact database? Here are some tips!
  1. First and foremost, always include your signature in every single email you send out to anyone you ever want to hear from again. A default signature can be created in any email program you use whether it is Outlook, Gmail, Yahoo Mail, etc. It is 2010 and I receive business emails every single day from people who do not have their contact information at the bottom of their message. Not only do I find it frustrating but I immediately question their level of competency as a business person. Be professional and use a signature!
  2. Every word processing program such as MS word has a multiple item clipboard today. Always have a customized signature available on your clipboard with not only your contact info, but a message stating: "To insure we can continue to build a valuable business relationship, please include your contact information when you respond to me." Keep your clipboard minimized all day as you work and have the signature available to paste into every social and business networking outbound message you send. (We are all in a hurry and don’t want to type it all in replying for instance to a message on Linkedin) Since these sites don’t want you to leave, you have to make an effort to communicate offline and they know that. Beat them at their own game!
  3. If you don't have a signature and text grabbing tool, its time to get started. I use a great time saving free software program called copy2contact which lets you grab, review, and save new contacts and appointments in just seconds. It works with Salesforce, Blackberry, Outlook, NetSuite, and Palm Desktop. Linkedin also has free productivity tools where you can get a text grabber, and create a beautiful signature with professional graphics. I think these free tools are an EXCELLENT free find! Click on the "tools" link at the bottom of any Linkedin page to find them another time.
  4. I have all my webmail on Linkedin filtered and forwarded to a folder called Linkedin within Outlook so I can grab peoples signatures and send my signature whenever I reply.


If you have other tips to add, please be my guest. Please consider becoming a follower of my blog as well.

To your wealth!
Russell Roesner *President*Equity Coalition*415 680 3454*San Francisco, CA

Linkedin Profile

Wednesday, January 13, 2010

How to appear Legitimate in Todays Market

In today's world and yesterday's world too, a large part of business success has rested on the old saying that "Its perception over reality." If you are trying to raise capital or for that matter do any other form of business these days, you have to pay attention to how others perceive you by your online presence. This article goes over the basics of how you can legitimize yourself or at least not sabotage yourself by appearing professional online.

Email: I receive a number of people sending me opportunities to invest or financing inquiries from people with email addresses ending in Yahoo, Google, Hotmail, etc. If your email address is not connected to your own domain name, it shows me that you are probably working from home and have not developed your company enough for me to take you that seriously. To take it a step further, if you are using web mail, then it means you don't have a website either.

Domain Email: You don't even need a website to have a domain name and email service. I use namecheap. For $9.69 year, I can register a domain name. For $3.95 a month, I can have an email only account with up to 10 mailboxes using my own domain name. It is easy and takes an hour, even for a beginner. Go-daddy and Laughing Squid have similar plans.

Website: As I often do, I'm going to tell it like it is........If you don't have a website you do not have a company today and you will not be taken seriously by people you contact. An adequate website can be created in half a day with many web-hosting companies. Network Solutions has a program called image cafe where you can choose from 100s of canned website templates depending on your business focus. If you can use Microsoft word, you can do this. Many people without a website think they have to hire a web designer and spend months planning it out. I was one of those people 2 years ago. Let me give you a simple tip. Start off with a simple website, even if its just one page functioning like an online business card. You can build upon it over time. The point I want to drive home is that having your own URL and website is required today and is very easy to do.

Linkedin: When someone contacts me for the first time via email, Linkedin, or even a phone call, I look them up on Linkedin. It is absolutely essential you create a rich Linkedin profile about yourself. When someone I don't know does not have a detailed Linkedin profile or no links out to a website, I move on.

Again, its about perception over reality. You may not be a big company but if you have a website, a real email account with your domain name, and a rich and detailed Linkedin profile, you create an air of legitimacy that will help you win business and gain clients in today's market.

To your Wealth!

Russell Roesner, President
Equity Coalition
2440 Cabrillo Street
San Francisco, CA 94121
415 680 3454
Linkedin Profile