All Forum Posts by: Israel Irizarry

Trust Deed and REIT investments are seemingly similar at first glance. They both utilize crowdfunding type platforms that open the door to commercial real estate investments at a lower "buy-in" than your typical real estate venture (i.e. rentals, fix-n-flips, etc.); and offer a steady stream of passive income. There are some key differences that you should be aware of when deciding which investment vehicle is best for your portfolio and for your tolerance for risk.

If you are unfamiliar with these types of investments or just a bit rusty, here is a brief synopsis on both. There are many different types of REITs, equity, mortgage, or a combination of both (hybrids), that can be publicly traded, non-traded, or Private. Here we are going to focus on the most common, the publicly traded equity REIT; where the REIT fund managers purchase multiple properties to lease the space and collect rents. These properties are bundled into a fund where you purchase shares on the stock market exchange, and that rental income is then distributed as dividends to you as a shareholder. Trust Deeds are a debt investment. Commercial brokers, such as Ignite Funding, work with real estate developers to broker and fund short-term loans for individual projects (i.e. acquiring land or a property, developing raw land, and/or construction) with hard money lending. You along with many other investors are lending your money to these borrowers, earning a return on interest negotiated by the broker.

Key Differences:

Fixed vs Fluctuating Form of Income:

When you invest in Trust Deeds with Ignite Funding, you will earn an annualized 10%-12% return paid out to you monthly. This form of income is more likely to be steady because borrowers have a better incentive to continue making payments. Borrowers that wish to maintain the success of their business and continue to receive lending for future projects will not tarnish their reputation by frequently defaulting on payments, and they know that a hard money lender will foreclose and take the property back in a heartbeat if necessary. REITs only pay dividends on a quarterly basis, with annual dividend yields averaging around 3% to 8%. That is contingent upon all properties retaining paying tenants who have less of an incentive to pay consistently or stay on the property. Any one of the properties failing to perform can be detrimental to the life of the fund, causing fluctuations and making this form of income less reliable.

Liquidity:

Trust Deeds are less liquid than REITs because of the nature of a debt investment versus an equity investment that's publicly traded. The trade-off for liquidity in Trust Deeds is the property encumbered by the loan is collateral to your investment because your name is on the deed of trust and title insurance. With the guidance of the broker, investors get to decide how to proceed if the borrower goes into default and can even foreclose and sell the property if necessary. This helps mitigate the amount of principal you risk losing in the process. In a REIT, there is no such collateral protecting your investment and you do not have a say in how things are managed if property performance declines. You must hope that you aren't selling your shares at a lower market value than you bought in, cutting into your principal and earnings. If the REIT altogether fails, you stand to lose all your principal.

The Ability to Diversify:

Very few REITS have a mixed portfolio of property types, most tend to specialize in a specific real estate sector. They are either composed of all apartment buildings, all health care facilities, all hotels, etc. You are also relying on the REIT's fund managers to choose profitable properties to fold into the fund. When investing in Trust Deeds, you are in control of which project you are lending your money on. This creates the opportunity to diversify across borrowers, product type, and geographical area. If one area of the market slows down, a diversified portfolio will contain other investments that should continue performing while the other works itself out.

Fees:

In order to maintain REIT status, government requirements mandate that they must payout a minimum of 90% of income back to investors which does not leave much for the fund managers to work with. In order to make up for this lack of capital they can charge base fees, performance fees, acquisition and divestment fees, digging into your overall earnings. When you invest in Trust Deeds, the broker is paid through the extra brokerage points paid by the borrower and does not hinder the return on your investment.

Whether you are investing in Trust Deeds or REITs, you should always perform your due diligence on the company or fund manager you are looking to invest your hard-earned money with. Look at the management team, their performance track record, and question if their interests are in line with your own as an investor. You should also question yourself and what type of risk you are willing to face, like with any investment there are no guarantees.

As an financial advisor, you can provide trust deed investments to your clients through our Investment Advisor Program. This proven program allows you to integrate turn-key investment options into your clients’ portfolio providing them diversification and 10%-12% annualized returns through monthly income. At Ignite Funding, we work to ensure you experience a high level of professionalism throughout the entire process.

https://ignitefunding.com/iap-investment-advisor-program-home/

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First Trust Deed collateralized by an approximately 367,000 square foot mall in Nampa, ID (about 22 miles west of Boise, ID). Current tenants in this mall include national brands such as Big 5 Sporting Goods, Ross Dress for Less, and Jo-Ann Fabric as well as 30+ local tenants. The property is currently operating at a 36% vacancy however retail vacancy for this market is about 10%. Do to the declining consumer appetite for traditional mall space, it is the borrower’s intent to demolish a portion of the mall and turn it into a lifestyle center. To do this, the borrower will demolish approximately 30% of the in-line shop space and remove most of the interior corridors. In addition, the borrower will renegotiate leases with two of the big tenants to move their space as well as increase the duration of their lease. On top of that, the borrower will bring in two big box tenants to absorb a large amount of the vacant space. Given this property has more vacancy than the surrounding properties, it is the borrower’s intent to lease up the remaining space before he puts the property on the market for sale.

Loan Amount: $11,000,000

Yield: 10.5% (Principal Balance ≥ $100,000); 10.0% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: Nine months with two optional nine-month extension periods at maturity.

Onsite Video Footage 4.9.19

RHINO HOLDINGS OLYMPIA, LLC #4575 | WASHINGTON

First Trust Deed collateralized by an approximately 87,000 square foot retail building in Olympia, WA (about 67 miles southwest of Seattle, WA).

Loan Amount: $5,698,000

Yield: 10.25% (Principal Balance ≥ $100,000); 10.00% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10 day grace period.

Term: Nine months with an optional nine-month extension period at maturity.

BULLHEAD CARE, LLC #4594 | ARIZONA

First Trust Deed collateralized by a partially completed, 14,787 square foot geriatric behavioral hospital in Bullhead City, AZ which is approximately 100 miles southeast of Las Vegas, Nevada.

Loan Amount: $5,600,000

Yield: 10.5% (Principal Balance ≥ $100,000); 10.0% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: 9 months with one optional nine-month extension period at maturity.

FIG STARWOOD FARMS LLC #4595 | TEXAS

The collateral for this loan is approximately 26 acres of land that will consist of 244 townhome lots located in Cypress, TX (approximately 25 miles northwest of Houston, TX).

Loan Amount: $2,600,000

Yield: 10.5% (Principal Balance ≥ $100,000); 10.0% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: Nine months with an optional nine-month extension at maturity.

LOKAL BR7 LLC LOAN #4596 | COLORADO

The collateral for this loan consists of a partially completed 2,189 square foot home located in Commerce City, CO (approximately 20 miles northeast of Denver, CO and 12 miles west of Denver International Airport).

Loan Amount: $470,000

Yield: 10.5% (Principal Balance ≥ $100,000); 10.0% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: Nine months with an optional nine-month extension at maturity.

LAS VEGAS, Feb. 19, 2019 /PRNewswire/ -- Ignite Funding today announced that on February 15, 2019 they have distributed more than $50 million dollars in interest income from their Trust Deed investments to their investors over the past 8 years.

As a licensed commercial mortgage broker, Ignite Funding is the conduit in connecting bankable borrowers with sophisticated investors seeking collateralized real estate investment opportunities. There are an abundance of borrowers seeking capital to build residential communities and commercial projects throughout the Southwestern United States. The borrowers pay an interest rate which earns Ignite Funding investors 9 to 12% in annualized returns. Investors at Ignite Funding are the bank for the borrowers.

Investors that wish to learn more about Ignite Funding's real estate investments can do so by visiting ignitefunding.com and by reviewing client comments on the BBB, Facebook and Google.

Ignite Funding encourages potential real estate investors to participate in the next $50 million distributed.

About Ignite Funding: Ignite Funding fills a lending gap by providing homebuilders and developers a reliable lending source not available with small, mid-size and large financial institutions. This gap in lending options allows investors an opportunity to participate in real estate investments that offer double-digit annualized returns to build wealth in their retirement portfolio.

Tickets: https://www.eventbrite.com/e/trust-deeds-working-through-the-myths-truths-of-trust-deed-investing-tickets-54294239532 This will be the FIRST Trust Deed, real estate investing seminar for 2019. This will also be our fourth year providing free education about Trust Deed investments and teaching investors how important they are to any portfolio.
At the seminar, you will learn
*Who you are investing with. *Where you are investing is secure. *When is a good time to invest in real estate. *What you are investing in. *Why you should invest with Ignite Funding. *How you can earn double-digit returns in real estate.
All of these questions will be answered on February 26th!
LIMITED SEATING - THERE ARE ONLY 30 SEATS AVAILABLE **RSVP'd guests will receive a FREE investor kit and free dinner.

We will now have extended time after the seminar for YOU to meet with Dawn and go over your application and answer any personal questions you may have.

Tickets: https://www.eventbrite.com/e/trust-deeds-working-through-the-myths-truths-of-trust-deed-investing-tickets-54294239532

LOKAL BR7, LLC | #4569 – COLORADO

Loan Amount: $4,380,000

Yield: 10.25% (Principal Balance ≥ $100,000); 10% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: Nine months with two optional nine-month extensions at maturity.

LOKAL VICTORY RIDGE, LLC #4570 | COLORADO

Loan Amount: $2,460,000

Yield: 11% Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: Nine months with two optional nine-month extensions at maturity.

HARMONY461, LLC #4573 | NEVADA

Loan Amount:

Yield: 10.25% (Principal Balance ≥ $100,000); 10.00% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: 6 months with one optional 6-month extension period at maturity.

RHINO HOLDINGS OLYMPIA, LLC #4575 | WASHINGTON

Loan Amount: $5,698,000

Yield: 10.25% (Principal Balance ≥ $100,000); 10.00% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10 day grace period.

Term: Nine months with an optional nine-month extension period at maturity.

Other available investments: https://ignitefunding.com/category/available-inves...

DRAGON RIDGE DEVELOPMENT, LLC, #4551 – NEVADA

First Trust Deed collateralized by a fully developed 1.1-acre lot in the MacDonald Highlands Community which is approximately 19 miles south of downtown Las Vegas, Nevada. The MacDonald Highlands Community is nestled in the picturesque McCullough Mountains which has become one of the most sought after addresses in the Las Vegas Valley. Finished lots on this street are currently selling for more that $2,000,000 for just the lot. Although no homes have sold on this 51-lot street yet, some homes are anticipated to be sold for more than 10 million. This loan is to acquire the lot and build a roughly 8,000 square foot home. Now that building permits have been fully approved by the HOA as well as the city, the borrower is able to begin construction immediately. It is anticipated the home will be completed and sold within the duration of this loan.
Loan Amount: $3,500,000

Yield: 10.25% (Principal Balance ≥ $100,000); 10.00% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: 9 months with one optional nine-month extension period at maturity.

BLUE HERON HIGHLANDS SHOW HOME, LLC. #4554 – NEVADA

First Trust Deed collateralized by a fully developed 1.3-acre lot in the MacDonald Highlands Community which is approximately 19 miles south of downtown Las Vegas, Nevada. The MacDonald Highlands Community is nestled in the picturesque McCullough Mountains which has become one of the most sought after addresses in the Las Vegas Valley. Finished lots on this street are currently selling for more that $2,000,000 for just the lot. Although no homes have sold on this 51-lot street yet, some homes are anticipated to be sold for more than 10 million. This loan is to refinance the acquisition of the lot and build a roughly 13,000 square foot home. Now that the building permit have been fully approved by the HOA as well as the city, the borrower has already begun construction on the home as the foundation of the home is completed. As is typical for Blue Heron, they build one "showcase home" to showoff all of the newest and most innovative architecture in design and technology. When they do this, they typically will pay off the loan with their own investor capital once the home is completed and ready to tour.

Loan Amount: $3,900,000

Yield: 10.25% (Principal Balance ≥ $100,000); 10.00% (Principal Balance < $100,000) Interest is paid monthly in arrears with payments due on the 1st of each month with a 10-day grace period.

Term: 9 months with one optional nine-month extension period at maturity.

When we say we have a proven track record, we can stand behind our claim with results to our investors. What does a proven track record mean to you?

Is it a real estate investment firm that communicates with investors the good, the bad and the ugly of a default scenario as the situation unfolds? Does it mean a real estate investment firm that handles defaults in the most prudent way possible to protect the asset and the investor’s capital investment? Does it mean a real estate investment firm that does not do an investor capital call for the expenses to take back the property, but instead puts their own capital on the line for an investment they have no ownership in?

Defaults are always a possibility for anyone who is a lender on real estate. It’s how you handle the default situation that determines your results. When you invest in real estate, you go into the investment knowing that there is a risk that the borrower may not make their payment. Ignite Funding, as the Loan Servicer of your investments, monitors the monthly payments made by the borrowers. In most instances the borrowers make their payments on or before the first of each month or within the 10-day grace period. By the 5th of the month Ignite Funding engages borrowers when payments are not made to get an understanding of intent and/or reasoning. Ignite Funding communicates to our investors when the 10-day grace period has been exhausted and no payment was made. Within the following 10 business days we are determining through ongoing communications with the borrower the best course of action. Each situation is different and must be handled based on all variables being examined. Some situations can be rectified in short order while others require in- depth communication to determine the best course of action (loan modification, loan forbearance, foreclosure proceedings or Deed in Lieu). The Default Guidebook further defines the course of actions in more detail.

A default situation is not however a time to make a rash decision that could affect the value of the real estate asset or how long an investor will not have access to their capital. If we rush to foreclose on a property when a borrower is seeking traditional financing to pay off a loan, we could be making a decision that could have a negative cause and effect. Instead a loan forbearance of 30-days may lead to a payoff. Another scenario is a borrower informing Ignite Funding that they will not be making payments on any of their loans moving forward as they have elected to change their business model. The next step with the borrower must be handled with precision to ensure the protection of the real estate assets. These scenarios are real and is what Ignite Funding is managing on your behalf with the borrowers. You can trust that Ignite is doing everything possible as your Loan Servicer. We do not get paid for our services when you are not earning income, so our interests are very much aligned and we are equipped to handle these situations with the best possible outcome for our investors in mind.

Let’s go back for a minute to the borrower that informed us that they elected to stop making further payments to our investors on all their loans due to a business model change. The magnitude of this situation affected nearly $19 million of investor capital at Ignite Funding. Evaluating a situation of this magnitude unfortunately takes time to determine the best course of action. This is not something an investor wants to hear, but returning 100% of their capital is. Ignite Funding needed to evaluate the situation by reviewing the nearly 26 acres of land and 374 residential lots to determine factors that included, but were not limited to;

• the current value of the real estate assets “as is” and “if improved”,
• current market conditions where the properties where located,
• potential buyers and timeframe of purchase to determine if a Deed in Lieu is a viable option for some assets,
• determining the benefits of the information for properties where the current borrower may be able to provide intrinsic value based on work completed (surveys, bonds, etc.),
• costs associated in taking back these properties through foreclosure versus Deed in Lieu, and ongoing negotiations with an untrustworthy borrower to determine if we would allow the borrower to walk away with no liability to the situation thus reducing the costs to the investors to take back the properties.

Now let’s go back to where we started. What does a proven track record mean to you?

Is it a real estate investment firm that communicates with investors the good, the bad and the ugly of a default scenario as the situation unfolds? YES. Ignite Funding provides informative information to its investors. It may not be what you want to hear, but it is always the truth.

Does it mean a real estate investment firm that handles defaults in the most prudent way possible to protect the asset and the investor’s capital investment? YES. Ignite Funding returned 100% of the investor capital as it relates to this situation. Not only did we return 100% of the investor capital, investors earned interest during the time the borrower was making payments and in some cases a capital gain upon the sale of the property.

Does it mean a real estate investment firm that does not do an investor capital call for the expenses to take back the property, but instead puts their own capital on the line for an investment they have no ownership in? YES. Ignite Funding spent $180,000 on behalf of its investors to take back the properties related to this situation that was reimbursed upon final disposition of each property.

Mitigating risks when investing in real estate means working with a reliable real estate investment firm that has your best possible outcome in mind. That is what you get when you invest in real estate with Ignite Funding.