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Mortgage Investment Opportunities Since 1980



Be Wary of High Yield Trust Deeds

July 9, 2020

We here at Blackburne & Sons would very much be in your debt if you were to forward this short lesson in trust deed investing to your accredited investors friends. Thank you!


Joke Du Jour

After eight days of backpacking with my wife, Linda, we were both looking pretty scruffy.  One morning she came to breakfast in a baseball cap, her shoulder length hair sticking out at odd angles. "Terry," she asked, "does my hair make me look like a water buffalo?” I thought for a moment, then said, "If I tell you the truth, do you promise not to charge?”


You can lose money first trust deeds. Let me say that again. You can lose money in first trust deeds. Am I a great salesman or what? Haha! Anybody out there remember the Russian immigrant stand-up comedian from the late 1980’s, Yakov Smirnoff? He was on Jonny Carson a bunch of times. His classic line was always, "Is this a great country or what?"

Therefore the answer to the question, are high yield first trust deeds worth it, is a resounding, “No!” The higher the yield that your hard money broker is offering you on a first trust deed, the riskier the deal. You do NOT want first trust deeds with a high yield because the higher the interest rate, the higher the monthly payments. If the monthly payments get too high, you will financially break the back of your borrower. You WANT your borrower to succeed. In forty years of arranging hard money first trust deeds, my investors have made a profit on a foreclosure fewer times than the number of fingers on my hand. You WANT your borrower to succeed.

The good ones are the lower-yielding first trust deeds - the deals with yields of 7% to 8%.  They are the ones that often pay like a slot machine (no guarantees here, folks).  They are the ones that give you a handsome monthly income, without ever touching a penny of your principal (your seed corn).  They are the investments that provide you with the cash you need to meet the renovation capital call on your foreclosed property, when you foolishly invested in a high-yield first trust deed.  

Hellooo? The good ones are NOT the high-yield deals. I have often said I would personally never invest in a first trust deed yielding more than 9%. If you ever succumb to the siren call of an 11% first trust deed and suffer mightily, please don’t condemn all hard money first trust deeds.  You reached for yield and got burned.  If you find yourself picking up the phone to reserve a piece of an 11% or 12% deal (don’t touch that hot stove), just take a tiny piece.  The investment might not end well.


Investing in first trust deeds involves substantial risk. Be sure to read the “Risk Factors” section of the Offering Circular carefully before investing. Foreclosed property almost always requires renovation, so be sure to maintain some liquidity. A substantial and prolonged decline in real estate values is possible.


Schedule a Zoom Meeting With Angela Vannucci




P: (916) 338-3232

F: (916) 338-2328

CA DRE #1425852 / NMLS #389465


Realty Capital Corporation

4811 Chippendale Drive, Suite 101

Sacramento, CA 95841

CA DRE #00829677 / NMLS #103430

Won’t you kindly forward this email to a few of your accredited investor friends?