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THE RETURN
Besides owning rental property, can you think of any other investment vehicle which yields consistent returns over 10% and is secured by a first-lien on real estate?
Every investment portfolio should include these...
Shouldn't your portfolio have some of this too?
It's well-known that CD's and Bonds yield Low Returns but carry Significant Security. It's also well-known that the Stock Market is Volatile but often yields Big Returns. It's not so well-known that private investors can invest in Trust Deeds and Mortgages and enjoy Security Comparable to Bonds with yields Greater Than the Stock Market.
$1 invested in the S&P 500 on January 1st 1966, with all dividends reinvested (and no costs paid), would be worth $102.17 on December 31st, 2015. This represents an annualized return of 9.69% but, if you factor in inflation over the same period, the adjusted annualized return drops to 5.38%, which means the $1 would actually be worth $13.74.
Stocks
This information and the original article written by Bill Barker of The Motley Fool, titled "How Have Stocks Fared the Past 50 Years? You'll Be Surprised." can be seen in its entirety by Clicking Here.
The vast majority of our loans carry 12% interest with a 6 month term. Since our loans fund purchase price and remodeling costs, there is a first large draw followed by several smaller draws. We advise our investors to keep 33% of the unfunded balance liquid at any given time in order to facilitate timely draw funding. This means that a small amount of your total allocation will not be earning interest at any given time. On average, the effective yield of our investor's allocated capital is 11%, even though the nominal value of the note and loan is usually 12%.
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Using 11% interest as our baseline and then subjecting our yields to the same inflation adjustment as done in the above study of the 50 year S&P 500 average, we end up with a 6.69% effective annualized return.
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The graph and data chart below reflect these parameters.
Trust Deeds & Mortgages
What about Bonds and CD's?
After subjecting them to the rigors of inflation they didn't make it to the chart.
As you can see, compared to the 50-year historical average of the S&P 500, our Trust Deeds and Mortgages are out-performing when invested both tax-free and after-tax.
For more information on how to invest tax-free Click Here.
How do we figure?
Every 6 months, tax liability on interest earned, deducted from principal.
Tax Rate - 35%
Initial investment plus compound interest until tax is paid on earned income at withdrawal.
Annual Returns Re-invested Tax-Free
Tax Rate - 35%
"Real estate is an imperishable asset, ever increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security."
- RUSSELL SAGE
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