It has often been said that the time to buy any investment is when blood is running in the street. Well, there sure has been plenty of blood spilled over California commercial real estate since 1989. The devasting recession that rolled across the country throughout the 1980's finally hit California in 1989. By the time the recession ended in 1994, commercial real estate values in California had lost on average 45%.
Probably in excess of 70% of the banks, S&L's and private investors who owned commercial second mortgages going into the recession were completely wiped out. Today the expression "commercial second mortgage" has become almost as loathed as the expression "limited partnership".
But the pronouncement of the death of the California economy has been greatly exaggerated. Silicon Valley is booming, and commercial vacancies there have plummeted. Rents in Silicon Valley have increased by 30% since 1994. Office buildings in Sacramento were recently determined to offer the best return on investment for office buildings anywhere in the country. This is hardly surprising with major software companies like Oracle spilling over into the area.
In Southern California the movie industry is booming. Hundreds of thousands of laid off and displaced white collar workers have now found new employment, albeit lower-paying, with the miriads of small companies scattered throughout the area. Commercial real estate in Southern California is finally clearing the market. After declines of 45% or more, bottom fishers are snapping up properties.
All commercial second mortgages are bad, is the attitude of most institutional lenders today. All of them? Your common sense tells you that such a blanket rule can't be true, but good luck finding a commercial second mortgage in California today. This gives the shrewd speculator an opportunity, a niche where he can earn 20% interest with a surprisingly reasonable amount of risk.
To play the game, you must be both a California resident and a highly sophisticated, accredited investor. By accredited I mean that you have a net worth - exclusive of your home, auto's and furnishings - in excess of $1 million.
In addition, these second trust deed investments are sold in their entirety to a single individual. Therefore the minimum investment is at least $50,000 and more often $70,000 to $100,000.
If you meet this description, and the market inefficiency that I have described rings true to you, you are invited to call me, George Blackburne, at 916-338-3232. Alternatively you can send me an e-mail with your name, address, telephone number and real estate investment background. I will promptly send you some very interesting information.
If you are a big sissy (like me), we also have far less risky, low loan-to-value, first trust deeds yielding 11% to 13% interest. These first trust deeds are often senior to the 20% second mortgages from accredited private investors that I have described above. If you started to foreclose your first mortgage, the second mortgage investor would have to bring your loan current; otherwise he would be wiped out. A good argument can be made that these accredited second mortgage investors essentially credit-enhance your first mortgage. This makes these lower-yielding investments particularly attractive. You are invited to call me or e-mail me about these lower-yielding but clearly safer investments as well.
Please note that I am an attorney, and Blackburne & Brown Equity Mortgage Corporation is a member of the Blackburne & Brown family of companies. We have been in business for more than 16 years, and our flagship company is currently servicing over $34 million in private money loans.
George Blackburne, III, Esq.
Blackburne & Brown Equity Mortgage Corporation
4811 Chippendale Drive, Suite 101
Sacramento, CA 95841
916-338-3232
fax 916-338-2328
e-mail: george@blackburne.com
Real Estate Broker, California Department of Real Estate