Contact Info

Address:

10811 Washington Blvd, Suite 370
Culver City, CA 90232

Phone:

(310) 280-9173

Email:

Chris@CoastalCapital.com
Scott@CoastalCapital.com

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Most common things that Private Lenders Look for in Applicants

Private lenders can offer a more flexible and personalized loan process than traditional banks, but they still need to be assured of the borrower’s ability to repay the loan. Here are some of the things private lenders typically look for in applicants:

1. Credit History:

Even though private lenders may have more flexible standards than banks, they will still typically review an applicant’s credit history to get a sense of their past borrowing behavior. A good credit score can be an advantage, but a less-than-perfect score doesn’t necessarily disqualify an applicant.

2. Income:

Private lenders will want to see evidence of steady income that’s sufficient to cover the loan payments. This can be from a job, but also from other sources like rental income, dividends, or a business.

3. Debt-to-Income Ratio (DTI):

his ratio compares the amount of debt an applicant has to their income. A high DTI ratio may suggest that an applicant could have trouble making loan payments.

4. Collateral:

Many private loans are secured, meaning the borrower offers an asset — such as a home or a car — that the lender can take if the borrower fails to repay the loan. The value of this collateral is a key consideration for the lender.

5. Investment Plan (For Business or Real Estate Loans):

If the loan is for a business or real estate investment, the lender will want to understand the borrower’s plan for the money and how they intend to generate a return.

6. Exit Strategy:

Hard money lenders often offer pre-approvals for their loans, which can greatly speed up the funding process once a specific property has been identified.

7. Experience:

In some cases, such as business or real estate investing, a private lender may consider the borrower’s experience in the field.

8. Personal Character:

Private lenders might also take into account an applicant’s character, reputation, and integrity. This can be especially true in smaller communities or for lenders who have an ongoing relationship with the borrower.

Keep in mind that criteria can vary widely among private lenders. Some might place a lot of emphasis on credit scores, while others are more interested in collateral or the potential profitability of an investment. It’s also worth noting that private lenders’ interest rates are often higher than those of traditional lenders, reflecting the higher risk they take on.

Why Hard Money Loans Close Faster Than Other Loans

Traditional banking institutions might require weeks to approve and distribute your loan, which can be problematic if your project is time-sensitive. To circumvent unnecessary delays that can hinder your project or prolong your acquisition process, consider partnering with private money lenders. At Val-Chris Investments, we are committed to facilitating seamless and prompt transactions that help bring your vision to life. Below, we’ve outlined the reasons why hard money loans are typically settled more quickly than other types of loans:

1. Less Bureaucracy:

Traditional lenders like banks have to adhere to strict regulations and standardized underwriting processes. Hard money lenders are typically private lenders, so they have more flexibility and can move through the approval process more quickly.

2. Less Documentation:

Hard money lenders usually don’t require as much documentation as traditional lenders. They’re primarily interested in the value of the property that will serve as collateral for the loan, so they may not need to review as many financial documents, such as tax returns, pay stubs, or bank statements.

3. Creditworthiness is Less Important:

Because the loan is primarily based on the value of the collateral, hard money lenders are less concerned with the borrower’s credit score. This speeds up the process as thorough credit checks are usually not required.

4. Direct Access to Decision-Makers:

In traditional lending institutions, there are usually several layers of approval required for a loan. With hard money lenders, you’re often working directly with the decision-makers, which can speed up the process.

5. Specialization in Real Estate:

Many hard money lenders specialize in real estate loans and are comfortable dealing with properties that need to be rehabbed, or borrowers who plan to quickly sell the property. Their understanding of the market can expedite the process.

6. Pre-Approval:

Hard money lenders often offer pre-approvals for their loans, which can greatly speed up the funding process once a specific property has been identified.

However, while hard money loans can close more quickly, they often come with higher interest rates and fees than traditional loans. Borrowers should weigh these costs against the benefits of a quicker closing.

Coastal Capital Quarterly Summary – Performance Recap Q2 2023

Investor Quarterly Newsletter

Performance Results
2nd Quarter ending July 31, 2023

Modern,Business,Center,At,Night

June Latest Updates & Insights

COASTAL CAPITAL INSIGHTS

Each month Coastal Capital strives to bring you the latest updates and insights into the California real estate market for both investors and brokers.  We always welcome new investors who enjoy above-average returns that are not correlated to the equity markets.  As always, we appreciate both new investor and broker referrals, as the network builds it brings more value to all through diversification.

Please note that you can add on to your existing investment in any amount.  While an initial investment requires an investment of $100,000; existing partners in the Fund can add on in any amount from $2,500 or more.

MARKET UPDATE

In May’s InSights newsletter we highlighted the ultra-low inventory of single-family residency & multi-family homes coming into the Spring selling season. Well, the California Association of Realtors released their May sales and home price numbers last week and just when you think it can’t go any lower, it does! The lack of inventory in virtually every California market from North to South, excluding San Francisco of course, is experiencing a severe lack of inventory. In the report, CAR’s C.A.R. Senior Vice President and Chief Economist Jordan Levine is quoted: “While home sales rose solidly in May, we don’t expect to see a rapid recovery because of the lock-in effect that’s keeping prospective sellers with low interest rate mortgages from listing their homes on the market and keeping inventory extremely tight.”

Forty-nine out of 51 counties in California registered sales declines from a year ago in May with 36 dropping more than 20% from the same month a year ago. Other highlights:

  • New listings down 20% since a year ago
  • Days on market at a 10-month low
  • Median price at a 9-month high
  • Mortgage payment growth rate is more tempered 

Given that current low-interest mortgage borrowers have no interest in giving up their low payments (especially in these inflationary times) we fully expect these supply constraints to continue in both the short- & near-term.

The commercial world of real estate is a completely different ball game.  Work from home is devastating the commercial office space market.  Demand for large office towers in major cities, have yet to rebound as work from home trends turn into the market standard. According to a recent paper by the National Bureau of Economic Research, attendance in the 10 largest business districts in the US is still below 50% of its pre-COVID level, as white-collar employees spend an estimated 28% of their workdays at home.

The national average is 19%, including Los Angeles at 26%, NYC at 23%, and Miami at 16% for vacancy rates. As demand has dropped, equity and debt investors have been trying to identify the current value of these properties. An office building in San Francisco owned by 
MUFG, was previously valued at $300 million is now on the market with just a quarter occupancy rate for an 80% discount! Two buildings in Midtown Manhattan sold for 50% of their asking price last week.

That being said other segments of commercial real estate, such as industrial, retail, hotels are performing pretty well. These segments are usually much smaller properties and well within our credit box and lending limits. This just reiterates that one has to research and know the market (location), the sub-market (commercial, residential, land, etc.) and then drill down even further into the sub-market categories (office, light industrial, retail, etc.)

With $1.5 trillion of commercial mortgage debt coming due by the end of 2025; much of it in office space may default (and it makes for great headlines when a $200M+ building enters foreclosure or sells for pennies on the dollar.) Even though the news may say “the sky is falling” across commercial real estate markets, keep in mind that many of the segments are thriving. This points out our Fund’s strategy of investing in what we know & where we know and what specific state that market is in; great, good or challenging will continue to drive our solid returns.

As for our application desk, California business owners are flooding our inbox with financing requests. The recent banking crisis combined with the clamp down banks’ lending criteria is literally leaving entrepreneurs stranded. Even those with decent credit scores are feeling the pinch. Demand from landlords continues at a brisk pace as well with rental vacancies on most properties being filled almost immediately by tenants who can’t find a residence to purchase. This past month we also started seeing an uptick in our yield with many of our trust deeds going out the door at a 13.99% rate which will help in boosting future returns in a few months.

Thank you for all our existing partners who have been referring over friends & family to join us. Please note that our initial minimum investment is $100,000; however existing partners in the Fund can add on in any amount of $2,500 or more.

PORTFOLIO HIGHLIGHT

In 2023 we have not seen many fix-n-flips deals due bidding wars with homebuyers driving up acquisition cost. This higher cost eats into the profit margin of the flip leaving not enough margin for most flippers to take on risks from potential cost overruns. Our borrower needed just a few bucks to put the finishing touches on the property that he’s been working on for the past six months to get it to market. He knew that this unique two-bedroom property needed tons of curb appeal for a couple with no kids to fall in love with his flip.

The most important factor to him was speed to close as he wanted the house listed ASAP and hopefully sold within a week. Even though the deal size was small, our trust deed contract guaranteed us six months interest (we expect to be paid out in three months doubling the returns hopefully.) So glad we were able to step in quickly thanks to his broker bringing a complete application package to us. Funds were wire in just 5 days.

  • SFR 2 BED / 1 BATH
  • Whittier, CA
  • Position: 2nd TD
  • Rate: 12.99%
  • CLTV: 64%
  • Appraised Value: $960,000

Looking for a way to get more from your retirement savings? A self-directed IRA (SDIRA) could be the answer. We constantly get asked on how to set this up and asked the firm we recommend providing some insight with our investors:

What is a Self-Directed IRA?

Self-Directed IRA (SDIRA) is quite simply, an IRA. All IRAs abide by the same laws and possess the same capabilities. Unlike other IRAs held at banks, brokerage firms and other institutions, with a SDIRA, you’re not limited to stocks, bonds, or mutual funds.

 

What are the benefits?

A SDIRA gives you the opportunity to build a more diversified and resilient portfolio. It allows you to take advantage of alternative investments such as real estate, precious metals, private equity, notes, and more. A custodian/administrator is required to do the record keeping for the assets in your account, but nothing moves in or out of it without your direction. You decide how much, when, and most of all, what to invest in, giving you the freedom to invest in what you know best.

Investing in Real EstateWith a Self-Directed IRA

Real Estate is a popular investment among SDIRA holders because it is a tangible asset that people know and trust. With a SDIRA, you can invest in a wide range of real estate assets: residential or commercial properties, developed or undeveloped land, condos, hotels, mortgage notes, and more. Depending on what type of account you choose, earnings can continue to be either tax-free or tax-deferred.

The level of control and flexibility associated with a SDIRA does come with its own set of responsibilities. For example, investments made with your SDIRA are owned by your SDIRA, not by you personally, making self-dealing prohibited. Click here for more information on SDIRA rules. 

Getting Started

The first step is to decide what type of account you want to open. Then, establish how you’ll fund it. Make sure to consult with a legal and/or tax advisor before you begin can help you to answer these questions. If a SDIRA sounds like it could be the answer to your retirement questions, get your copy of the Self-Directed IRAs Basics Guide.

Brokers Always Welcome

Coastal Capital is always looking for referrals from brokers and open to new investors in the fund. Please share this email or connect us directly.

Asset Based Loans on Business Purpose Real Estate

  • Loan Amounts: $250,000 to $500,000
    Exceptions required for larger amounts
  • Origination Fees: 1 to 3 points with a  minimum of $2,000
  • Serving Location: State of California Only
  • Purpose: Business or Investment Purpose Only
  • Types: SFR, Multifamily, SFR Additions, Fix & Flip, Light Commercial & Retail, Land.
  • Fix Loan Term: 6 months to 18 months
  • Rates: from 10% up to 15%
  • Loan to Value: 65% without exceptions, higher available
  • Loan to Cost: Up to 80% with hold back for exceptions
  • No minimum credit score. Low FICO credit score okay

HOW TO REACH THE TEAM AT COASTAL CAPITAL

Chris Tomasewski
Chris@CoastalCapital.com
310-529-5678

Scott Griest
Scott@CoastalCapital.com
310-529-9975

Chio Baldocchi
Chio@CoastalCapital.com
310-280-7223

Phil Guertin
Phil@CoastalCapital.com
949-378-2713

The Benefits of Trust Deed Investing During Inflationary Periods

The financial environment in the United States has undeniably shifted over the past year. The term ‘inflation’ has become commonplace in our conversations, reflecting its pervasive impact on every facet of our daily lives. The effects of inflation are evident everywhere, from escalating grocery bills and variable fuel costs to sky-high airfare.

In reaction to these surging costs, interest rates have climbed, placing some capital markets in precarious situations. However, a number of real estate investors have found this to be an opportune moment to pivot towards trust deed investments. Continue reading to learn why investing in trust deeds is a savvy move during periods of inflation.

What is inflation?

Inflation is a term used to describe the general increase in prices of goods and services in an economy over time. It essentially means that the purchasing power of money decreases, as the same amount of currency can buy fewer goods or services.

Inflation occurs when there is an imbalance between the supply and demand of money and goods. Some of the main causes of inflation include:

  1. Demand-pull inflation: This occurs when there is excessive demand for goods and services compared to the available supply. When demand outpaces supply, businesses may increase prices to maximize their profits.
  2. Cost-push inflation: This type of inflation is driven by an increase in production costs, such as raw materials, wages, or taxes. When businesses face higher costs, they may pass them on to consumers through higher prices.
  3. Monetary inflation: It occurs when there is an increase in the money supply within an economy. When more money is available, people have more purchasing power, leading to increased demand and potential price increases.

Inflation is typically measured using various indices, such as the Consumer Price Index (CPI) or the Producer Price Index (PPI), which track the changes in the prices of a basket of goods and services over time. Central banks and governments closely monitor inflation rates and aim to maintain a stable and manageable level of inflation to promote economic growth and stability.

What Causes Inflation in 2023

  1. Pandemic-related economic dislocation: The economic disruption caused by the COVID-19 pandemic resulted in supply chain problems and fiscal and monetary stimuli provided by governments and central banks around the world in 2020 and 2021.
  2. Supply shortages: The recovery in demand through 2021 led to broad and historic supply shortages, including chip and energy shortages. These were influenced by increasing consumer demand and affected construction sectors worldwide.
  3. Effects of the Russian invasion of Ukraine: The Russian invasion of Ukraine in early 2022 affected global prices for oil, natural gas, fertilizer, and food, which exacerbated inflation. Higher gasoline prices, in particular, were a major contributor to inflation, as oil producers saw record profits.
  4. Shift in consumer spending: After the COVID-19 recession, consumers shifted their spending towards goods and away from services, particularly in the United States. This shift placed stress on supply chains, such that the supply of goods could not meet demand, resulting in price increases.
  5. Food and energy prices: In 2023, the International Monetary Fund noted that food and energy were the main drivers of inflation, with rising prices squeezing living standards not only in North America but worldwide.
  6. Increase in the money supply: One theory suggests that the large increase in the money supply in the early months of the pandemic contributed to the uptick in inflation in the U.S. The M2 money supply, a broad measure of the amount of money in the economy, grew at a record monthly rate of between 22% and 31% during this period.

 

Trust deed investing can be a smart strategy during times of inflation for several reasons:

  1. Hedge Against Inflation: Trust deeds, or deeds of trust, are secured by real estate. Real estate is often considered a good hedge against inflation because property values and the income from properties (rent) tend to increase over time. When inflation rises, rent and property values often rise in response, potentially protecting the investor’s purchasing power.
  2. Fixed Interest Rates: Trust deeds typically have fixed interest rates. This means that the income stream from a trust deed investment can remain constant over time, regardless of inflation. While the real value of this income stream can be eroded by inflation, the nominal value (the actual amount of money received) remains the same.
  3. Short-Term Investment Horizon: Trust deeds are often short-term investments, with terms typically ranging from 1 to 5 years. This can be an advantage during periods of inflation because the investor’s money is not tied up for long periods. This allows for adjustments to be made as economic conditions change.
  4. LTV Ratios: The Loan-to-Value (LTV) ratio in trust deed investments is usually quite conservative, often capped at around 65% to 70%. This provides a cushion if the value of the underlying property decreases, providing some protection against the risks associated with inflation and market fluctuations.
  5. Priority of Claim: In case of borrower’s default, a trust deed investor is usually the first one to receive their share from the sale of the property since they hold the first lien position. This first claim on the asset adds an extra layer of security to the investment.

It’s important to note that while trust deed investing can be a viable strategy during times of inflation, it’s not without risk. As with any investment, potential investors should conduct thorough due diligence and consider seeking advice from financial professionals. At Coastal Capital, we offer not just stellar returns, but also unparalleled peace of mind with an impeccable record of zero loss since inception. 

Call (310) 280-9173 to learn more.

Factors To Consider Before Investing in Rehab Property

Investing in rehab properties can be lucrative, but it’s also a complex endeavor that requires careful consideration. Here are some key factors to consider before you invest:

1. Cost of Renovations:

You need to have a clear understanding of the scope and cost of the renovations needed. This should include not only the obvious fixes but also potential hidden problems that can arise once you start the work. Hiring a professional to do a pre-purchase inspection can help you get a better sense of what you’re in for.

2. After Repair Value (ARV):

This is the estimated value of the property after all the renovations are complete. Understanding the ARV is critical to figuring out whether the investment will be profitable. Consult with a real estate professional or use comparable sales in the area to estimate this value.

3. Financing:

Traditional lenders often don’t finance properties in poor condition, so you may need to secure alternative financing, such as a hard money loan or private investment. Consider the terms of these loans carefully, as they often carry higher interest rates.

4. Timeframe:

Renovations can take time, and delays are common. Consider whether you’re able to handle a potentially lengthy project and how carrying costs during the rehab period will affect your bottom line.

5. Local Market Conditions:

The state of the local real estate market can greatly affect the profitability of a rehab investment. Look at factors like the area’s home sales and whether property values are rising or falling.

6. Skill and Experience:

The state of the local real estate market can greatly affect the profitability of a rehab investment. Look at factors like the area’s home sales and whether property values are rising or falling.

7. Potential for Return on Investment:

After factoring in the purchase price, cost of renovations, carrying costs, and any loan interest, will you be able to sell or rent the property at a price that delivers a good return on investment?

8. Legal and Environmental Considerations:

Be aware of any zoning laws or building codes that could affect your renovation plans. Additionally, older properties might have environmental issues, such as lead or asbestos, that need to be addressed.

Rehab properties can be a great investment, but they’re not for everyone. Do your due diligence, and consider seeking advice from professionals before diving in.

May Latest Updates & Insights

COASTAL CAPITAL INSIGHTS

Each month Coastal Capital strives to bring you the latest updates and insights into the California real estate market for both investors and brokers.  We always welcome new investors who enjoy above-average returns that are not correlated to the equity markets.  As always, we appreciate both new investor and broker referrals, as the network builds it brings more value to all through diversification.

Please note that you can add on to your existing investment in any amount.  While an initial investment requires an investment of $100,000; existing partners in the Fund can add on in any amount from $2,500 or more.

MARKET UPDATE

Low, low inventory levels of single-family residency & multi-family homes continues into this Spring selling season (which is historically the busiest time of the year) for real estate agents.  As of May 6, the inventory of single-family homes for sale statewide was at 26,627 homes, slightly below where it was exactly a year ago (26,994 homes) and well below early May 2019 inventory levels, which came in at over 60,000 homes, according to data from Altos Research.  We are seeing this trend across markets south of the Bay area and at all price levels.  Entry level homes less than $750,000 are being snatched up quickly if priced within reason.  In the Bay area the social issues of homelessness, crime and exodus of tech workers has hit the area hard and inventory is flowing as people leave to greener pastures of California (Coastal Capital has pulled back significantly from the area in 2022 with only one trust deed in the area.)

“It is very different from what we saw in the fall,” Ryan Lundquist, a Sacramento County-based residential real estate appraiser and market analyst, said. “It is like the market went from an ice bath to a blood bath — it is very competitive, and buyers are feeling frustrated at the lack of options.”

And it appears that the low inventory situation won’t be ending any time soon, as the number of new listings coming to market is also well below where it was last year. During the week ending May 6, 4,942 new listings of single-family homes came to market in California. A year ago, 7,684 new listings came on the market during the same week, and in 2019, 8,188 new listings were added, according to Altos.  We predict the current Seller’s Market will continue for the near- and mid-term.

Source: Altos Research

 

The theme of high rents throughout California continues. While the rental rates are no longer sky rocketing, they are holding steady and creeping up. The ROI for landlords continues to drive the demand for multi-unit buildings. Young Californians won’t be surprised to hear that homeownership rates are declining in their age group. Now a new study from Terner Center for Housing Innovation from UC Berkley finds that on average, it takes longer to become a homeowner in California than in any other state.

The point when half of Californians at any given age become homeowners is 49, according to the study. That exceeds other expensive states like New York (46), and it’s much higher than many of the states Californians have been flocking to, such as Texas (37) and Arizona (35). The study finds that in 1980, almost two-thirds of Californians aged 35 to 45 owned a home, but only 40% of residents in that age group owned a home in 2021.The same trend is happening among younger age groups. About 40% of Californians aged 25 to 35 owned a home in 1980, but only 16% in that age group own homes today.

Without new building starts or a massive migration exiting California we expect that landlords will continue to make up a majority of our application volume, especially in Southern California from Santa Barbara to the Mexican border.  The light commercial and industrial markets continue to chug along as normal.  Our applications desk has seen an uptick in deal flow in this segment.  We feel this segment of the marketplace is normal except for office space which continues to struggle as workers fight their employers on returning to the office.  This month we did fund our first commercial deal at an incredible LTV.

Small business owners are turning to private money lenders for their business-purpose loans in droves.  Banks with all the recent failures are hoarding cash and the last person they want to loan it to is someone who is self employed without significant assets.  The availability issues of conventional financing is really increasing demand for our trust deeds in this segment.  Across all markets in California for private mortgages & trust deeds we are seeing elasticity in rates that borrowers are willing to accept ranging from 12% to 14%-plus.

Thank you for all our existing partners who have been referring over friends & family to join us.  Just a reminder that initial investment amount requires $100,000; existing partners in the Fund can add on in any amount from $2,500 or more.

PORTFOLIO HIGHLIGHT

Just when we thought we had seen every possible scenario a new one came across our desk. A local real estate office in Modesto, California took over a church and paid cash for it to transform into their offices. They needed just a little bit of financing to finish the interior renovations but even with perfect credit they found it difficult to find a cooperative lender given the uniqueness of the property.  While not a typical deal structure, Coastal Capital immediately understood the equity position and provided the broker with a quick solution!.

  • Church Converted to Office
  • Modesto, CA
  • Position: 1st TD
  • Rate: 12.99%
  • CLTV: 27%
  • Appraised Value: $500,000

Looking for a way to get more from your retirement savings? A self-directed IRA (SDIRA) could be the answer. We constantly get asked on how to set this up and asked the firm we recommend providing some insight with our investors:

What is a Self-Directed IRA?

Self-Directed IRA (SDIRA) is quite simply, an IRA. All IRAs abide by the same laws and possess the same capabilities. Unlike other IRAs held at banks, brokerage firms and other institutions, with a SDIRA, you’re not limited to stocks, bonds, or mutual funds.

 

What are the benefits?

A SDIRA gives you the opportunity to build a more diversified and resilient portfolio. It allows you to take advantage of alternative investments such as real estate, precious metals, private equity, notes, and more. A custodian/administrator is required to do the record keeping for the assets in your account, but nothing moves in or out of it without your direction. You decide how much, when, and most of all, what to invest in, giving you the freedom to invest in what you know best.

Investing in Real EstateWith a Self-Directed IRA

Real Estate is a popular investment among SDIRA holders because it is a tangible asset that people know and trust. With a SDIRA, you can invest in a wide range of real estate assets: residential or commercial properties, developed or undeveloped land, condos, hotels, mortgage notes, and more. Depending on what type of account you choose, earnings can continue to be either tax-free or tax-deferred.

The level of control and flexibility associated with a SDIRA does come with its own set of responsibilities. For example, investments made with your SDIRA are owned by your SDIRA, not by you personally, making self-dealing prohibited. Click here for more information on SDIRA rules. 

Getting Started

The first step is to decide what type of account you want to open. Then, establish how you’ll fund it. Make sure to consult with a legal and/or tax advisor before you begin can help you to answer these questions. If a SDIRA sounds like it could be the answer to your retirement questions, get your copy of the Self-Directed IRAs Basics Guide.

Brokers Always Welcome

Coastal Capital is always looking for referrals from brokers and open to new investors in the fund. Please share this email or connect us directly.

Asset Based Loans on Business Purpose Real Estate

  • Loan Amounts: $25,000 to $500,000
    Exceptions required for larger amounts
  • Origination Fees: 1 to 3 points with a  minimum of $2,000
  • Serving Location: State of California Only
  • Purpose: Business or Investment Purpose Only
  • Types: SFR, Multifamily, SFR Additions, Fix & Flip, Light Commercial & Retail, Land.
  • Fix Loan Term: 6 months to 18 months
  • Rates: from 10% up to 15%
  • Loan to Value: 65% without exceptions, higher available
  • Loan to Cost: Up to 80% with hold back for exceptions
  • No minimum credit score. Low FICO credit score okay

HOW TO REACH THE TEAM AT COASTAL CAPITAL

Chris Tomasewski
Chris@CoastalCapital.com
310-529-5678

Scott Griest
Scott@CoastalCapital.com
310-529-9975

Chio Baldocchi
Chio@CoastalCapital.com
310-280-7223

Phil Guertin
Phil@CoastalCapital.com
949-378-2713

Coastal Capital Quarterly Summary – Performance Recap Q1 2023

Investor Quarterly Newsletter

Performance Results
1st Quarter ending March 31, 2023

Why Is Portfolio Diversification Important For Investors?

No matter what your long-term financial goals are, making smart investments along the way can be a major factor in your success. Portfolio diversification is a highly recommended investment strategy that you should consider if you’re serious about investing.

Without it you can lose large chunks of your portfolio with a downside move by one asset. If all you own is Tesla stock, you’ve seen it go up fast and also down very fast! Great for rollercoasters but not your wealth.

What Is Portfolio Diversification?

Portfolio diversification is essentially the act of choosing different types of investments that don’t have the same historical performance. To do this, people typically invest in different types of assets, such as:

  • Stocks, bonds, and mutual funds
  • Real estate
  • Private notes (trust deeds
  • Businesses
  • Cash
  • Hard assets, such as precious metals, art, and watches

Strategic asset allocation allows you to build a portfolio that is more resilient than one made up of just one asset class. Even when one asset is in decline, a balanced portfolio has a better chance of generating overall returns. 

 

It’s also important to think about the liquidity of your investments. For example, private loans, notes and trust deeds are a safe, relatively liquid, and stable investments.  In addition, they provide good yields, whereas the liquidity and value of hard assets depend on their value at any given moment.

What Happens When You Don’t Diversify?

Markets of all types fluctuate but not always in the same way. Having a mix of assets and assete types helps protect you when one market swings. When you don’t diversify, you have all of your proverbial eggs in one basket. Although many markets go through cycles, and you may be able to wait out a down period, the possibility of losing your investment is always a reality, especially if all of your investments are in the same asset class.

What Are The Benefits of Diversification for Your Investment Portfolio?

By diversifying your portfolio to include a mix of assets such as private notes, stocks, and real estate, you get the potential benefits of managing risk and stabilizing returns. Study after study has proven that for long-term wealth generating investments a sensible mix of income real estate investments (such as Coastal Capital), equities sprinkled with a few alternative investments (art, angel investing, crypto) almost always generates above average returns with less inherent risk

Manage risk.

Portfolio diversification allows you to choose a variety of investments that match your risk tolerance. When you have investments in multiple types of assets, you maintain the possibility of generating returns, even when one or more markets are in decline. Having a combination of high-risk assets, such as cryptocurrency, balanced with assets such as private loans, which typically deliver more stabilized returns, allows you to balance risk.

Stabilize returns.

Putting all of your investments into high-risk assets such as cryptocurrency or trading options can provide you the largest gains; however, there are no guarantees. A diverse portfolio may have the potential to perform better than if you were investing in just one asset class, especially in the long term. You can also choose assets that tend to have more predictable returns. For example, because private loans generate income from the interest on the loans, the returns tend to be more stable.

How Do You Successfully Diversify Your Portfolio?

When strategizing, it’s important to keep a few things in mind. Investing is a dynamic activity, and you can’t just set your diversification strategy and forget it. Follow these tips when diversifying your portfolio. 

Choose the right asset mix for your risk tolerance.

Different types of asset classes come with different levels of risk. Understand the nuances of each type of asset you’re considering and how much of your portfolio they should account for.

Do an annual checkup.

Investing preferences change over time. You might be more or less risk-tolerant than you were when you made your initial investments. Your financial situation might also change with a new salary or a windfall. Take a look at your portfolio at least once a year to determine if your asset mix stills feel right for your goals. Make adjustments as needed and repeat the process on a regular basis.

Stay diversified within each asset type.

If you invest in the stock market, diversify with a mix of stocks and bonds with different market capitalizations. With your real estate investments, maintain a mix of residential and commercial properties. You can also diversify geographically to protect yourself against local fluctuations. The more diversity you have, the more safety you have built to protect your financial future

 

Here at Coastal Capital fund we partner with investors to generate above average returns (13% annually on average since inception) safely secured by real estate by pooling all our partners capital to be diversified in over 100 private notes (aka trust deeds.). Many of our partners choose to allocate 20 to 40% of their portfolio to the fund and it serves as a great baseline.  If you need assistance in diversifying your portfolio please visit us at https://www.coastalcapital.com/investors/ for more info or give us a call.

February Latest Updates & Insights

COASTAL CAPITAL INSIGHTS

Each month Coastal Capital strives to bring you the latest updates and insights into the California real estate market for both investors and brokers.  We always welcome new investors who enjoy above-average returns that are not correlated to the equity markets.  As always, we appreciate both new investor and broker referrals, as the network builds it brings more value to all through diversification.

Please note that you can add on to your existing investment in any amount.  While an initial investment requires an investment of $100,000; existing partners in the Fund can add on in any amount from $2,500 or more.

MARKET UPDATE

Mortgage rates are holding steady around 6.5% to 7% for conventional financing.  The market has definitely priced in the Federal Reserve’s recent rate hikes and most likely at least one future hike.  As mentioned before the average mortgage rate over the past 35 years has been 7.5%, so we truly are returning back to baseline.  It appears that the loose monetary party is over for now and the hangover the next morning isn’t too bad. Guess we all learned some valuable lessons from the financial crisis of 2008/2009.

The Mortgage Bankers Association recently released their forecast for 2023.  They are expecting a slow drop to 5.2% by the end of the year which continues in 2024 to the 4.5% range.  Their reasoning is that economic growth rate will slow down some as the Federal Reserve tightens up.  This will send investors scrambling back into the safety of government bonds.  We all know that this demand will boost bond prices and lead to lower yields which will bring down the prime rate.  As Fund managers we are not completely on board with this forecast but do think mortgage rates will remain pretty steady and in line with historical norms for near- and mid-term future languishing around six percent into 2024 with the occasional dip into the upper-five percent range.

Now for most of our California markets the lack of inventory continues to write the story (except for San Francisco and the Bay-area which are down 5 to 10 percent with the combination of tech layoffs & homeless issues.)  Homeowners are only listing their homes if they must sell!  In high-end markets where working professionals tend to move for employment the levels are even lower.  These homeowners have locked in super low rates and are choosing to rent out their homes for $10,000+ a month rather than sell.  This way they have a property to return to later and are enjoying significant cash flow.   The National data is also telling the same story. 

The chart below summarizes data points from CoreLogic, Black Knight, Case Shiller & the Federal Housing Finance Agency.  Month-over-month home price changes are holding relatively steady.  Nataliya Polkovnichenko, Ph.D., Supervisory Economist at the Federal Housing Finance Agency (FHFA), says:

“U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022. While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices.”

Sources: Case Shiller, FHFA, Black Knight, CoreLogic

The data also shows that price depreciation peaked around August. Since then, any depreciation has been even milder. Local price trends still vary by market, but here in California we’re experiencing even less depreciation.

It is going to be an interesting Spring selling season for realtors as the inventory shortage is expected to continue indefinitely. New building starts continue to be depressed with the annual rate of total housing starts falling 21.8% from the previous year in the fourth quarter of 2022. This combined with the fact that new listings are down roughly 20% from the previous year is spelling bad news for the upcoming selling season. Let’s not forget that 40% of annual home sales for the year happen in the Spring. It is going to be a tough year for all our realtor friends.

Multi-family residential income continues to drive the returns of the portfolio and make up the majority of our trust deeds. Rental rates have definitely slowed down in their astronomical increases experienced last year; however they are not anywhere to close decreasing. The Fund’s clientele of landlord investors continues to flood our application desk with new requests for financing as they either seek to quickly snap up opportunities or are renovating existing assets to maximize cashflow.

Conventional banks are really starting to tighten up according to our small business clientele. We are constantly hearing stories from business owners with multi-decade banking relationships being shut down when applying for credit lines, factoring and even equipment financing applications (which are secured by the physical equipment!). Many of these borrowers have solid cash flow and near prime credit. As a result, our loan application desk is seeing a big uptick in volume. Lots of solid deals out there at above average rates. If you follow our social channels, you have probably noticed a majority of yields being originated at a 13.99% rate. Given all the above as Fund Managers we are very bullish on 2023 and our success will only be constrained by our access to lending capital.

The Fund continues to grow from a strong mix of new and existing partners. Please let us know if a family member or friend wants to join us in 2023. Initial investment amount still requires $100,000 and existing partners in the Fund can add on in any amount of $2,500 or more.

PORTFOLIO HIGHLIGHT

This borrower has turned to Coastal Capital numerous times while building a great portfolio of vacation rentals in Palm Desert-area. He finds gems in the desert and then remodels them with great outdoor spaces, epic pools, games galore (bocci ball courts, horseshoe pits, putting greens, etc.) and of course outdoor kitchens with bars. Then he turns on his “cash money machines” as he calls it! We call them the AirBnB and Vacation Rental By Owner (VRBO) platforms.

With this property we were able to fund in a week so he could get pool contractors out the following week. Given his track record and beautiful remodels we considered this one a trophy property and pushed the loan-to-value to 68%. Now he’s got this property fully rented out for the entire 2023 high season!

  • SFR 4 BED / 3 BATH
  • Desert Hot Spring, CA
  • Position: 2nd TD
  • Rate: 13.99%
  • CLTV: 68%
  • Appraised Value: $560,000

Looking for a way to get more from your retirement savings? A self-directed IRA (SDIRA) could be the answer. We constantly get asked on how to set this up and asked the firm we recommend providing some insight with our investors:

What is a Self-Directed IRA?

Self-Directed IRA (SDIRA) is quite simply, an IRA. All IRAs abide by the same laws and possess the same capabilities. Unlike other IRAs held at banks, brokerage firms and other institutions, with a SDIRA, you’re not limited to stocks, bonds, or mutual funds.

 

What are the benefits?

A SDIRA gives you the opportunity to build a more diversified and resilient portfolio. It allows you to take advantage of alternative investments such as real estate, precious metals, private equity, notes, and more. A custodian/administrator is required to do the record keeping for the assets in your account, but nothing moves in or out of it without your direction. You decide how much, when, and most of all, what to invest in, giving you the freedom to invest in what you know best.

Investing in Real EstateWith a Self-Directed IRA

Real Estate is a popular investment among SDIRA holders because it is a tangible asset that people know and trust. With a SDIRA, you can invest in a wide range of real estate assets: residential or commercial properties, developed or undeveloped land, condos, hotels, mortgage notes, and more. Depending on what type of account you choose, earnings can continue to be either tax-free or tax-deferred.

The level of control and flexibility associated with a SDIRA does come with its own set of responsibilities. For example, investments made with your SDIRA are owned by your SDIRA, not by you personally, making self-dealing prohibited. Click here for more information on SDIRA rules. 

Getting Started

The first step is to decide what type of account you want to open. Then, establish how you’ll fund it. Make sure to consult with a legal and/or tax advisor before you begin can help you to answer these questions. If a SDIRA sounds like it could be the answer to your retirement questions, get your copy of the Self-Directed IRAs Basics Guide.

Brokers Always Welcome

Coastal Capital is always looking for referrals from brokers and open to new investors in the fund. Please share this email or connect us directly.

Asset Based Loans on Business Purpose Real Estate

  • Loan Amounts: $25,000 to $500,000
    Exceptions required for larger amounts
  • Origination Fees: 1 to 3 points with a  minimum of $2,000
  • Serving Location: State of California Only
  • Purpose: Business or Investment Purpose Only
  • Types: SFR, Multifamily, SFR Additions, Fix & Flip, Light Commercial & Retail, Land.
  • Fix Loan Term: 6 months to 18 months
  • Rates: from 10% up to 15%
  • Loan to Value: 65% without exceptions, higher available
  • Loan to Cost: Up to 80% with hold back for exceptions
  • No minimum credit score. Low FICO credit score okay

HOW TO REACH THE TEAM AT COASTAL CAPITAL

Chris Tomasewski
Chris@CoastalCapital.com
310-529-5678

Scott Griest
Scott@CoastalCapital.com
310-529-9975

Chio Baldocchi
Chio@CoastalCapital.com
310-280-7223

Phil Guertin
Phil@CoastalCapital.com
949-378-2713

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