Accredited investors have the unique opportunity to invest in mortgage loans. You’re not limited to investing in the stock market if you’re accredited. Mortgage lending could pay you interest monthly, without the bother of managing tenants or property.
Little City does the due diligence and vetting for each loan, property and borrower. You’ll have the opportunity to review credit, experience, and an appraisal or BPO (broker price opinion) before making your decision to lend.
High equity, secured mortgage loans are unique, and Texas first liens are particularly strong assets. The Texas foreclosure process is quick and non-judicial. Foreclosing on investment property with substantial equity is straight-forward and can often result in a bid above what’s owed.
Why do accredited investors invest in our hard money loans?
Texas first liens have a unique position and value. Our notes provide for monthly payments and there’s minimal time investment required to evaluate and maintain these investments.
First mortgage loans are a unique asset class historically not available to smaller investors. Little City connects smaller, accredited investors to institutional-quality loans secured by Texas real estate.
High Equity
Little City restricts the loans we make to 30% or more equity, also known as 70% loan to value, LTV. Certain combinations of strong LTV, PFS, credit, and experience can make a case for slightly less equity.
Real estate loans made at 70% LTV retain 20%+ equity even after selling expenses. Selling costs are typically between 7% and 10% of the sales price. A volatile market may swing a few percentage points during the course of a 1-year loan, but probably not 20%+.
Banks are known to make real estate loans with 10% or even less down, aka 10% equity. Since the costs of real estate sales can approach 10% in most areas, these types of loans effectively have 0% equity.
Banks often rely on the borrower’s ability to pay rather than high equity in the property. Hard money loans have the key element of high equity. Without strong equity, there is insufficient security.
High Security
First lien mortgage loans are a highly secure investment for accredited investors. If a borrower doesn’t pay, the property is available via foreclosure to satisfy the debt. Borrowers typically pay on time because if they are 30+ days late they receive a legal notice that they have 10 days to resolve the non-payment before we accelerate the loan, meaning we call their full note due and payable.
With 30%+ of equity at stake, borrowers will normally find a way to catch up the interest, refi, or sell before we proceed further toward foreclosure. Texas foreclosures occur monthly, on the first Tuesday, and can be executed as soon as 45 days from the acceleration notice.
Palatable Risk & Strong Recourse
If your stock investment tanks, you have no recourse. If your start-up tanks, you have no recourse. If a currency investment tanks, you have no recourse. If your friend’s shop/restaurant/other venture tanks, you have no recourse. It’s rare to find an investment vehicle that has tangible recourse.
If your first lien mortgage investment fails, you have the property. Beyond that, we require a PG (personal guarantee) from the borrower, so a shortfall would require the borrower to pay back the difference.
Location
We limit our loans to the major metro areas of Texas: Austin, San Antonio, Houston, and Dallas. No large (30+ acre) parcels or rural property. We also don’t lend on properties that are substantial outliers, like a $5M home in a primarily $500k area.
Marketable and relevant comparable sales must be available, there must be at least 3 relevant, sold comps within a year (365 days), preferably within 6 months (180 days) and best-case, within 60-90 days. We only lend in marketable locations with a healthy transaction history of similar properties. We also strongly prefer a market environment experiencing an average of 45 days or less of market time, from listing to sale.
Concise Pitch
Our lenders understand real estate. Unlike stocks and startups, which require a lot of research and specialized information, first mortgage real estate investments are relatively simple. Our lenders have bought and sold real estate and understand how to compare and value similar properties.
Our lenders are busy. We’ve been making these kinds of loans for 20 years. Our analyses are concise and thorough. Most lenders devote less than 15 minutes to reviewing our offering and from there, receive their ACH interest payments on time, monthly.
Most of our deals are claimed quickly and many of our loans are offered to repeat borrowers who flip multiple properties per year, consistently get good deals, and pay their interest on time.
Passive Real Estate Investment
Mortgage investments are a low-effort way to be a real estate investor. No property management, no property maintenance, no vacancy, and no tenant calls or complaints. No repairs, no HOAs, and no sweat when there’s a hard freeze or a flood.
All of the returns and none of the trouble! Accredited investors can invest in Texas mortgage products with Little City Investments.
Reach out to us if you’re interested in investing in our hard money loans. We can send you a sample deal right away, and typically we can get a new investor on board within a few weeks. You must be an accredited investor. Typical offerings range from $150k to $3M.