Hood River Land I

Angela says, “This is the 2nd of two offerings secured by land in Hood River, OR. This offering, like the other, is being offered at an 11% yield and interest-only monthly payments, as well has a cash-out component which funds will be used towards the next phase of development for the subject land. A few strengths of this offering is the 22% loan-to-value (based on the MAI appraised as-is, bulk-sale value of the land, pending approval of plans for 11 town homes), and is an experienced Oregon developer, with 700+ credit. This loan will also include a partial release clause, requiring the borrower to make principal pay downs if/when town homes are sold, to release them from the security. If you are an investor who is more comfortable with the higher yields, and like land as collateral, please consider this offering as an addition to your portfolio.”

Blackburne & Sons is pleased to present this $700,000 first trust deed secured by 2.55 acres of land, to be divided into 11 subdivision lots (pending final approval), located in Hood River, Oregon.

This loan is a cash out refinance, where funds for the refinance will be allocated mainly to the development of the subject property by our borrower. Blackburne & Sons recently completed another loan for this borrower in the same area, Loan No. N2589 / Hood River Land II.

Hood River is a small town in northern Oregon and is the county seat of Hood River County. Despite being hundreds of miles from the sea, Hood River is actually a port city on the Columbia River and is roughly an hour drive (62 miles) from Portland, the largest city in Oregon. Per the 2010 census, Hood River had a population of 7,167, which was a 25.9% increase in population since the 2000 census. Hood County, as of the 2010 census, reported a population of 22,346.

As more people move out of major cities and into suburbs, Hood River may be an option for new residents, thus enhances the attractiveness of the pending residential development in the area. Per the appraiser, future demand for the market area appears to be stable and economic viability appears to be above average. He goes onto say that “due to limited supply of land available for future development, the population of the neighborhood is projected to remain stable with growth driver by availability of additional housing product rather than economic conditions”.

The main economic drivers of Hood River are tourism, primarily wind surfing and kite boarding on the nearby Columbia River, and agriculture. In fact, Hood County is the world's leader in Anjou pear production. In recent years, there has been some growth in the aerospace sector as Institu and Hood Technologies (subsidiary of Boeing) moved into the area. These companies build components of military drones, such as stabilized camera turrets, and infrared sensors.

The subject property consists of a 2.55 acres of land, to be divided into 11 subdivision lots, with pending approval. Each lot will be roughly 5,600SF - 7,057SF. The town homes will be roughly 1,400SF-1,900SF, with a mix of 3 bedroom / 2.5 bath and 4 bedroom / 2.5 bath units. After completion, the borrower anticipates selling each town home for roughly $958,000.

The property was purchased in May 2019 for $1,400,000 all cash. The borrower has spent over $1,000,000 in soft costs and development since the purchase. The borrower intends to use the loan proceeds to fund the construction of the first home. Once the first property is sold, he will use the proceeds to construct the second property and so on and so forth. At this time, the borrower does not intend to use a construction loan, as the draw schedules typically associated with construction loans are too slow and cumbersome. When asked why the borrower selected Hood River, for his next development, he cited the close proximity and ease of travel to Portland via I-84, and the high demand and low inventory of housing as the main factors. Per the borrower, he has reportedly completed over 100 different projects in the Hood River area.

In order to facilitate the borrower's plans of building one (or more) homes, selling them off individually, and then rolling the proceeds into the next property, the borrower has requested to include a partial release clause in the terms of this loan. This partial release will include the requirement for the borrower to pay down a portion of our loan, as individual lots are sold.

Title to this property is held through an Oregon limited liability company and the principal of this entity will personally guarantee this loan (“Guarantor”). The LLC reports income under the Guarantor's personal tax returns on his Schedule C, as this LLC is a single-member entity.

The Guarantor is a married man, whose primary business is land / property development. In 2019, the Guarantor reported a net income of $197,696 and $101,140 in 2018. He has a reported net worth of $4,631,628 (exclusive of businesses owned) and a 735 mid credit-score. The Guarantor has been developing properties since he was 18, and started his own company at 22. Per the bio he provided, he has worked on homes ranging in price from $250,000 to over $2,000,000. Note that his new wife (just married in 2019) will not be guaranteeing this loan and they do not file tax returns together.

A local MAI appraiser was engaged, who valued the subject property at $3,180,000 (AS-IS - Bulk Sale Value). Additionally, we engaged a local commercial broker who completed a drive-by inspection of the subject property to conclude an AS-IS opinion of value range of $1,500,000 - $1,750,000.

At a 11.0% yield to the investors, a 22.0% LTV (AS-IS - Bulk Sale Value) this appears to be a reasonable investment. Investing in any first security deeds involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular carefully before investing. A large and prolonged decline in real estate values is possible. Foreclosed commercial properties almost always need to be renovated before they can be leased or sold, so be sure to maintain some liquidity.

You should spread your mortgage investment portfolio out among lots of different deals. If you have $300,000 to invest, you should invest $10,000 to $20,000 in 15 to 20 different fractionalized first trust deeds. For example, if the deal is a $300,000 first trust deed on an office building in Boise, with a $15,000 investment you would own 5% of the loan. By spreading your money out into a bunch of different deals, you are achieving the diversity of a fund without the failed fund sponsor problem. If you are extremely wealthy, you could double (or even triple) my suggested investment amounts, but be careful about pouring too much money into a single deal. We once had a whole building fall into an old coal mine. Ouch.
Be wise and resist investing in any first trust deed yielding more than 9%. I would personally never invest in a first trust deed with a double-digit yield. The payments slowly grind the borrowers into the dust.
Blackburne’s Law theorizes that a portfolio of 8% and 9% first trust deeds will outperform a portfolio of 11% and 12% first trust deeds over a seven-year term. Only our wisest (and eventually the happiest) investors listen to me.
You can also buy some of our smaller deals in their entirety, but I only recommend this if you are richer than Crassus.
It is very easy to lose money in hard money first mortgages, so fight-fight-fight against the temptation to invest in high-yield deals. As Nancy Reagan used to say, “Just say no.” But if you choose 7% to 9% first mortgages, I predict that you will be very, very pleased.
During the S&L Crisis, commercial real estate fell by 45%. Within three years, values reached new highs. During the Dot-Com Meltdown, commercial real estate fell by 45%. Within three years, values reached new highs. During the Great Recession, commercial real estate fell by 45%. Within three years, values reached new highs. Some time in the next decade, we will have another opportunity to snatch up prime commercial real estate at a huge discount. You will be terrified, but when Blackburne and Sons invites you to join a syndicate to buy a nice commercial property at a 35% discount off its prior high, just remember that the best time to invest is when blood is running in the streets. Why not when real estate has fallen by 45%? You’ll never catch the very bottom because historically the bounces off the bottom happen much too fast. Bounce-soar. You will be terrified, but just remember that the best time to invest is when blood is running in the streets.

Blackburne & Sons Realty Capital Corporation--For more information, contact Angela Vannucci
4811 Chippendale Drive, Suite 101, Sacramento, CA 95841
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Bureau of Real Estate -- License Number 829677 -- NMLS Number 103430
Publicly advertised to California residents only under California Department of Business Oversight business plan permit.
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