Investor Insights Magazine

BY MARCUS CARTER, PRESIDENT LA MESA FUND CONTROL & ESCROW

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MESSAGE FROM BROCK VANDENBERG

Q&A WITH CURRENT INVESTOR TEAM MEMBER SPOTLIGHT

THE GROWING APPEAL OF PRIVATE FIXED INCOME INVESTMENTS FOR HIGH NET WORTH INVESTORS OUR EVENTS

QUARTERLY RETURNS RECENT SUCCESS STORY

"FROM FIX & FLIP TO ADUS: TRUST DEEDS & PRIVATE MORTGAGE TRENDS

THE IMPORTANCE OF CONTINGENCY IN CONSTRUCTION BUDGETING

MESSAGE

FROM THE PRESIDENT

As we advance into the latter half of the year, the landscape of private lending, particularly in the real estate sector, presents increasing opportunities At TaliMar Financial, we recognize that an expanding array of real estate investors and operators are turning to private financing solutions to meet their needs This trend is underscored by the entrance of prominent private equity firms into our industry, drawn by the highly attractive returns that private real estate lending affords.

In such a dynamic and competitive environment, the pivotal question is how to distinguish oneself. The foundation of success in real estate lending is, undoubtedly, relationships and trust. Moreover, real estate is inherently a local-centric business At TaliMar Financial, our strategic focus on the Southern California market differentiates us from our competitors. This localized concentration has enabled us to forge robust relationships with seasoned borrowers and brokers and to develop a deep understanding of the distinct submarkets within Southern California These advantages have been instrumental in our ability to cultivate a healthy loan portfolio and consistently deliver solid returns to our investors.

Looking ahead, I am optimistic about the prospects within the private real estate debt space. The demand for capital in the accessory dwelling unit (ADU) market is set to escalate as urban municipalities strive to augment their housing stocks Concurrently, I foresee a sustained growth in the demand for traditional private money bridge loans, as local and regional banks continue to prioritize liquidity

At TaliMar Financial, our commitment to excellence and our strategic market focus position us uniquely to capitalize on these trends and continue providing exceptional service and value to our clients and investors.

WHAT IS YOUR PRESENT OCCUPATION, AND IF RETIRED, PAST PROFESSIONAL EXPERIENCE.

STEVEN SHOEN TALIMAR INCOME FUND INVESTOR

SHARE SOME OF YOUR HOBBIES OR INTERESTS.

I am violinist/ Musician, songwriter. I recorded 2 CDs of my songs: They were both “Million dollar sellers I have a million in the cellar ” Search my name on Spotify and enjoy my tunes. I also explore our wonderous National Parks.

NRINGOFBRODGARIN EOLITHICORKNEY

Retired For many, many years I was a residential real estate broker in Marin County, Northern California, worked hard and smart, and helped my buyers and sellers, who are still my friends

WHERE DO YOU CURRENTLY LIVE?

Scottsdale, AZ

KIDS EMMA AND NICK

Scotland. Tally ho to castles and old Caldonia too We’d stop to smell the heather, where sheep call home, and learn how Roman walls of stone were built to last. Where skies are blue and all is tickity boo. Seriously the guides brought history to life Fab times.

HAVE YOUR INVESTMENT GOALS CHANGED OVER YOUR LIFE, AND IF SO, HOW?

After the Great Recession and my divorce, I had to start over from ground zero. The stock market was a gamble. I was a Realtor.I knew and believed in residential real estate. I decided not to diversify, and I needed to make up for lost ground, so I put all that I earned into deeds of trust and private mortgages. However, I investigated every property to the nth degree I knew of two firms in Marin that I did well with.

From investing in long-term houses and duplexes, and carving out a good career in selling real estate to…now I greatly enjoy my Soc Sec and interest income. I like to wake up when I wake up, and smell the coffee (Ethiopean) I keep my days full and play violin with our ukulele group a few times a week.

My Mom and Dad invested in the 80’s and 90’s with a well-known San Diego private mortgages company I did so, too, with a small amount. We all lost money with that company as the market went bad during that ’92 recession

The firm took from Peter to Pay Paul and we were ‘Peter.’ Later, in Marin in 2014, I knew a private mortgage company and the owner, and successfully invested with them and another TD company till I moved to Scottsdale. I heard about Brock and TaliMar through Verivest TaliMar’s philosophy and mine are pretty much the same. Invest in all forms residential, from apartment buildings, to duplexes and houses.

Again, I am an investigator. I called Brock a few times, and felt quite comfortable with how they invested. I researched the properties they lent on I trust Brock and all has been tickity boo since.

EDINBURGH CASTLE

TEAM MEMBER SPOTLIGHT

BRANDON WARNKE ACCOUNT EXECUTIVE

THE GROWING APPEAL OF PRIVATE FIXED INCOME INVESTMENTS FOR HIGH NET WORTH INVESTORS

In recent years, high net worth investors have increasingly turned to private fixed income investments, seeking to capitalize on higher interest rates and the attractive yields these investments offer As the market for traditional fixed income products becomes more challenging, private fixed income investments provide an appealing alternative. Among the most notable beneficiaries of this trend are individual trust deed investments and private mortgage funds, which offer consistent monthly income and the security of real estate.

The Impact of Higher Interest Rates

Higher interest rates have significantly altered the investment landscape While rising rates can pose challenges for traditional fixed income investments like bonds, they also create opportunities for private fixed income investments to offer more competitive returns.

Investors are now able to achieve considerably higher yields with private fixed income investments than in previous years, making them a more attractive option for those seeking to diversify their portfolios and enhance income

Individual Trust Deed Investments

Individual trust deed investments involve lending money to a borrower secured by a real estate property These investments offer several benefits:

– Attractive Yields: Trust deed investments typically offer higher yields compared to traditional fixed income products, allowing investors to earn more on their invested capital

– Monthly Income: Investors receive regular interest payments, providing a consistent stream of monthly income

– Security of Real Estate: The loan is secured by real estate, offering a tangible asset as collateral, which adds a layer of security to the investment

Investors can participate in trust deed investments through direct lending or by working with private lenders who specialize in these types of loans. The key is to conduct thorough due diligence to assess the borrower’s creditworthiness and the value of the underlying property

Private Mortgage Funds

Private mortgage funds pool capital from multiple investors to fund a diversified portfolio of real estate loans These funds offer several advantages:

– Diversification: By investing in a fund, investors gain exposure to a diversified portfolio of loans, reducing the risk associated with any single loan or property

– Professional Management: Private mortgage funds are managed by experienced professionals who handle the underwriting, loan servicing, and risk management, allowing investors to benefit from their expertise.

– Consistent Income: Similar to trust deed investments, private mortgage funds provide regular interest payments, generating consistent monthly income for investors.

– Real Estate Security: The loans in the fund are secured by real estate, providing a level of security for the investment.

Private mortgage funds cater to a range of real estate projects, including residential fix-and-flip, commercial bridge loans, and new construction financing. This diversity within the fund can enhance the overall return profile while mitigating risks.

Conclusion

The shift towards private fixed income investments among high net worth investors is driven by the pursuit of higher yields and consistent income in a rising interest rate environment. Individual trust deed investments and private mortgage funds stand out as attractive options, offering compelling yields and the added security of real estate collateral

As investors continue to seek ways to optimize their portfolios and achieve their financial goals, private fixed income investments are likely to remain a popular choice, delivering both income and security in an ever-evolving market.

WE ARE EXCITED TO ANNOUNCE THAT TALIMAR FINANCIAL RETURNED 9.59% IN THE 1ST QUARTER OF 2024. WE WERE ABLE TO TAKE ADVANTAGE OF RISING INTEREST RATES AND PASS THAT HIGHER RETURN ON TO INVESTORS

REFLECTS

REFLECTS

Nationwide

Pre

Projects

Detailed

Sophisticated

Licensed

NAVIGATING THE SHIFT:

FROM FIX AND FLIP TO ACCESSORY DWELLING UNITS IN TRUST DEEDS AND PRIVATE MORTGAGE FUNDS

In the realm of real estate investing, the landscape is ever-evolving, presenting new opportunities and challenges for investors in trust deeds and private mortgage funds One such transition gaining momentum is the shift from fix and flip loans to financing Accessory Dwelling Units (ADUs). Let’s delve into what these loans entail and why this shift is occurring

Understanding Fix and Flip vs. Accessory Dwelling Unit Loans

Fix and flip loans are a staple in the real estate investment sphere, providing funds for the purchase of distressed properties with the intention of renovating and reselling for a profit These loans typically cover both the acquisition and renovation costs, catering to investors seeking short-term financing solutions

On the other hand, Accessory Dwelling Unit (ADU) loans encompass financing for the creation of secondary housing units on residential properties. These loans not only include funds for the purchase of the property but also future construction costs associated with building the ADU ADUs have gained traction as a viable investment strategy, offering opportunities for additional rental income or multigenerational living arrangements.

The Fix and Flip Landscape: A Maturing Market

Over the years, the fix and flip industry has matured significantly, with institutional capital flooding the market This influx of capital has driven down interest rates and pushed up loan-to-value ratios, making it increasingly challenging for lenders to maintain attractive yields

The Shift Towards ADU Financing

In response to the evolving market dynamics, many lenders have begun to pivot their focus towards ADU loans Unlike fix and flip projects, ADU financing presents the potential for higher yields and more acceptable loan-to-value ratios, making it an appealing option for investors seeking to diversify their portfolios.

Navigating the Hurdles in ADU Funding

However, funding ADU projects comes with its own set of hurdles. One of the primary challenges is obtaining a final value for the property, as ADUs add an additional layer of complexity to the appraisal process Furthermore, delays in obtaining permits can prolong the construction timeline, impacting the overall profitability of the investment. Additionally, lenders must exercise caution to ensure they are lending to experienced sponsors capable of successfully executing ADU projects

Embracing the Opportunity in ADU Financing

Despite these challenges, the ADU financing industry presents a compelling opportunity for investors in trust deeds and private mortgage funds By capitalizing on the growing demand for secondary housing units and leveraging innovative financing solutions, investors can position themselves at the forefront of this burgeoning market

In conclusion, the transition from fix and flip loans to ADU financing represents a strategic move for investors looking to adapt to changing market conditions and capitalize on emerging opportunities in the real estate sector. With careful planning, due diligence, and a keen understanding of market trends, investors can navigate this transition successfully and unlock the full potential of ADU investments

OUR EVENTS

Our team was busy attending various networking events. The events bring us together with both borrowers and investors

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Gary Wallace, PrideCO Capital; Robert Austin, Crawford Real Estate Services, Inc, Brock VandenBerg, TaliMar Financial, Bradley Laddusaw, S&L Capital Group

Brock VandenBerg speaking at exclusive investor educational event

Marcus Carter, La Mesa Fund Control & Escrow

OUR EVENTS

Antalya City

TaliMar Financial Team

THE IMPORTANCE OF IN CONSTRUCTION BUDGETING CONTINGENCY

By Marcus Carter, President La Mesa Fund Control & Escrow

When evaluating a prospective loan for a new construction project, lenders must consider multiple factors, with one of the most crucial being the construction budget. It is essential to assess the accuracy, sufficiency, and level of detail in the budget, as inaccurate or insufficient budgets can lead to significant issues during the construction process.

One key element that should be included in any construction budget is a contingency line item. This article explores the significance of contingency in construction budgeting and its role in managing unforeseen events and cost overruns.

The Role of Contingency:

According to Webster's dictionary, contingency is defined as:

A" provision for an unforeseen event or circumstance"

In the context of construction lending and projects, unforeseen challenges and items are common occurrences These challenges can arise at various stages of construction, particularly during grading, site preparation, foundation work, and remodeling projects.

Unforeseen items often result in cost overruns, where the actual cost of a budget line item exceeds the allocated amount. Cost overruns can be caused by factors such as contractor budget miscalculations, changes in material prices, labor cost increases, or additional circumstances not accounted for in the original project design and plans

Factors Contributing to Cost Overruns:

Several factors can contribute to cost overruns, including changes requested by the owner, commonly known as borrower change orders Any deviation from the original plan or design generally necessitates changes in the construction budget

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While some changes may be minor and can be accommodated within the existing budget, others may require additional engineering, labor, or materials, resulting in significant budget adjustments Moreover, property owners may choose materials that are more expensive than initially budgeted, requiring a change and increase in the budget. Additionally, material prices can fluctuate over time, emphasizing the importance of preparing the budget as close to the construction start date as possible to mitigate the risk of material cost increases.

Incorporating Contingency

in Construction Budgeting:

To ensure effective construction budgeting, it is crucial to include a contingency line item

As a general rule, construction contingency should be allocated at 5% to 10% of the overall construction budget.

The contingency serves as a source of funding for cost overruns resulting from unforeseen events, material cost increases, labor cost increases, or changes in material selections by the owner A well-planned contingency line item acts as a safety net for the owner, lender, and contractor, providing the necessary funds to address unforeseen items that inevitably arise during construction projects.

Conclusion:

In summary, the construction budget is a vital aspect of loan evaluation for new construction projects Among the various factors considered, the inclusion of a contingency line item is crucial Contingency allows for the management of unforeseen events, cost overruns, and changes during the construction process. By allocating an appropriate percentage of the overall budget to contingency, construction projects can mitigate the financial risks associated with unexpected challenges, material cost fluctuations, and changes in project requirements. A well-prepared contingency line item serves as a valuable safeguard for all stakeholders involved in the construction project.

ABOUT US

TaliMar Income Fund I is a mortgage fund focused on funding residential and commercial private money loans. Since 2008, our experienced management team has successfully funded 850+ loans totaling $450+ million. Our mission is to provide investors a transparent investment platform to earn consistently monthly income

If you have any questions, please do not hesitate to contact our Investor Relations team at (858) 242-4900.

info@talimarfinancial.com