6723 Variel Ave. Woodland Hills, CA 91303 

 805 538 2226

info@dmlcap.com

DRE# 2049878 | NMLS# 1644837

©da Motta Leonard Capital. All rights reserved.
DML Capital licensed under California Bureau of Real Estate license number 2049878.

Notes: 1) Track record is of the principals and completed deals during syndicated model. Prior performance is not indicative of future results. Data is as of Mar '19.                 2) Investments in trust deeds secured by one or more interests in real property are subject to risk of loss

INVESTOR OVERVIEW

How do investors learn about DML Capital’s investment opportunities?

DML Capital sends deal prospectuses to our community of investors via email. The prospectus provides information such as the rate of return for the investor, a summary of our internal risk evaluation, property location, type, purchase price, loan terms, loan amount, LTV, and other key decision metrics.

To join, request to be a part of our community of qualified investors, click here.

What are the requirements to become a qualified investor with DML Capital?

Qualified investors must be able to invest at least $50K in a prospective deal and their investment amount cannot exceed 10% of either:

  • The investors net worth, exclusive of home, furnishings and automobiles OR

  • The investors adjusted gross income for federal tax purposes

What does a typical transaction look like for an investor?

A traditional transaction follows this process:

  • Investors agree to fund the loan based on terms provided by DML Capital.

  • A comprehensive set of legal loan documents is drawn.

  • The loan documents are signed with an independent notary.

  • The investor is named as the actual beneficiary on the loan documents, insuring their security
    on the property.

  • The loan is funded by the investor directly to the title company, securing their position on title. Title insurance provides proof of lien position for investors and that all property taxes and non-junior liens are paid off.

  • The escrow/title company balances out the file and provides a legal closing statement to all parties.

  • The investor is named as loss payee with hazard insurance company on property.

  • DML Capital sets up the file with a servicing firm for receipt of investor’s monthly payments.

  • The investor is set up with secure web access to the servicing company to monitor borrower’s payments.

  • DML Capital monitors payments and insurance coverage for the life of loan.

  • In the event of non-payment, DML Capital will coordinate the foreclosure process with
    a local foreclosure attorney.

 

What types of investment products are available?

DML Capital offers 1st and 2nd trust deeds secured by one or multiple properties.

Investors can participate as:

  • A whole loan investor who owns 100% of the trust deed and invests the entire amount for the term of the loan OR Investors can share their interest in the trust deed with other investors by means of fractionalized trust deeds which allow investors to participate in larger deeds or divide their investment among several borrowers.

  • DML Capital will also be creating a fund in the near future

What is a trust deed?

A trust deed, or deed of trust, is a legal document that transfers title of real property to a third-party trustee (usually an escrow/title company) whom holds the deed as collateral for a loan between the borrower and DML Capital. This ensures that if the borrower is unable to perform or defaults on their loan that DML Capital has the right to take over ownership of the property.

What is the difference between a first trust deed and a mortgage?

A mortgage and a trust deed are the same thing in principle. However, trust deeds differ from mortgages in that deeds of trust always involve at least three parties (i.e. escrow/title company), where the third party holds the legal title, while in the context of mortgages, the mortgagor gives legal title directly to the mortgagee. Trust deeds are the favored financial instrument in many states including California, Washington and Oregon.  

What are the key elements I should know about trust deed investing?

  1. Knowledge, experience and integrity of the Mortgage Loan Broker through whom the transaction is conducted

  2. Market value and equity in the property and the security of the loan

  3. Borrower’s financial standing and creditworthiness

  4. Escrow process involving the funding of the loan or the purchase of the notes

  5. Documents and instruments describing, evidencing, and securing the loan

  6. Loan servicing provisions, authority and compensation

  7. Recovering your investment when the borrower fails to pay

HOW THE MONEY BREAKS DOWN

What interest rate does DML Capital charge its borrowers?

Interest rates are variable depending on the borrower’s situation and fluctuate with market interest rates. DML Capital typically offers competitive rates in line with the market that range between 7-12%.

Why do borrowers pay such high interest rates?

The rates are higher than traditional bank rates because our borrowers need loan products that the bank can’t offer to them or they need the money faster than what the banks can provide. DML Capital focuses mainly on the collateral for the loan, whereas banks require both strong collateral and usually excellent credit and cash flow from the borrower. DML Capital charges a premium for this which is reflected in our interest rates to our borrowers. See “Who are the borrowers that DML Capital lends to, and why do they go to DML Capital?” for more information. 

What rate of return does DML Capital offer its investors?

Due to changing market rates and the unique nature of each borrower, the rate of return is variable by opportunity. Investor returns average between 5% and 10%. However, this return is protected against inflationary concerns due to the short-term nature of the loan.

How does DML Capital make money?

There are two areas in which DML Capital generates income. Fees to the borrower for originating the loan. These fees that are charged to cover “typical closing costs” such as loan documents, appraisal fees, broker commissions, points, inspections, insurance, etc. and represent an income stream for DML Capital. These fees are collected by DML Capital at the origination of the loan. Occasionally these front-end fees may be shared with the Investors to increase their rate of return on loans of 6 months or less. Management fees represented by the difference in the interest rate charged to the borrowers compared to rate of return given to DML Capital’s community of investors. This management fee represents the primary income stream for DML Capital and cover the costs of servicing the loan, collecting funds from borrowers, providing financial reporting to investors, and finding and communicating new investment opportunities. These fees are dispersed to DML monthly with the interest payments to investors as borrowers make payments.

Who collects the borrower's monthly payments and services the loan?

A neutral third-party company performs all note servicing. We have worked with our preferred servicing company, Note Servicing Center, Inc. (https://sellerloans.com), for many years and find them to be industry veterans with over 20+ years of experience. 

How do investors receive their investment return?

Our community of investors receive monthly disbursements of the interest on the loan either by check or direct deposit directly from the servicing company. Furthermore, when the loan is paid off the investor’s principal will also be returned.

Can investors make withdrawals or liquidate their investments?

Unfortunately, principal is only returned upon the payoff of the loan; however, an active secondary market exists for the resale of trust deeds. DML Capital has an extensive community of investors that we can access to assist with the liquidation of a trust deed.

Can investors use their IRA or pension plan to invest?

Yes! Eligible retirement accounts include traditional IRA, Roth IRA, SEP/IRA, Keogh plans, profit sharing plans, and defined benefit pension plans. However, DML Capital recommends that you consult a tax professional to ensure eligibility.

WHAT IF ......... HAPPENS? 

What if a borrower defaults on a loan?

DML Capital performs extensive due diligence before issuing any loan to make certain borrowers can fulfill their monthly obligations, which is in their best interest and DML Capital’s desired outcome. However, in the unlikely event a property must be taken over, DML Capital would engage the services of a foreclosure expert on behalf of its investor community. DML Capital typically protects its community of investors by giving investors two options:

  • Investors could elect to receive their principal back as if the loan had been paid off, thereby protecting their principal. 

  • Alternatively, investors could elect to share in the profits from the sale of the real estate that was secured as collateral. Given, DML Capital’s underwriting standards and substantial amount of equity secured at the time of origination, the sale of a property often results in incremental returns. However, the monthly interest payments to investors would be suspended from the point of default to the sale of the property.

What if a fire destroys the home that is security for a loan?

All our properties are required to have fire insurance to protect against this outcome. DML Capital is named as an “additionally insured party” on the fire insurance at the time of the investment. This way, in case of a fire, DML Capital and its investor community would receive its original investment back even if the borrower defaults.   

Since DML mainly lends in Greater Los Angeles area, what would happen if California experienced
a huge earthquake?

Investing in the Greater Los Angeles area, there is a possibility that an earthquake severely damages or even destroys an investment property. However, the most devastating effects of earthquakes are often localized, and it is unlikely that more than a few houses in the DML Capital portfolio would be severely impacted. If the property was destroyed, the property value would be reduced to land value, minus the cost to demolish and haul away the remains of the building. DML Capital offers a vast array of opportunities to create a diversified portfolio of trust deeds located throughout California, which mitigates the risk of loss due to a severe earthquake in one locale.  Furthermore, even in a strong earthquake, total destruction of a building beyond repair is quite unlikely.