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Secured Income Group: Real Estate Yields with CD Terms

Exposure to real estate lending yields via an investment that mimics a CD.

We’ve been following a company in nearby Tustin, California, that has been offering accredited investors a way to access yields available in real estate lending through a vehicle that looks and smells like a bank certificate of deposit (CD). Secured Income Group is an alternative fixed income asset manager that has been servicing high net worth individuals and accredited institutions for over 21 years. Founder and President Max McDermott has grown the company to over $100 million in accredited investor assets under management.

Secured Income Group derives its revenue from originating short-term bridge loans and construction loans secured by first trust deeds on the subject properties: residential real estate in the US, with a primary focus on southern California. The company’s loan clients are professional real estate investors who buy homes for income, or buy to remodel and sell for a profit. According to the company’s website, its delinquency rate has averaged less than one half of one percent (0.5%) for over 20 years.

General loan terms

Bridge Financing. Bridge loans are designed to allow borrowers to buy and stabilize distressed properties so they may be sold or refinanced. It’s a lending niche that’s traditionally prohibited by local and mainstream mortgage sources because of their own underwriting restrictions. Loans are typically in the $30,000 to $500,000 range for 12 months with available 3-month extension periods.

Construction Financing. Construction loans provide funds for the building of one or more structures on developed land. The company’s construction loan program is limited to single-family residences and two to four unit unit residential properties. Loans are typically in the $50,000 to $750,000 range for 12 months with available 3-month extension periods.

Secured Rate Term debentures

The company’s Secure Rate Term debenture represents the first time that Secured Income Group has opened its doors to accredited investors outside of the immediate circle of friends and family. The Secured Rate Term debenture mimics the function and duration of a CD but at higher yields associated with real estate lending:

  • Fixed yield for the duration of the debenture term with no hidden fees
  • Choice of four terms with corresponding ascending yields
  • Option to reinvest quarterly dividends
  • Option to roll over at maturity
  • Debenture is secured against first trust deeds on properties
  • IRA eligibility. Over 30% of the company’s investors use their IRA to invest.

Source: CD rates from Bankrate as of Oct. 13, 2017. Secure Rate Term debenture rates from Secured Income Group via EquityNet.

Minimum investment thresholds are reasonable for the terms and yields: $5,000 for 6 months, $10,000 for 1 or 2 years and $25,000 for the 3-year term. Detailed information on the company and its Secure Rate Term debentures can be found on the company’s website or at EquityNet.

It’s important to be mindful that the company isn’t subject to the scrutiny of any Federal or state regulatory agency, and any funds invested with the company aren’t insured by the FDIC. With that caveat, we think the Secure Rate Term debenture is an option worth exploring for accredited investors seeking exposure to yields typically associated with real estate lending while maintaining the term flexibility of CDs.