Highlights from 2018/Outlook for 2019 – from our Founder and President Max McDermott:

• In 2018, we launched our “Investment Tracker” account feature that allows every investor to manage and track their investment from the ease of their fingertips. The reception has been overwhelmingly positive, and your continued feedback is very much appreciated. This feature was long overdue and allows us to service our investors seamlessly and scale our operations more effectively going forward.
• We’ve raised over $22MM this year from new and existing investors, and expect an equal or greater amount in 2019. We now have over 200 Debenture Investors and nearly $35MM in total Debenture Funds. We are currently marketing online to local investors in Southern California but will be testing marketing efforts in 2019 in other major markets including New York, parts of Florida, and Texas.
• The total yield on our capital base dropped slightly from last year, as more funds have flowed into the private lending space in recent years and loan pricing has not increased.  However, our profit almost doubled from last year, and we expect a similar increase in 2019. This is almost entirely due to the significant expansion of our capital base without an incremental increase in our cost structure, which is the latency inherent in lending money. Our Annual Financials will be available online for your review in February of the coming year. Please feel free to reach out with any questions.
• In 2019, we anticipate continued strong loan demand as we regularly receive 60-80 loan requests per month. We only approve 5-10 new loans monthly that meet our strict underwriting criteria, all the while continuing to service our legacy client base. Our foreclosure rate in 2018 was less than 1%, the same average for the last six years.
• In 2019, we expect a flat or slight decrease in average sales prices in the low to middle end market, as we digest significant gains made from the last 6-7 years. Affordability will continue to outpace wage inflation, which will limit price increases going forward.  Short-term risks to the market are an uptick in rates, as we are in the middle of a Fed tightening cycle, and perhaps a mild to medium recession. In the long run, I believe these will ultimately be healthy for the market.
• California is in the middle of a serious and protracted housing crisis, as there are approximately 180,000 new households being formed each year, while only 80,000 new units being built to accommodate those folks – in the form of detached housing, apartments, and condos/townhouses.  I’ve included a link to a 52 page article from the California Housing Authority HERE, which discusses this phenomenon in more detail. This is the primary reason rent increases in California are dramatic and sticking. It is in our opinion that this is a structural long-term dynamic that will continue for the next 3-5 years, until this need is met.
•  We continue to focus our portfolio on low-to-middle priced market, as we always have, which have the largest pool of natural buyers and the most aggressive financing in the marketplace. We’ve honed our underwriting after 22 years and 4,000 loans, to have the lowest risk with the most sizable equity position on every loan. The strength of our portfolio and our borrowers is our gospel.

As always, please reach out Sabrina, Amy, or I with any questions. We look forward to hearing from you, and all our best in the coming year.

Sincerely,

Max McDermott

Founder