Main Street Apartments

George says, “With no implied guarantees, it has been our experience that the default rate on smaller deals is much lower than that on larger loans. People also always need a place to live"

Blackburne & Sons is pleased to present this new first mortgage secured by a 6-unit, 3,332SF apartment building on a 1.12 acre parcel, located in Bowdoinham, Sagadahoc County, Maine.

Sagadahoc County is located in the southern coastal region of Maine and consists of 370.19 square miles. The county was initially part of York and, later, Lincoln County before being set off and incorporated in 1854. Being centrally located in southern Maine, Sagadahoc County is in close proximity to the rocky coastline, as well numerous ski and recreation areas in the western mountains and local lakes. As reported by the State of Maine Census for 2018, Sagadahoc County has a population of approximately 35,634. Popular destinations in Sagadahoc County include the Maine State Aquarium, the Coastal Maine Botanical Gardens, Frontier (a popular café in the area), and Bowdoin College Museum of Art.

Bowdoinham, Maine is located in the northwestern section of Sagadahoc County, approximately 37 miles north of Portland, Maine and 20 miles south of Augusta, the state’s capital. Bowdoinham is bordered by the towns of Richmond, Bowdoin and Topsham. The town is approximately 39.20 square miles in size and has multiple rivers running through it, which drain into the Merrymeeting Bay. As reported by the State of Maine Census for 2018, Bowdoinham had a population of approximately 2,971, with a median age of 48 years old. The city’s largest industries are health care & social assistance, manufacturing, and retail trade. The highest paying industries are Retail Trade and Manufacturing.

The subject property consists of a three-story apartment building, totaling 3,332SF, excluding the full, partially finished 1,516SF basement. The first floor consists of 1,430SF of net rentable area and 86SF of common area. The second floor consists of 1,272SF of net rentable area and 44SF of common area. The third floor totals 500SF of net rentable area and contains no common area. Units are both garden style and townhouse style apartments. The subject property was constructed in 1800, and has last been renovated and improved since the current owner’s purchase in 2018. According to the appraiser, the property is in average condition and is legal non-conforming per current zoning. The appraiser also mentions the rear, easterly portion of the subject site is minimally effected by areas of wetland fronting Sampson's Creek. The property was originally a single family residence that was converted into apartments, so the zoning is grandfathered in and is currently legal, non-conforming use.

Our borrower is an individual who will hold title through a limited liability company. He has a mid-credit score of 657 and a net worth of $2,316,123. Working as a business owner, his 2017 income was $99,927 and his 2016 income was $67,984. He is currently going through a divorce, however there is a prenuptial agreement. The purpose of this loan is to pay off a 13% $170,000 first mortgage.

We engaged a local appraiser who valued this property AS-IS at $250,000. We also engaged a local broker who drove by the property, took photos and performed an opinion of value. The broker also valued this property at $250,000.

At a 8.0% yield and 64.9% LTV (Appraised Value) this appears to be a very reasonable investment. Investing in any first mortgage involves substantial risk. A large and prolonged decline in real estate values is possible. Be sure to read the Risk Factors section of the Offering Circular carefully before investing. Foreclosed property almost always needs to be renovated before it 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.

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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