Santa Fe Multifamily

Blackburne & Sons is pleased to present this first mortgage secured by a 7,033SF, 11-unit multifamily property on a 0.36-acre site, in Santa Fe, Santa Fe County, New Mexico.

In 2020, Santa Fe County had a population of 150,319 with a median age of 46.8 and a median household income of $60,668. Between 2019 and 2020 the population of Santa Fe County grew from 149,293 to 150,319, a 0.687% increase and its median household income declined from $61,200 to $60,668, a -0.869% decrease. Santa Fe County is New Mexico’s third-most populous county, after Bernalillo County and Dona Ana County.

The economy of Santa Fe County employs 69,100 people. The largest industries in the county are Health Care & Social Assistance (9,448 people), Retail Trade (8,321 people), and Professional, Scientific, & Technical Services (7,518 people). The highest paying industries are Professional, Scientific, & Technical Services ($74,139), Mining, Quarrying, and Oil & Gas Extraction ($70,938), and Finance & Insurance ($60,710).

The county is governed by a five-member county commission, whose members are elected from single-member districts. Elections are partisan and all five seats are currently held by Democrats. County commissioners serve a four-year term, with term limits preventing them from serving more than two full terms. The New Mexico Corrections Departments and the Penitentiary of New Mexico are located in an unincorporated area in the county.

The largest universities in Santa Fe County are Santa Fe Community College (778 degrees awarded in 2020), St. John College (109 degrees), and the Institute of American Indian and Alaska Native Culture and Arts Development (85 degrees).

Santa Fe is the capital of New Mexico. The name “Santa Fe” means ‘Holy Faith’ in Spanish, and the city’s full name as founded remains La Villa Real de la Santa Fe de San Francisco de Asis (‘The Royal Town of the Holy Faith of Saint Francis of Assisi’). In 2020, Santa Fe had a population of 84,400 people with a median age of 43.3 and a median household income of $57,274. Between 2019 and 2020 the population of Santa Fe grew from 83,922 to 84,418, a 0.591% increase and its median household income declined from $57,972 to $57,274, a -1.2% decrease. Santa Fe is the fourth-largest city in New Mexico. It is also the county seat of Santa Fe County. Its metropolitan area is part of the Albuquerque-Santa Fe-Las Vegas combined statistical area, which had a population of 1,162,523 in 2020.

Santa Fe is widely considered one of the world’s great art cities, due to its many art galleries and installations, and it is recognized by UNESCO’s Creative City Network. The cultural highlights of the city include Santa Fe Plaza, the Palace of the Governors, the Fiesta de Santa Fe, numerous restaurants featuring distinctive New Mexican cuisine, and performances of New Mexico music. Among the city’s many art galleries and installations are the Georgia O’Keeffe Museum, a gallery by cartoonist Chuck Jones, and newer art collectives such as Meow Wolf. Santa Fe’s cityscape is known for its adobe-style Pueblo Revival and Territorial Revival architecture.

According to the United States Census Bureau, the city has a total area of 37.4 sq mi., of which 37.3 sq mi are land and 0.077 sq mi is covered by water. Santa Fe is located at 7,199 feet above sea level, making it the highest capital in the United States. The Santa Fe River and the arroyos of Santa Fe drain the region to the Rio Grande.

The subject property consists of a 4-building, multifamily complex containing 11 dwelling units (7,033sq ft) situated on a 0.36-acre site. The property includes (2) studio units, (8) 1-bedroom units, and (1) 3-bedroom unit. The foundations are concrete slab, with wood frame construction. Exterior walls are stucco with flat and sloped, sealed membrane and metal roofing. Each building has forced air, HVAC and each unit has smoke detectors.

The subject property is considered to be a legal, non-conforming use due to insufficient parking (only 10 parking spaces). In the event of a total loss (fire, etc.), the property may not be able to be rebuilt in the same manner that is it is currently. The subject property currently has 5 vacant units. The property currently has 6 tenants on month-to-month leases. The current rental income is $4,205 per month.

Our borrower plans to rehab the units over the coming months, and bring it up to full occupancy. The appraisal also noted $70,000 in deferred maintenance for roof replacement and water heaters. This deferred maintenance is part of the borrowers planned renovations.

The borrower is a single man who will hold title to the property individually. He has a net worth of $2,041,467 and has a mid-credit score of 785. He reported $479,693 in adjusted gross income for 2021, and in 2020 reported $286,915 in adjusted gross income. His primary business is a real estate investor, and his business income is reported under his 2021 1040s.

The borrower was set to purchase this property for $500,000 with another lender, however at the 11th hour the lender backed out due to the units being legal non-conforming despite the property appraising for more than purchase price ($610,000). In order to close the transaction, the seller accepted the $150,000 deposit and provided seller financing of $350,000, with the understanding that the borrower would find alternative financing immediately. Our loan, will take out that $350,000 seller financing.

We hired a local MAI appraiser who valued this property (AS-IS) appraised value of $610,000. A local broker was also engaged who performed a drive-by opinion of value (BPO) who values this property at $720,000-$725,000.

At an 10.0% yield to the investors and a 57.38% LTV (AS-IS) Appraised Value, this appears to be a reasonable investment. Investing in any first trust deed involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular carefully before investing. A large and prolonged decline in real estate values is possible. Foreclosed commercial properties almost always need to be renovated before they 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.
During the S&L Crisis, commercial real estate fell by 45%. Within three years, values reached new highs. During the Dot-Com Meltdown, commercial real estate fell by 45%. Within three years, values reached new highs. During the Great Recession, commercial real estate fell by 45%. Within three years, values reached new highs. Some time in the next decade, we will have another opportunity to snatch up prime commercial real estate at a huge discount. You will be terrified, but when Blackburne and Sons invites you to join a syndicate to buy a nice commercial property at a 35% discount off its prior high, just remember that the best time to invest is when blood is running in the streets. Why not when real estate has fallen by 45%? You’ll never catch the very bottom because historically the bounces off the bottom happen much too fast. Bounce-soar. You will be terrified, but just remember that the best time to invest is when blood is running in the streets.

Blackburne & Sons Realty Capital Corporation--For more information, contact Tom Blackburne
555 University Ave., Suite 150, Sacramento, CA 95825
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Department 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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