BLUE MARTIN CAPITAL
BENEFITS OF REAL ESTATE
Why We Love Real Estate Investments
Real estate is a tangible asset. When purchased at the right price, based on historical asset prices and underlying cash flows, it has more stability than other competing investment opportunities. In fact, real estate in many ways is predictable, unlike the price of stocks, currencies and commodities like gold and oil. We feel more comfortable owning assets that we can see and touch.
Although real estate appreciates in value, for tax purposes the government permits an investor to expense the cost of the purchase price as depreciation over the life of the asset. Additionally, when a real estate investment is sold, the gain on the sale is taxed at a lower rate than ordinary income.
Real estate is proven to be an inflation hedge in comparison to other investments. In fact, because leases in real estate are adjusted over time, they protect real estate owners against the eroding effects of inflation on the dollar.
Real estate is purchased and sold in a marketplace that is unorganized and inefficient. Many times decisions are made based on emotional considerations. This creates opportunities for active real estate investors to buy at undervalued prices. We find great opportunities in this inefficient marketplace, especially when we have the ability to act quickly.
Real estate is a tangible asset which over the long term appreciates in value, especially when purchased at prices below long term market trends or when managed properly by active real estate managers. We seek to maximize the value of our real estate investments through buying the right assets at the right prices and using superior management techniques.
Real estate is local. Local real estate trends are influenced more by local market conditions than regional or national economic factors. We choose to make real estate investments in areas that we know, in desirable places in the path of growth. We know our market and plan to invest because of long term prospects for job and population growth.
Why You Should Add Private Mortgages to Your Portfolio
You’ll often hear from your financial advisor or on CNBC that you should diversify your portfolio so to also include real estate assets. The truth is that, while we agree with that principle, executing it in an efficient and truly profitable way is more difficult than it sounds.
You see, when you buy and own individual properties, you:
are practically forced to quickly become an experienced property manager, which takes time and comes with several pitfalls
are possibly pushed by circumstances into hiring a property manager – which takes a chunk of your gains
need to make sure that the property is well cared for, namely when it comes to maintenance costs – which takes another chunk of your gains
exposed to only a few properties in specific locations – meaning that, whereas other real estate markets may be doing well, your properties may fall due to being concentrated on certain underperforming locations
However, when you put your capital to work with Blue Marlin Capital, you:
gain from all the benefits of owning property without any of the typical nuisances
lend to borrowers that are required to have equity in the loan – of 10 to 30%
downsize risks, with borrowers agreeing to take the risk of first loss in case properties sell for less than expected
get monthly cash flow, having borrowers paying monthly interest directly, irrespective of property appreciation dynamics
secure your investment, knowing that in case of default you as the lender can foreclose and claim the collateralized property
OUR INVESTMENT PHILOSOPHY
Analytical and Careful
We make investments based on long-term, historical trends. We look to prior history to help us anticipate future performance. We ground our expectations in the realities of market cycles and the opportunities these cycles create.
We follow a strict underwriting process to buy assets with a margin of safety and positive cash flow. Our pre-acquisition analysis focuses on conservative modeling and is based on long-term trends in revenues and expenses, with realistic expectations for potential one time and on-going expenses. Our due diligence process is both thorough and realistic.
Cash flow drives the value of every investment we make. Therefore, we base investment decisions on income. While appreciation is an important factor, it is not the basis of our investment decision. We invest in tangible assets which protect our principal and generate reliable cash flow.
We seek to determine the true value of the investments we make. We do not make investment decisions based on fluctuating market prices; instead, we focus on underlying fundamentals that drive the intrinsic value of the assets.
We expect cycles and find opportunities in changing markets. We base our investment decisions on facts and historical trends. We take advance of new opportunities as they arise.
Margin of Safety
Acquisition price is the most important factor in determining return on investment. We seek to acquire and develop real estate assets at prices that make sense for the long term.
We limit our investment risk by making diversified investments in varied asset types, from single family homes to commercial real estate. We also believe in investments of varied time durations, which provide an additional form of diversification. These, in turn, create predictable cash flow and sustainability.
The management team at Blue Marlin Capital has proven to have the ability to identify opportunities and see those opportunities through to a profitable conclusion.
Adding Extra Layers of Capital Preservation
Because we take your investments seriously and know the real estate investing world inside out, we have developed an approach that adds extra layers of capital preservation when it comes to underwriting loans:
Low Loan-To-Value Ratio for Higher Safety
We categorize different loans and different properties in a different way – because we take a careful look at any of the investment lending opportunities that we review before recommending them to our clients. However, as a general rule, we never grant loans with a loan-to-value ratio that is higher than 75%, and we aim to have a national portfolio with a loan-to-value ratio no greater than 65%. This means that your loans are secured by the fact that you hold more equity in the collateralized property.
Focusing Exclusively on Short-Term Loans
That’s not just because that is where the demand is coming from – it is also because short-term loans are far more predictable in terms of their expected performance. They are not exposed to interest rate variations and they are not long enough to suffer from changing market outlooks. At Blue Marlin Capital, we only offer short-term loans with a repayment horizon of 6 to 18 months that allows us to offer great returns to our clients while still being defensive.
The Repayment Part of High Returns
There is no point in talking about high returns if there is also high risk in the equation, and actual loan repayments are not duly considered. That’s why we never approve a loan without having assurances about how it will be repaid, even in the worst case scenario. When it comes to loan underwriting, while we are dynamic and supportive of real estate developers, we only want to work with borrowers who clearly show that they have experience in the field, execution capacity, a well-established plan in which the numbers make sense, and a well-calculated and outlined financial ability to repay the loan. This means that, if we have a doubt, then we have no doubt – loans are approved only when we feel sure about the repayment part of getting high returns.