Did you know that many of the smartest and most successful investors in the world have the simplest investment strategies? What most of these investors would agree on is that usually the best investments are ones that you can see, feel and touch.
Usually this equates to real estate, because you know exactly where your money really is and typically it is going to be something that people are never going to not need. People are always going to need somewhere to live, even if the market does go up and down.
It is not like a company, where in many ways you can invest in something that is not tangible. The movie the Wolf of Wallstreet comes to mind when Matthew McConaughey’s character says that you never let the client cash in after making money on a stock, “because then it becomes real.” Although this is based off of Wallstreet in the eighties in many ways things do not really change.
The subprime mortgage crisis in 2008 came down to the same idea of brokers irresponsibly offering mortgages to people with the erroneous assumption that it wouldn’t matter because housing price would continue to rise. Of course, the housing bubble did burst, and all the major banks were over exposed, because they had pooled all the bad mortgages into collateralised debt obligations.
When you co-fund loans with HomeSec you are not investing in a pooled funds scenario, you are co-investing with HomeSec. You are on the title and your name is also on the mortgage. This means that you know exactly which property it is and what business you have lent money to, unlike a pooled funds lender (See our article Why investing with a pooled funds lender isn’t always the safest investment.)
So, whether the property is in Geelong, Victoria or on the Gold Coast in Queensland that is your sole investment. It is not secured against one hundred different things that overexposes you to more risk. Quite honestly, when you invest with a pooled funds lender, you have no way to see, feel or touch what you are investing in, because you have no idea what you are actually investing in. With HomeSec, you could even drive past the property if you wanted to.
With a pooled funds lender, you cannot do this, because you are investing with the company as opposed to being a lender for a standalone loan.
The truth is there will always be investors that get caught up in following the latest trends and follow the herd. The smart investors are the rich investors and as Warren Buffet famously says dip their toe in the water instead of their whole foot. So, they diversify their investments by putting their money into several different investments to spread their risk. This is exactly what the investors that co-lend with us do at HomeSec.
You do not simply hand over all your hard -earned money with HomeSec and hope for the best like you essentially do with a pooled funds lender. As Matthew McConaughey’s character says in the Wolf of Wallstreet that “the first rule is to move the money from your client’s pocket to your pocket.”….Yikes!!! No, that is definitely not what happens when you lend with HomeSec. As a lender with us each loan is a standalone.
So, if you have $1,000,000 to lend and you co-fund with us $100,000 as an example into ten loans, then you have ten separate deals. This means that your money is diversified.
Not one loan is connected to another loan. Warren Buffet has the same strategy for investing on the stock market. He has been known for investing in say fifty different companies like apple and google etc. It is one of the most fundamental rules and yet people often fail to follow it. (See our article Are you really diversifying your investments?)
At HomeSec, you do not invest in one thing, you invest in several individual, separate loans. Our investors know exactly what they are investing in and are up to speed with everything they are investing in. They are able to assess each deal on its own merit and do their own due diligence. They also know that as they are co-lending with us, there is nothing that we would ask them to fund that we wouldn’t fund ourselves.
So, you are not simply transferring your money over to us, only to have us spend it on a Christmas party! So, please do not hand over your money to a lender that isn’t looking out your best interest. Talk to HomeSec about how you can make smart diversified investments with us by becoming the lender instead of just another investor.
