What It Means to Know Your Investor - December 17, 2013

At Sterling Pacific, we constantly strive to put the needs of our investors first. It’s why we do our best to assess whether or not our investments are a good fit for potential investors through in-person interviews and our subscription agreement. In doing so, we are able to help a potential investor evaluate the feasibility of investing with us.  In an attempt to assist with these efforts across the industry, the California Bureau of Real Estate has instituted new investor paperwork in order to better establish qualifications of investors, and help ensure that deals work for both investors and brokers.

CA BRE-870
So what is it this new rule requires? In short, brokers such as Sterling Pacific are now required to include the form RE 870 for investors. This form can be downloaded at the BRE’s website for further review, but it acts as a way to gather financial information pertinent to possible deals. The largest problem some investors have with it is that it asks for a large quantity of personal data to be shared by the potential investor with the broker, without any guarantee of participation in a future deal. It also opens up the possibility of people using misinformation in order to appear more suitable for the investment. But for both of these things it’s important to remember: This is designed to help you.

Why It’s Useful
While this form can feel slightly intrusive, or a way of barring entry into investments, its sole purpose is to help protect potential investors. By giving brokers this evaluative tool, it enables them to more accurately determine if the investment opportunity is right for the investor. One thing Sterling Pacific often cautions is that investors should maintain capital reserves. While trust deed investing is evaluated at low risk, and the real estate market is on an upward climb, it by no means is risk free. One of the main risks posed is delayed or defaulted payments, and should these occur, those relying on the interest payments for income could find themselves in a tight spot. While we already take steps to avoid this, the new regulations help us further our efforts, and increase our efficacy in advising you in regards to investment opportunities with Sterling.

What We’re Doing
We’ve always done our best to make investing requirements abundantly clear. A quick scan of our FAQ shows what we feel is a fair requirement of investors, and what we’ll be looking for when a potential new client comes to us. The BRE-870 form furthers our efforts to adequately prepare and know our investors, allowing us to best advise you.

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