Is trust deed investing right for me?
Trust deed investing is not for everyone. Minimum investment requirements will vary depending on the trust deed, but as a rule the entry requirements are higher than for most other investments. Ask yourself this question: Am I comfortable committing substantial assets to an investment for as long as three years? If you answer yes, then trust deeds may be suitable for you. We can review our investor accreditation standards with you and discuss whether trust deeds are consistent with your investment objectives.

What is the return potential for trust deeds?*
The rate of return will vary depending on the nature of the deed. Historically, returns have ranged from 8.5% to 12% per year. To compare, stocks have returned about 8% over the last three years (2005-2007), and 10.4% over the last 10. Bonds meanwhile have averaged 4.56% and 5.97% over the same periods. Returns also vary depending on whether you fund a specific loan or invest in a mortgage pool, where multiple investors share in a portfolio of loans.

What are the potential risks of trust deed investing?
No investment is entirely risk free – we want to be clear about that. In the case of trust deeds, real estate values may fluctuate and borrowers on occasion default for any number of reasons, which may delay repayment. But a good underwriter can effectively manage those risks with their strong knowledge of the market, tough underwriting policies and sound business practices.

The potential for liquidity risk should also be considered. Depending on the investment program liquidity risk is average.

Risk also varies among different types of trust deeds. Sterling Pacific makes loans secured by first-, and second- deeds of trust only. A lender holding a first deed of trust is paid off first if the borrower should default and the property must be sold to satisfy the loan. Lenders in second position are paid next, and therefore face potentially more risk. But investors in second position are compensated as returns are generally higher than on a first deed of trust.

How does Sterling Pacific manage risks?
Risk can be mitigated. A trust deed investment is only as secure as the underlying loan, which is a function of the strength of the underwriter. As the underwriter of the loan, Sterling Pacific represents the investor to ensure all foreseeable potential risks of the loan are mitigated.

Our strict underwriting standards and awareness of the market are your insurance against potential risk.

Additionally the following factors are the fundamental drivers in the Sterling due-diligence process.

• 50% to 75% loan-to-value ratios, depending on the property, which is more conservative than industry averages.
• Licensed third-party, independent appraisers who are experts in their geographic area and property type.
• A stringent due-diligence review process, including a seasoned investment committee who independently review all loans.
• Frequent site inspections performed by members of the Sterling team.

To date, our investors have incurred no losses, explaining why Sterling Pacific has built an unblemished record in helping investors grow their portfolios.

*All financial data - Bloomberg.