Best of Investing
Know How To Identify When You Need A Patent, Trademark, or Copyright
Episode Aired: July 11th, 2020
Show Speakers: Elizabeth Rest, Edward Brown, and Mark Hanf
It’s hard to know if you should apply for a trademark, patent, or a copyright. Elizabeth Rest is here to help us learn the difference. Plus we dive into the red hot Bay Area Real Estate Market with Mark Hanf. If you are a real estate agent, you’ll may want to start on segment 3.
Please click play, and read along with the audio.
Edward Brown: [00:00:00] Welcome! You’re listening to the Best of Investing. I’m your host, Edward Brown, along with my cohost Mark Hanf of Pacific Private Money, our phone number is (888) 912-1190. Use that number to answer the trivia questions for a five-pack training certificate given away during this show. And that certificate is not sponsored by the radio station, but by Tan Bella tanning salon with two locations in San Francisco and one in Marin. Today’s trivia theme is, as it usually is, random trivia.
Gotta keep you in suspenders there. And today we have a special guest Elizabeth Rest, who is an attorney, and she’s going to discuss trademarks and patents, even though she’s not a patent attorney, because we want to know the difference between, you know, trademarks and patents and copyrights. So, Elizabeth, welcome to the Best of Investing.
Elizabeth Rest: [00:00:45] Thank you so much for having me.
Edward Brown: [00:00:47] All right. So first question is what’s the difference between a trademark, a copyright and a patent.
Elizabeth Rest: [00:00:53] So there are several different types of intellectual property that I’m sure that you’ve heard of, and that you’re familiar with. The three that you just named are the most common.
So trademarks are any names, symbol, color, slogan that identifies the source of a product or a service. So the main function of a trademark is to designate one person’s goods or services from another.
Edward Brown: [00:01:21] And is that where we see like the little R
Elizabeth Rest: [00:01:24] That’s exactly right. The little R is specifically for trademarks.
You may also see a little TM too, and sometimes a little SM. So, you know , the little R in the circle is specified for certain trademarks. You’ll start noticing them now that I’ve mentioned it.
Edward Brown: [00:01:40] Gotcha, gotcha.
Elizabeth Rest: [00:01:41] Right. And then copyrights are for original works of authorship. So think about works of art, movies, books, paintings, things like that. And patents are very specifically for new and novel inventions. Think about it as a scientific discovery or invention.
Edward Brown: [00:02:00] Alright. And you specialize in trademarks.
I remember off the air, you were telling me that a lot of attorneys don’t do multiple segments of that. I know the average person, we think of trademarks, copyrights, patents, you know, it’s all in the same genre, but apparently it’s different.
Elizabeth Rest: [00:02:18] It’s very different. And you’ll hear people say, you know, I’m an intellectual property.
Edward Brown: [00:02:22] Yes
Elizabeth Rest: [00:02:23] If you were to ask me, I’d probably say that because that’s what most people understand. But there are very distinct differences. And usually people that do patent law, attorneys that practice in that area, only do patent law. And then attorneys that practice in trademark do all of the other types. So, you know, trademarks, copyrights, trade dress , and then trade secrets. Which I didn’t mention is another area of intellectual property. And usually those attorneys are completely separate as well.
Edward Brown: [00:02:53] Or trade language., like Trump tried to get “You’re fired.” Remember that? He tried to
Elizabeth Rest: [00:02:57] He was trying to get that as a trademark.
Edward Brown: [00:02:59] Yeah.
Mark Hanf: [00:03:01] Elizabeth, I have a question for you.
What about people who, so I know there’s a process. You’ll probably talk about that. Of, how do you trademark, like a phrase for example?
You typically will see a phrase like in an advertisement, and it will say TM next to it. And I have heard in the course of my career that, you know, if we do advertising, and we come up with a little slogan or something, we should just put a TM there anyway.
Even if we don’t actually legally trademark it. Are there any legal benefits to someone putting the little symbol TM next to something that they’re placing on an advertisement for the public can see.
Elizabeth Rest: [00:03:40] Sure. Absolutely. It sort of depends on what it is. I don’t want to make a blanket statement. That’s such an attorney answer, you know, it depends, but that’s actually true.
And the reality, is if it’s something really generic, like you just mentioned, you know, “You’re fired.” That’s not something you’re ever going to be able to claim exclusive rights to. You know, and another one, Paris Hilton for example, tried to get a trademark for the phrase, “That’s hot.” That’s another example of something where, you know, she may have started using it or Trump, you know, obviously used “You’re fired” in his television show.
Let’s say they were to put out an advertisement in print, and it said “You’re fired” in big bold print. And they wanted to put a little TM next to it. You can absolutely do that without applying for a registration. And it shows the world that you are claiming rights in that slogan or in that word or that phrase.
It doesn’t actually mean that it’s a valid right. It just means that you’re claiming it.
Edward Brown: [00:04:40] What if you were to put an R because R means registered, right?
Elizabeth Rest: [00:04:44] You can only use the little R in the circle, which is called the notice, the trademark notice, once you have a registration. So that’s the key. You can use the TM, which is for trademark or SM, which is for service mart.
You can use that from the minute you start using a name or a word or a slogan or a symbol.
Edward Brown: [00:05:04] What’s a service mark?
Elizabeth Rest: [00:05:06] Trademarks are protected goods or services. So let’s say that I’m a winery, and, I sell wine. The wine is my product so I can get a trademark because that’s a good, but I also have a tasting room where people can come and visit.
And I also have a wine club. I’m offering services to the public under my same mark. So that’s a service. And you can generically refer to them all as trademarks, but the little TM and the little SM are to designate goods or services.
Edward Brown: [00:05:35] Gotcha. Okay, so just can’t use the R unless you actually register it.
Elizabeth Rest: [00:05:39] That’s right.
Edward Brown: [00:05:40] And what is the process for- we got a minute before you have to cut to break here and we’ll continue on, but what is the process for obtaining a trademark registration? Can I do it myself?
Elizabeth Rest: [00:05:50] A lot of people think that they can do it themselves. And there is a lot of websites where you can go to, but obtaining a trademark registration is deceptively easy.
It’s essentially a form that you buy, but what you need to understand are all of the intricacies and all of the nuances of trademark law, understand what PMP protected before you move forward.
Edward Brown: [00:06:14] Gotcha. Okay. All right. We are going to cut to our first commercial break. We’re talking random trivia here.
I say this one’s a fairly easy question, right? We always like to start off with an easy one, kind of tease the audience and then we’ll get into the harder ones later. So here’s our first trivia question, who was the first Republican president of the United States? So remember we used to, in the old days, we used to have the wigs.
Yeah. And all that.
Mark Hanf: [00:06:42] I thought you said this was easy.
Edward Brown: [00:06:44] Yep. Well, okay, maybe it’s not so easy. All right. Call (888) 912-1190. Be the first call with the correct answer, and you’re gonna win that tanning certificate, which is worth over a hundred dollars. So again, here’s the trivia question, who was the first Republican president of the United States? And stay with us.
You’re listening to the Best of Investing with Edward Brown and Mark Hanf, and our special guest, Elizabeth Rest to discuss trademarks. Don’t touch that dial, we’re gonna be right back.
Edward Brown: [00:00:00] Welcome back to the Best of Investing! Again, I’m Edward Brown, your host, along with Mark Hanf, and our special guest Elizabeth Rest, who’s an attorney. Okay, here’s our first trivia question. Who was the first Republican President of the United States?
Mark Hanf: [00:00:15] Lincoln.
Edward Brown: [00:00:15] Yes! Good ole’ Abe Lincoln. Very good. That’s why I figured it was easy because it was an easy President to remember. Not like ZacharyTaylor or something like that, you know, John Tyler.
Mark Hanf: [00:00:25] Taft
Edward Brown: [00:00:26] Or Taft, haha, your favorite.
Mark Hanf: [00:00:31] My favorite obscure President of the past. I always vote for Taft.
Edward Brown: [00:00:36] Yeah, for as much as he weighed, he was a President and a half. 300 and some pounds. So anyway, Elizabeth, you, specialize in trademark attorneyism, I guess. Mark you were going to ask her.
Mark Hanf: [00:00:49] So, we were just talking about like a lot of people will, you know, try this at home. There’s so many things you can do online with legal zoom, et cetera. And I would imagine a lot of your practice is defending trademark violations. Describe a typical situation, where you’re helping a client where they’re claiming some kind of trademark violation.
Elizabeth Rest: [00:01:06] Sure. You know, that can act absolutely run the gamut, but the most common are counterfeiting. Where someone is, you know, just absolutely copying, making your product and selling it as if it were real. You’ve all heard of the fake Chanel bag, and you know, all that kind of stuff. So that’s counterfeiting.
There’s definitely a lot of work in that area. And then the other one is where someone will have a trademark, and they come out with a product or a service that’s a competing product or service with a very similar name.
Edward Brown: [00:01:37] So in other words, Coke has the real thing and someone else comes up with it’s almost the real thing.
Elizabeth Rest: [00:01:42] Yeah, well that would be pretty clear, but you know, there are a lot of nuances in this. The standard in trademark law is a likelihood of confusion. So you don’t actually have to show that consumers are confused, but what you have to show in order to show that there’s an arrangement of your trademark is that consumers are likely to be confused.
Edward Brown: [00:02:04] I mean, that’s very subjective. What do you do?
Elizabeth Rest: [00:02:06] It is very subjective, and trademark law as a whole is very subjective. And much to the chagrin of a lot of trademark practitioners and a lot of brand owners as well. But you know, there are standard.
Edward Brown: [00:02:19] So I’ve heard from people who were trying to get patents, they were a little nervous, and some cases their attorney told them don’t go for a patent because all you’ve done is opened yourself up for someone to do a little bit of tweaking and then they can do it on their own legally.
It’s the same thing with a trademark? Do you open yourself up to someone stealing it?
Elizabeth Rest: [00:02:39] Not necessarily. With the patent, you can reverse engineer a scientific discovery, and if you’ve come up with it yourself, you have an infringe. So you know, there’s a lot of, sort of wiggle room with regard to patents.
And like you said, someone can just change one little tiny thing and potentially come up with a new product. With trademarks, because of this likelihood of confusion standard. Let’s say that the goods are completely different. You know, let’s say the trademark is trademark, which of course would never be allowed, but let’s just use that as an example.
And my product is selling, you know produce, apples, oranges, et cetera. And someone came out with another company, and they wanted to call it trademark. And they were selling air conditioning units. Well, I probably wouldn’t have room to protest because there’s not likely to be any confusion in the marketplace. So you look at both confusion as to the market itself and as to the goods and services.
Likewise, if someone were to come up with another produce company, and they wanted to call it trademark. I probably have an argument there, but they haven’t used my mark
Edward Brown: [00:03:46] Yeah and isn’t there certain rules about using the words like United States versus, US.
Elizabeth Rest: [00:03:51] There’s a lot of rules. Yeah.
There’s a lot of rules. You can’t use flags. It can’t use certain people’s names. Presidents, for example, going back to your trivia question, there’s a lot of rules of what you can and can’t use in a training.
Edward Brown: [00:04:05] You know, it’s funny. There was an old Sergeant Bilko episode. This is talking the 1950s, where this guy was named Conrad Hilton.
And so he opened up, and figured out a way to use his name and go, Hey, legally, his name is Hilton. And then Hilton basically settled with him for that.
Elizabeth Rest: [00:04:25] That actually happens. And there’s a rule in trademark law where you can’t get a trademark, if your Mark is what they call primarily a surname. So Smith, for example, because it was to be fair to everyone out there in the world named Smith, who all of a sudden couldn’t use their name.
Edward Brown: [00:04:40] So he decided to change the name to Rockefeller, but go ahead.
Mark Hanf: [00:04:43] Does anyone ever, trademark like a company name? Like for example, you can do a, obviously a fictitious business statement, which I did when I first founded Pacific Private Money, then I incorporated it in California.
But I’ve always kind of wondered if I should, if I really wanted to protect that nationwide, is there something more I should do for the name Pacific Private Money? And is it typical that you take a business name and register it, or trademark it, or how do you protect that?
Elizabeth Rest: [00:05:10] Yeah, absolutely. You know, I highly recommend getting a trademark registration for business names so long as you’re using it as a trademark.
And that’s sort of the, the catch, you know, if my business name, is you know, whatever it is, you know, LLC, but I do business as something else, which a lot of people do that. They don’t do businesses as their corporate or LLC name. I can’t get a trademark for what my company name is, but if you’re using it to provide goods or services to the public , absolutely get a trademark administration.
And the key is in the U S, you have to be doing business in interstate commerce. So that means, you know, across state lines business between state. Something like that.
Edward Brown: [00:05:52] And so , how do businesses protect themselves from counterfeiters?
Elizabeth Rest: [00:05:56] Well, there’s a lot of ways that you can, and it sort of depends on the level of counterfeiting.
So for one, if you’re talking about, you know, huge, and I, you know, I hate to say this, but the big countries where counterfeiting is happening are China and Brazil. And so if you are dealing, I know it’s, everyone always is surprised by Brazil, but, one of the things you can do is register your trademarks with customs.
And it’s very, very cheap. And then what will happen, is anytime goods or services cross through customs, they will check their trademark list. And if goods come in that looks suspicious to them, they’ll pull them out and they’ll call the trademark owner and notify them. They say, Hey, are these legitimate? Should we let this across the pond?
Edward Brown: [00:06:39] Oh, okay.
Elizabeth Rest: [00:06:39] It’s a great service. So, and you can do that in almost every jurisdiction.
Edward Brown: [00:06:44] Very cool. Yeah. There’s gotta be some international laws like that. So,
Elizabeth Rest: [00:06:48] Sorry to interrupt. I was just going to say a trademark rights are jurisdictional and everybody forgets that. So let’s say you have a registration in the U S you have no protection in Europe, China, you know, anywhere else, you have to get registrations in every country where you operate.
Edward Brown: [00:07:01] Okay. And, Elizabeth, before we let you go, why don’t you give out your information. So the audience, if they have any questions about trademarks, they can get ahold of you.
Elizabeth Rest: [00:07:10] Yeah, absolutely. So my name’s Elizabeth Rest and my firm is Crown LLP in San Francisco. Our website is www.crownllp.com. And my email address is firstname.lastname@example.org.
Edward Brown: [00:07:27] Which I assume you trademark before you got it.
Elizabeth Rest: [00:07:30] We do have a trademark, for legal services.
Edward Brown: [00:07:34] Yeah, that wouldn’t look good. If someone ripped off you.
Elizabeth Rest: [00:07:36] No, especially the branding firm
Edward Brown: [00:07:39] Okay. We’re going to cut to our second trivia question. What is the hottest planet? You only have eight to choose from because Pluto , unfortunately it lost its planet status. Must’ve done something wrong. Call 888-912-1190 to answer this question. What is the hottest planet? All right. Stay with us. You’re listening to the Best of Investing. We are going to be right back. Don’t touch that dial.
Edward Brown: [00:00:00] Welcome back to the Best of Investing! Edward Brown here along with Mark Hanf. Second trivia question: What is the hottest planet?
Mark Hanf: [00:00:08] Well, our previous guest , she guessed mercury, I guessed, Saturn. I just randomly,
Edward Brown: [00:00:15] Yeah, the answer is Venus, and it’s because the atmosphere helps retain much of the sun’s heat.
Cause you think it’d be mercury being closer to the sun, but yeah.
Mark Hanf: [00:00:24] I don’t even want to know how hot it is. It’s probably like 700 degrees or something crazy.
Edward Brown: [00:00:29] Yeah, there you go. Now, that was hard, but you got that one. All right. So Mark, there’s a lot of stuff going on in the real estate market.
I mean, it’s kind of on fire, isn’t it?
Mark Hanf: [00:00:39] Yeah. You know, we’re going through a really rough patch right now as a society, nationwide and in California here. You know, I get two papers every morning at home. The Marin Independent Journal and the San Francisco Chronicle, and not a day goes by that the headlines are aren’t everything and all there is for COVID. And, you know, we’re experiencing a spike. You’re seeing charts and graphs where it looked like we had flattened the curve. And then all of a sudden, boom, it’s just exploded again. And, you know, Marin County, the headlines were we had the highest rate of infection. Which really, it was a little bit misleading, because, we have such a small population, and there’s a lot of testing going on here.
So it just, you know, it’s just funny. I have to keep telling my wife, you know, stop reading the headlines because, first of all, the people that wrote the article, don’t usually write the headlines. The headlines are written by the editors because they want to draw eyeballs. But if all you do is read headlines all day long, you know, and God help you, if you read the Drudge Report because you know, it’s got 50 headlines from across the world that would just make you want to crawl back in bed. Well, with all of this
Edward Brown: [00:01:49] What’d we have? Like 50 cases? I mean, it wasn’t really that large, it went for like 35 to 50. So it’s like, Oh my gosh, it’s 50% increase. But
Mark Hanf: [00:01:58] Well, and again, I don’t want to make this show about Marin County because you know, this is a Bay area radio show, but you know, the Bay area, now we’re seeing businesses being asked to close again that were preparing to open.
And I guess the point I’m trying to make, and I’m not saying anything new or novel that anybody doesn’t know is, there’s just, there’s a lot of economic hardship going on right now. But within that economic hardship, there are areas where industries, certain industries are doing actually rather well.
And I happened to be blessed at Pacific Private Money to be in a lending space where demand really didn’t go down all that much. It did go down year over year. Our company is down for the first time in 10 years. We’re not experiencing year over year growth year to date. And that’s because a lot of the loans that we’ve had in the pipeline never actually closed. The transactions didn’t happen. People backed out. So, but still we’ve stayed open, we’re advertising. And what’s interesting right now is our loan pipeline, the loan application pipeline of loans that we’ve green-lighted and we’ve collected applications, it’s about as high as it’s been, all year. Close to $30 million, which for us is a what we call a fat pipe. And in the real estate industry, we talk to realtors all the time, in the last couple of weeks what I’m hearing is that the real estate market in the Bay area is on fire.
Things that go, that are well-priced and listed are getting multiple offers again. And that reflects the fact that in the Bay Area, as much as California, we have limited inventory. And, of course the newspaper will tell you that, you kno w, listings are down year over year.
Well, yeah. Okay. Well, fewer homes are on the market, and much fewer homes are on the market then in, you know, really strong years where lots of homes, it was a robust marketplace. But those fewer homes are going quickly. So it’s still, for the most part a seller’s market throughout California.
And then particularly in the Bay Area, it’s not a buyer’s market. We didn’t have the 30%, a 20 to 30% decline in real estate values that a lot of people were fearful of back in March. Well, half were fearful and the other half were hopeful. Right? More opportunities.
Edward Brown: [00:04:17] So why don’t you think, you know, with the fact that of the virus, not dissipating yet and potentially increasing, why has real estate estate stayed up?
Mark Hanf: [00:04:27] Well, the real estate industry has gotten really creative in an effort to be able to take what was largely a very hands on and personal experience, and put it online. And make it so that you can do virtual tours. You can get a loan without ever having to visit a bank or a mortgage broker. You can do everything online and over the phone, and you can have notaries come by wearing a mask and sign the loan documents.
In fact loan applications, I happen to bank with Wells Fargo and I was reading an internal memo where they actually, it’s not an internal memo. It was released to the public. They’re now only taking jumbo loan refinances. And then again, jumbo loans are pretty common in the Bay Area.
They’re only taking jumbo loan refinance applications, if you have a million dollars or more in their bank. So they’re really, and that’s up from $250,000, but still, they’re exploding in refinance applications year over year.
Edward Brown: [00:05:26] So there’s that manay people with a million dollars in their bank, in their bank. Yeah, that’s amazing.
Mark Hanf: [00:05:30] That’s their way of slowing down the rate of refinance applications because I just refinanced my home and I’m about to sign loan documents this week. It took a few months to do it cause I own my own company and I’ve got complicated financials. So, you know, it’s taken the better part of 90 days to refinance my home, but I locked into a 3% rate. And, you know, that’s pretty amazing. So I’m pretty happy about that. Give a shout out to Wells Fargo there. Who I know have had a lot of bad press lately, but there are a lot of fine people that work for that bank and they have among the lowest rates that you’re going to find for jumbo loan products. If you can get your application in, which now looks like it’s going to be a little bit tough. But you know, again, just the point of this segment really is just, to say that , we’re in a business at Pacific Private Money, you know, Edward where you and I are raising capital from private individuals, who we use that capital to lend that money out and to thank them for the use of their capital we pay them 7 to 8% return on their money. I’m here to tell you that the real estate industry, the lending industry, the purchasing industry is very strong right now in the Bay Area.
Edward Brown: [00:06:34] All right. When we come back, we’re going to get into more of that. I’m sure the audience wants to know how they can very conservatively earn over 7%, closer to even 7 and a half percent.
All right. 3rd trivia question. What is a Aladdin’s monkey friend named? What was his name? Remember, in the cartoon where Robin Williams was
Mark Hanf: [00:06:54] I saw that movie a lot! I don’t know that I could remember the name. I’ll have to think about that during the commerical break.
Edward Brown: [00:07:00] Alright. Call 888-912-1190. The first caller with the correct answer is going to win that tanning certificate. Stay with us.
The Best of Investing is going to be right back.
Edward Brown: [00:00:00] Welcome back to the Best of Investing! Again, I’m Edward Brown, your host, along with Mark Hanf, Nam Phan is off today. 3rd trivia question: What is Aladdin’s monkey friend called? What’s his name?
Mark Hanf: [00:00:10] Badoo? I don’t know.
Edward Brown: [00:00:11] Close! Abu
Mark Hanf: [00:00:13] Abu. That’s right.
Edward Brown: [00:00:14] And not Apu, like in the Simpsons where he says, “Please do not feed peanuts to my God.” Remember that? When he tries to feed it to the fake Elephant? I love that one.
Okay, when we cut the break, we had teased the audience a little bit with the fact that your company is paying its investors a little over 7%, 7 and a half percent, actually, a little more like it. How do people get involved? What’s the deal with that?
Mark Hanf: [00:00:40] Well, just to get a tiny bit of background on that.
You know, we talked last segment about how the real estate industry is strong. Banking is remained fairly strong, demand for mortgages and refinances have remained fairly strong, and strong is relative. Strong relative to the number of houses that are transacting in the Bay Area and in California.
And the number of listings that are coming back onto the market. There’s just a lot of activity happening in real estate and in the Bay Area in California right now. A lot of activity, a lot of strong activity, prices are stable, and as we all know, mortgage rates are as low as they’ve ever been in 3% mortgages are not difficult to obtain. Both through banks and from other, non-bank, non-agency, loan programs. There’s just a lot of 3% money out there right now, if you qualify for it.
But if you don’t qualify for it, and this is where we come in, if you’re self-employed and you struggle to prove your income. Or you’re self-employed and you write off everything so you show virtually no income, which is great, but there’s always a cost to that cost. For those of you who have a business or you’re self-employed, you write everything off is you don’t have to pay taxes, but guess what, you’re not entitled to get 3% money because banks insist that you actually make money and pay taxes, unfortunately, in addition to having a good credit score. There’s a lot of people out there who are transacting that, you know, don’t qualify for that kind of money, and they want to buy property. And they need a tool, a funding tool to be able to purchase property. And then given time, they can massage their finances in a way that will allow them to get financing.
It might not be 3%, but it might be 4 or 5%. Our money at Pacific Private Money, we rent out to borrowers, closer to 9%, in this particular market. But it’s generally used, like bridge financing, basically bridge, meaning short term. And they use our money to be able to purchase property that they have a plan for, whether they’re going to move through it,
and then refinance it down the line. Maybe they need 4 or 5 or 6 months to do that, or they’re going to improve the property and flip it. There’s just a number of reasons why they use what used to be called hard money, still called hard money in some circles. We call it private money or fast alternative financing.
So when people come to us, we evaluate their credit worthiness. We look at the property. We look at their exit strategy, which is what we call, how are you going to pay us back? Are you going to refinance? Are you going to sell the property? One of those two things has to be part of the plan because we’re really not 30-year money, you know, or 10-year money.
We’re really, 1-year money, 6-month money, 18-months, 24-months. 90% of the loans we make are paid off in less than 2 years, you know, and probably 1/3 of the loans we make are paid off in 6 months. So we charge 9% on average for our money, for our 1st position loans.
And all of that money is sourced privately. It’s from accredited investors, which in the Bay Area is a fairly, you know, reasonable bar to achieve. It doesn’t take much for many Bay Area. I guess I’m what I’m trying to say is there’s a high percentage of Bay Area residents who are considered accredited, where they have at least a million dollar net worth.
And those investors are, you know, we call them retail investors because they’re kind of your everyday investor. They got several million dollars in savings. It’s their retirement savings, and they’re looking to increase the yield that they’re able to generate, the weighted average yield.
They’ll have some in stocks. They’ll have some in bonds. They’ll have some in annuities. And many of them have learned over the years that the alternative investment realm, which is what, you know, we at the Pacific Private Money are considered, they’ve learned that, wow, you can make investments that are backed by mortgages.
And since all we do, when we lend money out of Pacific Private Money, we only make mortgages. That’s that’s the only thing we do is mortgage backed loans, and we charge 9%. And we typically pay our investors, something below that below a fee, whether it’s a servicing yield or a management fee. And there’s several ways that people invest with us.
We now have 3 funds at Pacific Private Money. We have our legacy fund, the Pacific Private Money Fund, which we launched in 2013, that’s been paying, close to 8% now for 7 years straight. And then we’ve got 2 new funds that we just launched. One’s the North Star Capital Fund, which we’ve got up to $2 million. I think we just hit the $2 million mark on that one, and we just launched it 30 days ago. And that one’s going to pay between 8 and 10% based on construction loans that we have found to be in rather high demand. We’ve got some specialists who understand how to underwrite construction loans, and so we’re pretty excited about that to be able to help builders who are still rebuilding a lot of the fire destroyed homes in Sonoma and Napa counties. And then the 3rd fund we have is, one that I’m probably most excited about because it really allows us to extend our business model much more effectively, and that is what we call the Freedom Fund. The Freedom Fund, it’s designed similarly to other funds with one exception, is that we don’t enforce the lockup period. So we allow people to put money in, there’s a $250,000 minimum for that particular fund, but we don’t have the one year or extended lockup period. Nor do we enforce a penalty for early withdrawal. It is a reg D fund; however, we use that money to basically close loans that we’re going to sell to 3rd parties.
We treat it like a warehouse line of credit for our purposes.
Edward Brown: [00:06:16] How large is that fund right now?
Mark Hanf: [00:06:18] That fund is about $3.5 million right now, and we’re not looking to grow that fund too large. We’re looking to work with maybe $10-$15 million because we’ve identified some new clients that like to buy the loans that we originate.
Cause they love that yield that they’re able to get. The Freedom Fund, we pay a flat 7%, and that’s so it acts like a money market account, although it’s not a money market account. It’s still a mortgage pool fund, but we only close loans in that fund that we’re going to sell off within 30 days. So it’s like a warehouse line, we clear it every couple of weeks.
And so we’ve got 7%, if you just want to park your money somewhere, $250,000 or more. Maybe you’re holding, you want it to be relatively liquid because you want to buy real estate, or you want to make other investments, but you don’t want to earn zero while it’s sitting in the bank. It’s a way for you to earn a nice yield on money that you’d prefer to keep liquid
North Star Capital Fund, for those who don’t get too excited by 7.5%, 7.75% yield. They want to be a little bit more aggressive, and we’re really working hard to try to get that yield on the Northstar Capital Fund above 9% in our first year, so we can prove the model.
Or if you just love stability, and you appreciate the 7 year track record of a fund like Pacific Private Money Fund, we paid 7.5%.
Edward Brown: [00:07:45] All right. Stay with us the Best of Investing will be right back with some closing comments and deal of the week.
Edward Brown: [00:00:00] Welcome back to the Best of Investing. Last time for today, I’m Edward Brown, your host, along with Mark Hanf, and Nam Phan is off today. We already finished our trivia question. So you know interesting, I mentioned this deal of the week , probably about a month ago. The interesting thing is when people hear about how expensive the money is to borrow, you know, 9% and a couple of points, whatever, why would anyone want to borrow that?
You know, especially if they can get it from the bank. Well, the interesting situation was that this one couple had wanted to move from one house to another, and they could qualify for a bank loan. The offer that they were going to put in was going to have to be pretty close to asking if not above, because there was a competing offer. But because Pacific Private Money was able to help them come up with money in 11 days, it appeared like they were going to put in an all cash offer.
Technically, it wasn’t a cash offer.
Mark Hanf: [00:00:53] We call it mimicking a cash offer. Realtors get to mimic a cash offer with them, with our loan commitment.
Edward Brown: [00:01:00] Exactly. And as it turns out, the seller’s decided to accept their offer, even though it was $75,000 less because it was very, very clean and it was going to close in 11 days.
The other offer was 75,000 or higher, but it was going to take your typical 30, 45 days or more. And you never know. So in this case, it actually made sense for the client, the borrower, to pay a high rate of interest and points, and they still saved money because they have the fact that they saved $75,000.
And because there’s no prepayment penalty on it, they refinanced in about 3 months.
Mark Hanf: [00:01:39] So we say all the time, that many times our money pays for itself. And to the average person who doesn’t really think it through, they go that’s crazy. They get sticker shock from 9% and two points, which is $20,000 on a million dollar loan.
And they think, why would anybody pay that! Oh that’s usury! I mean, we’ve heard all of the objections from people who just don’t really think it through, and yet you just provided me an example of somebody who actually made money.
Edward Brown: [00:02:08] Yeah.
Mark Hanf: [00:02:08] Not only did they get the house they want, but they got it for $75,000 less than the other guy because they had a very, very clean offer. Their realtor understood, that with hard money, we had a commitment there to fund that loan and close quickly. So they were able to close in a relatively aggressive time period, less than two weeks. The seller was thrilled because seller’s like a sure thing.
And if you have a clean offer, with few or no contingencies, and the number 1 contingency that always makes the seller nervous is the financing contingency. If you have no financing contingency, and the only contingency you have are inspections and reports, and the seller knows what he’s selling. And he’s confident that the reports will be clean and the inspection will be fine, then you really have what amounts to a non-contingent sale. As a buyer, you can offer less and often win the deal.
Edward Brown: [00:03:01] Especially now with things being as crazy as they are with the economy and lenders, you know, they’re actually going to get their loan. You know?
Mark Hanf: [00:03:11] If I were selling real estate today, and it were a similar situation that you just pointed out, I would discount for sure thing. I absolutely would.
Edward Brown: [00:03:19] Yeah.
Mark Hanf: [00:03:20] You know, it’s just not worth waiting 45 days to find out that, oh something happened and they’re not qualifying, and now they need another 30 day extension. You’re sitting there going, I made plans.
Edward Brown: [00:03:33] Exactly
Mark Hanf: [00:03:34] It’s really hard.
Edward Brown: [00:03:37] One more time
Mark Hanf: [00:03:37] One more time. So I didn’t give up my phone number yet. We’re in the Bay Area here at (415) 883-2150 that’s (415) 883-2150. Call and ask questions. You know, we have a really friendly staff and we love talking about how we make money for our clients in this business.
So if you’re a realtor, and you’re looking to get more information on how you can use our bridge loans as a tool, we work with a lot of realtors. If you’re an investor looking for, more information about how you can make 7, 8, 9% on your money. You can call us at (415) 883-2150 or go to our website PacificPrivateMoney.com.
Edward Brown: [00:04:20] All right. Here’s our thoughts for the day. I’m at the age where an all nighter just means I didn’t have to get up to go to the bathroom. If I won the award for laziness, I would just send somebody to pick it up for me. All right, tune in next week to the Best of Investing, we’re going to be giving away more free prizes for answering trivia questions.
Thanks for listening on behalf of our team, I’m Edward Brown, wishing you the Best of Investing, so long.