By definition, neither is better, but they are, of course, different.
At MVP, we focus on commercial properties, such as multi-unit apartment buildings or shopping centers. Such properties are valued based on the cash flow they produce each year. We are not involved in single-family residential properties, where the value is based upon comparable property sales in the neighborhood, rather than on their income potential.
MVP’s dedication to commercial property is a result of our professional opinion on trust deeds. Simply stated, commercial property trust deeds require additional due diligence that is not familiar to the average investor. Our efforts are to create opportunities for investors that they might not otherwise have, left to their own resources. For example, when investing in a trust deed secured by a shopping center or an industrial building, it is critical to have an environmental assessment of the property prior to funding. The presence of any environmental problems is a major red flag and could expose the trust deed investor to significant liability. We are established to immediately handle such assessment needs.
In either case (commercial or residential trust deeds), we continually maintain that the key is to make sure that the loan-to-value (LTV) is conservative—60% or less is our rule of thumb.