By Elizabeth Cloutman

Photo by Monique Schoenfeld, Town Crier

Business Profile

Investors can receive monthly checks through this Los Altos-based firm

Andrew Lewis, president of Investment Grade Loans, said that he believes that too often Silicon Valley residents have equity in a home and stock or stock options as their only financial assets, and thus have to rely exclusively on their employment for regular income.

He said that by putting funds into the asset-based loans he arranges, his investors will receive monthly checks from interest dividends their investment earns.

“Investment Grade Loans - the name says what I do: we put people in loans that are an investment. They will make money from the interest,” Lewis said.

Investment Grade Loans does not handle loans on personal property, but rather loans based on hard assets such as commercial property, raw land, developed lots and single-family homes for those who don’t qualify for traditional bank loans, Lewis said. The reason they don’t qualify for a traditional loan can be because they have bad credit or lack a regular income, even though they own real estate. Lewis gave an example of a borrower: a developer who has run out of cash before completing a building project.

Lewis arranges loans for a percentage of the property’s current market value - ranging from a maximum of 20 percent for raw land to 60 percent for a single-family home - through mortgage brokers. Typical loan rates range between 13 percent and 16 percent and 4-10 points, and loan amounts average from $500,000 to $2.5 million.

Lewis then finds individual investors to provide funding for the loan. A loan usually has multiple investors, often including himself. Each investor receives a monthly check based on an interest rate one percentage point below the rate at which the money was loaned. Lewis earns one percent of the interest for his work.

Lewis said, given California’s steady real estate market where housing prices never dropped more than 25 percent during the 1989-92 recession, investing in these loans is a medium risk, comparable to T-bills, AAA bonds and owning commercial property for rental. On the other hand, he said the stock market is high-risk and provides no income. “It’s LTV - loan-to-value. With a $600,000 loan on a $1 million property, it would have to lose more than 40 percent of its value before you would lose a penny. When a stock goes down $1, you’ve lost $1,” Lewis said.

Lewis may be contacted through Broker One Mortgage in Los Altos.