A once-prominent Marin County real estate lending firm abruptly collapsed late last year, stopping payments to more than 100 investors. Those former clients told the Chronicle they’ve been informed that what they invested with Pacific Private Money Inc. — more than $100 million — is probably gone. In some cases, it was their retirement savings.
Reading the story, you might have wondered: How and why did those investors get themselves into this situation — and what can I do to prevent this from happening to me?
The company was an alternative real estate mortgage and investment firm based in Novato. It provided what are known as “hard money” loans, which are typically short-term, high-interest loans intended to fund real estate purchases, renovations or refinancing. The properties served as collateral for those loans. Most companies that do this take money from investors and loan it directly to borrowers. Pacific Private Money’s approach had a subtle difference: It pooled the money from investors and then invested it on their behalf by making these loans and paying a fixed return — not an inherently illegal or illegitimate practice, but one that may have added a layer of opacity as to where the money was going…