1230634--3/10/2006--VESTIN_FUND_III

related topics

{loan, real, estate}

{investment, property, distribution}

{debt, indebtedness, cash}

{control, financial, internal}

{cost, regulation, environmental}

{condition, economic, financial}

{regulation, government, change}

Units lack liquidity and marketability. Members have limited ability to have units redeemed. Our management has identified material weaknesses in internal control over our financial reporting, primarily related to the lack of technical accounting and reporting expertise. Our inability to provide such expertise may result in inadequate or deficient financial reporting. Any borrowing by us will increase members risk and may reduce the amount we have available to distribute. RISKS RELATED TO INVESTMENTS IN REAL ESTATE Our operating results will be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, and we cannot assure members that we will be profitable or that we will realize growth in the value of our real estate properties. Properties that have significant vacancies could be difficult to sell, which could diminish the return on members investment. We are dependent on tenants for our revenue, and lease terminations could reduce our distributions to our members. We may be unable to secure funds for future tenant improvements, which could adversely impact our ability to pay cash distributions to our members. We may be unable to sell a property if or when we decide to do so, which could adversely impact our ability to pay cash distributions to our members. Competition with third parties in acquiring properties may reduce our profitability and the return on members investment. Uncertain market conditions and the broad discretion of Vestin Mortgage relating to the future disposition of properties could adversely affect the return on members investment. If we set aside insufficient working capital reserves, we may be required to defer necessary property improvements. If we sell properties by providing financing to purchasers, we will bear the risk of default by the purchaser. RISKS OF THE MORTGAGE LENDING BUSINESS Defaults on our real estate loans will decrease our revenues and members distributions. The value of our real estate security may be insufficient. We may invest in unimproved land which does not generate income. We may invest in acquisition and development loans which do not generate income. We may invest in construction loans which do not generate income. Our investments in commercial property loans may not yield the anticipated increase in value and income. We may invest in residential loans. Investments in second deeds of trust and wraparound loans are subject to the rights of the first deed of trust. Balloon payments require sufficient resources to make payment when due. Investment in large loans may reduce our ability to diversify our loan portfolio. Taking a lease interest as collateral only provides a right to assume the borrower s obligations under the lease. Our underwriting standards and procedures are more lenient than conventional lenders. Our loans are not guaranteed by any government agency. Our real estate loans will not be marketable and we expect no secondary market to develop. Our loan portfolio may be riskier if it is not diversified geographically. We may have difficulty protecting our rights as a secured lender. By becoming the owner of property, we may become liable for unforeseen environmental obligations. Our results are subject to fluctuations in interest rates and other economic conditions. We face competition for real estate loans that may reduce available yields and fees. Our lending operations are subject to certain regulatory requirements. Vestin Mortgage has limited experience in acquiring and managing real properties. Our Manager lacks experience with certain real estate markets. Vestin Mortgage will face conflicts of interest arising from our fee structure. Vestin Mortgage will face conflicts of interest concerning the allocation of its personnel's time. Vestin Mortgage will face conflicts of interest relating to other investments in real estate loans. Vestin Mortgage will face conflicts of interest in selecting real estate loans for us. We may have a lack of control over participations.

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1230634--3/10/2006--VESTIN_FUND_III_LLC