In the preceding chapter the discussion of railroad bonds was brought to a close. Before passing to the consideration of real-estate mortgages, which is the next form of investment to be taken up, it may be well to review briefly the general principles advanced in the first chapter of this book, in order that the reader may have clearly in mind the main points upon which judgment of the value of investments should be based. There are five chief points to be considered in the selection of all forms of investment. These are: (1) safety of principal and interest; (2) rate of income; (3) convertibility into cash; (4) prospect of appreciation in intrinsic value; (5) stability of market price. Keeping these five general factors in mind, the present chapter will discuss real-estate mortgages as a form of investment, both as adapted to the requirements of private funds and of a business surplus. The average American business man is so familiar with real-estate mortgages that the details may be passed over briefly. A real-estate mortgage, or a bond and mortgage, as it is sometimes called, consists essentially of two parts, a bond or promise to pay a certain sum of money at a future date with interest at a certain rate per annum, and a mortgage or trust deed transferring title and ownership in a piece of real estate, with the provision that the transfer shall be void if the interest is regularly paid and the bond redeemed at maturity. Before advancing money on the security of a mortgage it is necessary to determine whether the title to the property legally vests in the maker of the mortgage; and during the continuance of the mortgage it is necessary to have proof that the taxes and assessments are being regularly paid, and, in the case of improved property, the fire-insurance as well. The safety of real-estate mortgages, in common with the safety of all obligations, depends upon the margin of security in excess of the amount of the loan. In the case of real-estate mortgages the amount of this margin may be determined without great difficulty. It is only necessary to have the property carefully appraised by an expert in real-estate values. It does not follow, however, because a mortgage has been shown to possess substantial equity, that it is perfectly safe as an investment, unless it satisfies also another condition of great importance. A mortgage may not exceed 50 per cent of the selling value of the real estate pledged, and yet be a poor investment. This point involves a serious objection to real-estate mortgages which sometimes escapes notice.