Why Trust Deed Investing is a Great Alternative Investment Option
Trust deed investing is simply investing in loans secured by real estate. It is a great alternative investment option because if structured properly, trust deed investments offer an attractive current yield with relatively low risk.
Returns on investment are generally high because trust deeds rely on property as collateral. Essentially, this means that issues like borrowers’ personal finances and credit scores are not important to the collateral value of the property. In order to mitigate risk for investors, trust deeds are always attached to a note with a set interest rate. Loans are short term and interest-only and you get a big payment in your hand at the end of the term which makes it a great alternative investment option. If structured properly, trust deed investments can mean high yield returns in a short amount of time which makes this investment strategy a smart choice for investors who recognize the potential value of California properties.
Benefits of Trust Deed Investing with California’s First Probate Loans
- Receipt of an amortized schedule on notes
- Prompt payment disbursal
- ACH deposits available
- Assistance with payoffs and other service functions
- Investor control over terms of the California trust deed investment, including types of property, location, period of time for payback, interest rate
- No mortgage pools
By investing in this alternative investment option, you can generate monthly passive income through real estate secured investments. Essentially, you make money just like the banks.
As of 2011, investors can receive returns of 9-12% on trust deeds with a solid margin of safety (loan-to-value of, say 65% or less). Even higher returns are possible for professional trust deed investors, because they invest frequently and have close relations with mortgage brokers and mortgage banks that create trust deed opportunities. Such professional investors can frequently negotiate to receive one or more points in addition to interest as part of their investment, increasing the overall yield.
Who are the borrowers?
Borrowers can be experienced real estate investors who buy homes then flip them for a profit. Sometimes borrowers are individuals (landlords, business owners, real estate developers, etc.) who need cash and use their non-owner occupied property as collateral. Also, there are individuals who have experienced extreme financial hardship and are facing foreclosure from default, but have significant equity in the home. These scenarios are handled on a case-by-case basis.
Why should you trust Trust Deed Investments?
Basically, investing in hard money Trust Deeds is like investing in a bond. The Trust Deed will yield you monthly payments with returns above what traditional Trust Deeds offer. In addition, the principal balance is paid back to the investor in a relatively short duration.
Like all investment practices, there is a risk but investing in Trust Deeds also yields high returns. These investments are not tied to the stock market and your investment is secured by the Trust Deed to the subject property.