How Trust Deed Investments Can Bring in Big Money. A trust deed investment is a way that individuals can invest in real estate without actually managing the property. What happens is that the investors invest money in someone else’s real estate investment project and the Trust Deeds are secured by real estate.
Basically, the investor becomes the bank and they can earn a much higher interest rate than a conventional lender.
In the current economic climate, savvy real estate investors are purchasing properties at foreclosure sales for bargain basement prices, refurbishing these properties, and reselling them for a profit. These house-flipping investments take a matter of months which means hard money loans are perfect for these types of investors. Trust deed investors help these real estate investors get financing and make a profit and the trust deed investors make money from the interest rates.
Here are three ways to avoid risk when investing in trust deeds and how to make big money:
- Understand the mortgage broker.
When it comes to trust deed investing, knowledge, experience, and transparency are important which is why you need a broker who has those values. You want to work with a team who values open, two-way communication. Communication, integrity, and timeliness are important when it comes to finding a broker. Finding a broker to handle and help you navigate your trust deed investments doesn’t have to be difficult. Find out more about HML Investments here.
- Know the market value
The market value is the the sale price, the cost to build, or the value in use to a specific owner does not necessarily represent the market value of the property. Trust deed investment is secured by a deed of trust on the Property, which serves as collateral. According to the California Department of Real Estate, “The market value of the Property is critical to your decision to lend your funds or purchase a promissory note because there is a possibility that the only way to recover your investment is through the sale of the Property. Therefore, the market value of the Property should be correctly estimated and the total loan-to- value ratio properly analyzed as illustrated below. This information should be made available to you before you commit your money to the transaction.”
A promissory note is basically an IOU that contains the promise to repay the loan, the trust deed is the document that pledges the property as security for the loan. It is the trust deed that permits a lender to take possession of the property if the borrower fails to make the monthly payments. Having the appropriate documentation ready is important in case you need evidence of you securing the promissory note. This will give you some peace of mind. No investment is without risk, but if handled properly, the investment will be relatively safe.