Make Smart Investments: Here’s What Makes a Trust Deed Investment Safe
What makes a trust deed investment safe is that the collateral is real estate. A trust deed is a financial agreement between a borrower and private investor in which the promissory note is backed by a deed of trust recorded on the property. The borrower promises to pay an agreed upon interest rate on the loan and must repay the initial amount at a specific time. If the borrower defaults on their loan obligations, the IRA owner will take possession of the home once the property goes through foreclosure. While investments inherently involve risk, trust deeds may offer an IRA owner the opportunity to recoup a portion or all of their original investment through the sale of the property.
A trust deed investment is safe because the risks are identifiable. Stocks, bonds, and mutual funds have been popular investments in the past but due to the current economic climate, that is changing quickly. Those who do not want to both with the tumultuous nature of the stock market have chosen to invest in trust deeds. When structured properly, trust deed investments have relatively low risks since the loan is secured by real estate. What that means is that, if the borrower defaults on the loan, the property becomes yours and you can sell it to recoup your initial investment. Many investors enjoy the relatively minor effort needed to manage the investment once their money is in place.
The typical trust deed investor is a person looking for a competitive return on their investment. Because getting a loan from the investor is much easier than getting a loan from traditional lender, the interest rates are higher. This means that the investor in turn, receives a higher return on his investment and the borrower gets a loan that works for them. The investment is secure because the money that is loaned is secured by the borrower’s equity in their property. What makes trust deed investments a great investment strategy is the security, good return, and passive monthly income.
Because of the flexibility available to them, trust deed investors have a lot of control over their investments. Unlike a traditional lender, the interest rates can be negotiated and you can make sure that you are involved in the sort of projects you are interested in. It’s simple—you make an investment, decide what the interest rate will be and then collect your payments every month. Trust deed investments offer an attractive yield on invested capital. If the borrower defaults on the loan, the property goes to you and you can sell it to recoup your investments.