What You Need to Know About Trust Deed Investment Funds
When deciding whether to get involved with Trust Deed Investment Funds, it is important to have a good understanding of your own preferences and profile first to know which is generally better suited for you. Due diligence is important when it comes to any kind of investment.
The first kind is a more hands on approach. This is the right approach for an investor who wants to review the appraisal, learn about each borrower, and wrap their heads around a deal. Individual Trust Deed Investors are typically more savvy investors when it comes to real estate transactions and has experience with real estate investments. Individual trust deed investments can be great for savvy investors, but investors may miss out on many opportunities because originators prefer the discretionary control of having a fund.
If you are more interested in a passive approach to investments, investing in a trust deed fund is the way to go. In the case of a trust deed investment fund, the investor puts their money into the fund and then they rely on the fund manager to follow the investor’s investment preferences. The fund manager carefully invests the money in high-yielding trust deeds. Trust and communication is very important when it comes to finding the right fund manager for you. You want a fund manager who has experience with trust deed investments and the real estate market as a whole. This approach is attractive because the fund typically gets the highest-yielding investments since it is being managed by a professional. If an originator must choose between investing in an individual trust deed or the fund, they will always choose the fund.
There are some potential advantages of a mortgage pool investment over individual trust deeds such as diversification and longevity but there are some risks to be considered when it comes to individual trust deeds. Structuring the fund properly is a huge challenge for most trust deed originators turned first time fund managers. This can lead to problems down the road. Choosing the right manager with the right strategy is the most important part of investing in a fund. What you want to look for when choosing a manager is experience, communication, fast processing, adequate capital, and flexibility. Find out more here.