Trust deed investments most secure investment
Trust deed investors Security:
Your money will be 100% secured by the subject Real Estate property.
Trust deed investor position:
Trust deed investor position will be the 1st lien on Title, therefor you will be paid before any other lien recorded on title. So if the property will foreclose, your money is safe.
When a hard money lender qualifies a borrower equity is a major factor. We require a minimum of 30% down payment in most cases. This down payment adds better cushion for your money. So if this loan turns bad then we have enough equity to put the property on the market at a discount and get our money back plus attorney fees.
Borrowers Exit Strategy:
While qualifying borrowers we want to make sure they know the plan for this project. We want to know if the borrowers are looking to purchase and flip the property or purchase to hold. We have to qualify them from the beginning stages for both. All we are doing is gathering information about how we are going to get paid. If a borrower is purchasing to hold the property, we need to understand how he will qualify for a conventional loan or any type of loan he is thinking of getting after 12 months. Then qualifying him by looking at credit history, income docs, etc. We need to make sure he will be able to qualify.
Normally hard money lenders like to get their money really fast. In some cases trust deed investors want to keep their money for few years but most don’t. Our terms are 6 months, 12 months or 24 months.
If borrowers default the loan:
Sometimes you will have borrowers that in true hardship and after putting 30% of their money in the property, remodeling the property and paying the high fees and interest can’t make payments anymore. Our next step will be to contact the borrower and try to modify the loan, maybe reducing the interest rate by 1% or 2% will help him and us.
If this modification doesn’t work, we will contact our attorneys and start the process for foreclosure.
Foreclosure process can take up to 6 months. In the process you will not get any checks from the borrower and you will have to pay the attorney fees of up to $5000.
Once the house is foreclosed, now it’s ready to sell. We will sell the property at a discount and recoup your investment and all the fees you had to pay for the foreclosure process.
What is the role of the loan servicer?
The loan servicer collects interest payments from the borrower and disburses them to the lender. The servicer also initiates the foreclosure process at the request of the lender in case of default by the borrower.
How do I know if a particular TD is safe?
There are four broad areas of due diligence required for a trust deed investment: (i) property/value assessment; (ii) borrower; (iii) legal items; and (iv) other items, including the broker/intermediary, if applicable. A trust deed is safe if all four areas check out properly.
Who will be making the decision where to invest your money?