Real Estate Investing Basics: Trust Deed Investing Intro
Trust deed investing intro: Trust deed investing is a great way to make passive income from real estate investments without any of the hassles of being a landlord. It also provides investors with security, flexibility, and substantial cash-flow.
Introduction to Trust Deeds
Trust Deed Investing is when investors invest our money in Trust Deeds secured by real estate. Basically, the investor becomes the bank and they can earn a much higher interest rate than a conventional bank. 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.
A trust deed investment is a promissory note secured by the deed of trust and is payable to the investors at an agreed upon interest rate, repayment amount and time frame. Communication with the broker and the borrower is important when it comes to trust deed investments and the promissory note should contain all of the rules and conditions agreed upon by the three parties. When the borrower signs the note, they are agreeing to the amount of the loan, the interest rate, the frequency of payments, any penalties in regards to late payments, and when they must repay the entire loan amount. The Promissory Note identifies the borrower and the person who is lending the money, called the note holder or lender.
If the borrower defaults on the promissory note, the investor takes possession of the property and may sell it in order to recoup the investment. If the LTV is properly calculated, the foreclosure sale should satisfy the debt. This provides the investor with security.