What You Should Know: Trust Deed Investment Information
This Trust Deed Investment Information will help you on your way to become a trust deed investor. Here is what you should know.
These are the seven essential elements according to the California Department of Real Estate.
- Knowledge, experience, and integrity of the MLB through whom the trans-action may be made or arranged.
- Market value and equity in the Property and the security for your loan.
- Borrower’s financial standing and credit worthiness.
- Escrow process involving the funding of the loan or the purchase of the promissory note.
- Documents and instruments describing, evidencing, and securing the loan or purchase of the promissory note.
- Loan servicing provisions, authority and compensation.
- Recovering your investment when the borrower fails to pay.
These elements are valuable Trust Deed Investment Information.Trust Deed Investment Information
Knowledge, experience, and integrity of the MLB through whom the trans-action may be made or arranged.
An important aspect of alternative lenders is that they can offer flexibility, liquidity, and partnership. Unlike traditional lenders, alternative lenders can offer partnership and communication in your investments and projects. When you are investing in real estate, you’re not just looking for financing, you are looking for a lender who value open, two-way communication. Some important Trust Deed Investment Information you’ll need are the basics of finding a great MLB. Communication, integrity, and timeliness is most important. Finding an alternative lender to handle these investments doesn’t have to be difficult. Find out more about HML Investments here.
Market value and equity in the Property and the security for your loan.
Unlike traditional lenders, the property’s market value is the most important aspect to hard money lenders. The borrowers are savvy real estate investors who are planning to make a very large return and/or strike a very profitable deal, and are willing to pay the high interest rates for a quick and simple source of capital.
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.
Borrower’s financial standing and credit worthiness.
According to the CDRE, “The borrower’s capacity is measured by: income; job position and stability; and overall financial standing, including assets, liabilities, and net worth, and any profit or losses incurred as the result of any business or investment activity.”
Important Trust Deed Information: These factors should be researched but hard money lenders are more concerned with the value of the property than the investor’s finances. For this reason, real estate investors have limited financing options available to them which means they generally turn to hard money lenders.
Escrow process involving the funding of the loan or the purchase of the promissory note.
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 foreclosure if the borrower fails to make the monthly payments.
Documents and instruments describing, evidencing, and securing the loan or purchase of the promissory note.
Investors will receive a copy of the following documents after the funding of a loan:
- Executed promissory note
- Recorded deed of trust
- Title policy
- Insurance on the property
Loan servicing provisions, authority and compensation.
These services may include collecting payments from borrowers, distributing payments to lenders, mailing notices, and coordinating foreclosure proceedings. Lenders and note holders are able to decide whether or not to handle these services themselves.
Recovering your investment when the borrower fails to pay.
If a borrower fails to pay their loan, the trust deed investor is protected by the margin of safety. Since the trust deed investor acts as the bank, you can foreclose on the property and sell it to recover the investment and past-due interest. Because hard money loans are generally short-term, real estate values are unlikely to change dramatically over the loan’s term. When structured properly, trust deed investments offer an attractive current yield with relatively low risk which makes it a safe investment. If the property value is high relative to the loan amount, then the investment should not lose money even if the borrower defaults on the loan.
Trust deed investors receive monthly payments at the agreed upon interest rate. These payments can be structured in various ways. One is partially amortized monthly payments containing interest and some principal; another is with a balloon payment balance delivered at the end of the loan term. When the borrower pays off the loan or the loan term expires, the investor receives payment for your principal investment and any remaining interest owed.