Investment Information: Trust Deed Investment Pros and Cons
Trust Deed Investment Pros and Cons: Trust deed investing is a great way to make passive income from real estate investments without any of the hassles of being a landlord. With a trust deed investment the investor is acting like a bank by lending money to a borrower and the loan is secured by real estate. The investor is able to earn a steady stream of passive income while securing those funds with the underlying real estate asset.
Trust Deed Investment Pros:
While the stock market can be unpredictable and volatile, trust deed investments are a great way to make solid rewards without a lot of risk. Investing in assets like stocks or bond, there is no physical aspect of the investment. With trust deed investments, you are investing in real estate which is a physical and tangible asset. When you become a trust deed investor, you’re essentially the bank but you are paid higher interest rates. You and the borrower agree on the rates and the terms then you collect your income monthly then receive the entire loan on a specified date. Trust deeds rates yield are generally in the 9%-12% range.
Piece of mind can be illusive when it comes to investments but trust deed investors can rest easy lenders knowing that their investment capital is secured by real estate. If a borrower fails to pay their loan, the trust deed investor is protected by the margin of safety. Since you act 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. However, you make the most profit when everything goes according to plan but you can feel safe knowing that you will be able to recoup your investment in the event of a default.
When you get involved with trust deed investing, you will work with a private money lending company. They will bring you, the lender, and the borrower together. These companies serve as the middleman in the transaction and their experience will help them to find the right investment for you and they will take care of the facilitation. This makes your job incredibly easy.
Trust Deed Investment Cons:
Compared to the advantages, the drawbacks are minimal. First of all, trust deed investments are not liquid. In other words, you cannot decide you want your money back one day and quickly convert your investment into cash, as you could with a municipal bond or shares in a blue chip company. You need to be willing to stick with your investment until the borrower pays off the loan, or, in case of default, until you have foreclosed and sold the underlying property. Also, if there is a default, you will need to manage the property until it is sold.
Trust deed investors provide private loans secured by quality collateral to strong borrowers with less risk than afforded previously. Borrowers find funding, trust deed investors make a profit. It’s a win/win. Hard money lenders can offer partnership and communication in your investments and projects. When it comes to hard money lenders, two-way communication, integrity, and timeliness is most important. Find out more about HML Investments here.