There are many trust deed investment benefits that you should know about before you start investing. With trust deed investments you can make passive income, you can diversify your portfolio, and feel secure in your investment. This is the trust deed investment terminology you should know.
Before you start trust deed investing, you should be familiar with the three players of trust deeds: the trustor, the trustee and the beneficiary. The trustor is the borrower, the trustee would be the trust deed itself, and the beneficiary is the investor, who is investing in the trust deed. It is important to always make sure the trustee is reliable. Both the beneficiary and the trustor should ensure that the trustee would be reliable and accountable enough to avoid unnecessary risks. If the borrower defaults on the loan, the trustee has the power to foreclose on the property on behalf of the beneficiary.
A trust deed or deed of trust is a document recorded with the county that creates a lien on the property. The lien secures the property as collateral to ensure the borrower’s obligations under the promissory note.
A promissory note is a written promise to pay an amount of money by a certain time. The amount and the time should be agreed upon by the investor and the borrower and should be specified within the note:
- Amount of the loan
- Interest rate
- Amount and frequency of payments
- When the borrower must repay the principal
- Penalties imposed if borrower does not repay per agreement.
Developers, flippers and long term investors are the blood of the Hard money business. These type of investors main concern is getting the deal and making money from it. These borrowers are experienced real estate for the express purpose of resale for a profit. They buy these houses or multiple unit buildings at a substantial discount, fix them up in a timely fashion and have an excellent marketing program for resale in a matter of months. Hard Money will provide them the money they need to purchase/refinance their real estate within days without looking at their tax returns or credit.