Become a Trust Deed Investor: Trust Deed Investment FAQ
Trust Deed Investments FAQ: What is trust deed investing?
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.
Trust Deed Investments FAQ: Why don’t banks lend to these investors?
Banks are reluctant to lend to these real estate investors because of their strict rules and regulations. Banks are unwilling to make approve investors for these types of loans unless they fit a very strict set of criteria. For example, if the person seeking the loan does not have a good credit score, they will not be approved for the loan. Hard money lenders, however, are concerned with the value of the property instead of 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.
Trust Deed Investments FAQ: Are trust deed investments safe?
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 Investments FAQ: How do trust deed investors get paid?
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.
Basically, investing in hard money Trust Deeds is like investing in a bond. The Trust Deed will yield you monthly payments with returns above what traditional Trust Deeds offer. In addition, the principal balance is paid back to the investor in a relatively short duration.