Make Passive Income Now: How Trust Deed Investments Work
Trust deed investments have existed for a long time, but not everyone knows how trust deed investments work. Trust deed investments are just like mortgages except for one difference: there are three parties involved. Apart from a borrower and a lender there is an investor. A trust deed is a financial agreement between a borrower and private investor in which the promissory note is backed by a deed of trust recorded on the property.
- The borrower comes to the hard money lender to request a loan for a real estate investment. The loans are short-term and can last up to two years.
- The hard money lender originates the loan, underwrites the file and draws loan documents.
- The hard money lender contacts investors about the investment opportunity. The investor and the borrower decide on the interest rate, time-frame, what would happen in the event of a default, etc.
- Once the loan is ready to fund and the paperwork is in order, the investors will fund to escrow or title.
- The hard money lender will then setup the servicing for the loan. The trust deed investor will then enjoy passive monthly income from the interest payments.
- When the investment is paid off, the trust deed investor can reinvest their money in a different investment.
The typical trust deed investor is a person looking for a competitive return on their investment. Because getting a loan from the investor is much easier than getting a loan from traditional lender, the interest rates are higher. This means that the investor in turn, receives a higher return on his investment and the borrower gets a loan that works for them. The investment is secure because the money that is loaned is secured by the borrower’s equity in their property. What makes trust deed investments a great investment strategy is the security, good return, and passive monthly income. With trust deed investments, savvy real estate investors with less than perfect credit can get the financing for their projects and trust deed investors will generate a steady stream of passive income.