Investing In Deeds of Trust Important Information You Need to Know

What you need to know before Investing in Trust Deeds

Before you begin Investing in Trust Deeds, there are some things that you will want to know. Deeds of trust are a different kind of investment than stocks or bonds, so you will want to familiarize yourself with the different terms and practices that make up trust deed investing. Below are some important things for you to know before you begin.

In most cases, Investing in Trust deeds involves purchasing existing funded loans or promissory notes. Then you become the person the borrower pays the remaining amount to, plus the interest. Sometimes it is not an existing loan, but a new one that goes between you and the borrower. In either case, you will be given the deed of trust against real property in order to secure your investment. If the borrower is unable to make the payments, then the property becomes yours.

But what exactly is a promissory note? 

This is crucial information, as it is a big part in Investing in Deeds of Trust. A promissory note is really a contract, or a written promise, that states that they will pay a certain amount of money by a certain time. It may state the number of installments, as well as the payment of interest. The person receiving the loan will legally become obligated to pay the debt when they sign the note. Along with the amount of the loan, the interest rate, number of payment installments, and when it must be paid by, it also states any penalties for late payments.

You obtain a promissory note by either purchasing the note or lending to a borrower. If you are doing this privately, without the use of a real estate broker, you will most likely be subject to an “interest rate ceiling” that is determined by whatever state you are doing business in. If you are charging over the amount of the ceiling, then you would be guilty of “usury.” It is often helpful to use a mortgage loan broker to assist you in following the laws while still receiving a fair profit on your investment.

Setabay Loans

Dennis Dahlberg

23335 N 18th Drive Site 120

Phoenix AZ 85027

623-582-4444

www.SetabayLoan.com

Trust Deed Investing - How Does it work?

How exactly does Trust deed investing work?

With an understanding of the basics provided above, it is easier to understand the entire picture of Trust deed investing. To state is simply, it is investing in loans that are secured by real estate. You will find that most trust deeds are relatively short term loans. These

 generally mature under five year, but many loans are two years or even less than that. Professional real estate investors are taking advantage of the current economic climate. They are buying properties at the low foreclosure prices and then fixing them up and selling them for a sizable profit. The real estate professionals do have their work cut out for them though. They must have a sound understanding of the market and climate, as well as make good decisions regarding the property after its purchase. They also need the startup capital to purchase in the first place. Because the homes are generally already foreclosed, and many times are not “move-in ready” along with the risk factors of selling it in the future, banks are unlikely to lend. That is where the trust deed investor comes in. They lend to the borrower, charging high interest rates because essentially the borrower has nowhere else to go, but also because they are expecting a high return of 20-50% so they believe they can afford it. The investor makes money through the monthly payments on the initial capital as well as the interest rates until the loan is paid off.

While I understand that all investments come with risks, I want to be fairly safe in a solid investment. Is Trust deed investing for me? Do the risks outweigh the benefits?

While most trust deed investing opportunities are successful in receiving a profit, they can be risky. There are definitely some questions that you will need to ask yourself. Be sure that you are comfortable with the people you are working with. Do you know if the borrower has had prior experience? And what about his cash reserves? Can he/she handle the property and pay back the loan? And as mentioned before, this property will be yours if the borrower defaults on the loan. Be sure that you are comfortable owning such a piece of property. Not necessarily for yourself to live in but as a rental or with the potential to sell. Are you satisfied with the value of the property? Do you think that location has the potential to become a profitable spot? And this is not an investment that you can quickly get capital from. Unlike stocks or bonds, you cannot cash it in quickly. If you are comfortable with having that much money tied up for the long haul, then trust deed investing can be a good bet.

Also, take the time to talk to professionals at all stages of this process to decide how to proceed, and when. You can benefit from their expertise and advice. This is a pretty elaborate process and lots of collaboration is needed. Take advantage of their knowledge and get started with Trust deed investing!

Setabay Loans

Dennis Dahlberg

23335 N 18th Drive Site 120

Phoenix AZ 85027

www.SetabayLoan.com