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Somewhere along the line you thought about investing in real estate but were afraid or unsure of what it might take to be a landlord or own a rental property. Here is a perfect solution that gives you the same cash flow without all the headaches. A Trust Deed investment is a loan, with real estate as collateral to protect you, acting as the private lender.  A borrower applies for a real estate loan with a loan originator, such as a mortgage lender or mortgage broker. The borrower promises to repay the loan amount plus interest, by making payments according to the terms of a note. The lender secures the promise to pay by using a mortgage or Trust Deed, with the real estate as collateral. If the borrower does not make the loan payments as agreed, the lender may foreclose on the real estate to recover all overdue payments, late fees and the balance due on the loan. The borrower loses the home, and forfeits any equity to the lender. In some cases, additional collateral or personal guarantees may also be used to provide further security and protection for the lender. Title insurance and property insurance are also used to protect the lender.

What type of return can I expect if I invest in a Trust Deed?

The typical return on a Trust Deed investment is between 10% and 15%. For example, an investment of $50,000 at a 12% rate earns $500 per month, which totals $6000 per year. A simple way to figure out how much you would earn per month on any size Trust Deed investment with a 12% rate is to calculate your investment by 1%. For example, an investment of $100,000 x 1% = $1000 per month. Also when compared to other unsecured investments such as stocks or 401k's, Trust Deeds offer real property as security. There are other secure investments such as FDIC banks that offer CD's and bonds, but the rate of return is typically less than 5%.

Why would the borrower want to pay a high rate for a mortgage, when lower rates are available at banks?

While there are many reasons borrowers pay higher rates for private mortgages, such as lower credit scores or lack of time on the job, the main reasons are because banks typically take 45 or more days to close a loan, they want a lot of documentation from the borrower to approve the loan, and the property must conform to their underwriting standards, which means it can't need repairs. The typical private mortgage borrower is someone who is purchasing a home to rehab, flip, turn into a rental, or buying a lot to build a home, and therefore will not have the loan for more than 12 to 24 months. There are borrowers that need these higher rate loans as a means to getting a lower rate loan in the future. These borrowers usually either have a lot of equity in a home they already own with a lack of, or poor credit, or they have a large down payment to buy a home but again have a lack of or poor credit. The idea with these borrowers is that a short term loan gives them the time they need to fix whatever is preventing them from getting a conventional mortgage. Most credit deficiencies can be corrected within 6 to 12 months.      

Want more info? Click on the page titled "Introduction to Trust Deeds" to the left or contact us today.

Three Questions To Ask Yourself About Your Investments:

If You Answered 'No' To Any Of Those Questions,

It May Be The Right Time For You To Invest In Real Estate Secured Trust Deeds... With Secure Deeds LLC.

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