No matter what angle you put on it or how savvy you are, investments are always a gamble and can be tricky. So, is it a smart move to invest in trust deeds?
First things first. What exactly is trust deed investing? Trust deed investing is when someone loans money to someone else; also known as the lender and the borrower. The borrower puts up property as collateral which is a trust deed investment. The property can virtually any property they own. Investing in a trust deed is literally granting a private mortgage.
The Cons
The biggest con when considering trust deed investments will be a foreclosure. This can be a legally complicated and lengthy ordeal. Foreclosing on a property means there is a chance you will not get your entire investment returned. It is critical that anyone investing in trust deeds has a broker. A broker is an essential resource for investors. Brokers can help navigate the loan process, give valuable information, and help the investor whether to pass or invest in deals.
Trust deed investments can be worrisome because the FDIC does not ensure trust deeds meaning you have absolutely no guarantee your investment funds will be returned. This is another reason to work closely with a broker. They can advise you on the best course of action for your investments. Working directly with a borrower is risky because of your conflicting interests. However, a third-party broker can more easily produce an outcome where everyone is content.
The Pros
Most investors own their own property and have a decent amount of knowledge when it comes to real estate. Real estate investors conduct research prior to purchasing a property. Trust deeds are secured by real, tangible collateral. Because the collateral is tangible if the loan goes into default and you are forced to foreclose on the property. As long as the property has value it is generally a safe investment. There is a good rate of return on trust deed investments. Of course, it depends greatly on the type of property and the condition it is in. Generally, the returns seen most often with trust deed investments are between 10% and 13%.
How to Get Started in Trust Deed Investing
There are four main ways to invest in trust deeds. You can personally source individual loans and directly lend money to real estate investors, invest in a fund that then invests in trust deeds, purchase loans backed by real estate brokers, or identify people or groups that are directly investing in trust deeds.
Just as with any investment, experience and knowledge play a big part. Trust deed investing works best when you have knowledgeable people around you.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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