Texas Hard Money Lender: June 2020

Saturday, June 20, 2020

What is a Trust Deed? Trust Deed Investing

What is a trust deed? A trust deed is also known as a deed of trust. It is a document that is used in real estate transactions when one party takes out a loan from another party to buy real estate. The trust deed represents the agreement between the lender and the borrower to have the property held in a trust by a neutral third party until the loan is paid in full.

Trust deeds are less common than they used to be in the past. Trust deeds are quite common in states like Arizona, California, Colorado, and Texas. Some states allow both trust deeds and mortgages.

In financed real estate transactions, a trust deed transfers the title to a third party called the trustee. The trustee is typically an attorney, a bank, or a title company. The trustee holds on to the title until the borrower has paid the debt back to the lender.

The purchase of a home or commercial business is a real estate transaction. The lender gives money to the borrower in exchange for a promissory note that is linked to a trust deed. The deed transfers the legal title to the real property to an impartial party (the trustee). Trust deeds take the place of traditional mortgages.

The trustee holds onto the legal title until the debt is paid in full by the borrower. Then the title to the property becomes the borrowers. If the borrow defaults on the loan, the trustee begins foreclosure and takes control of the property

Although trust deeds and mortgages are similar, they do have important differences.

Trust deeds and mortgages are used in loans for creating a lien on real estate. They are both recorded as a debt where the property is located. While a mortgage involves two parties, the borrower and the lender, a trust deed involved three parties. The borrower (trustor), the lender (beneficiary), and the trustee are all significant in trust deeds. However, contrary to popular belief a mortgage is not a loan to buy a property. Instead, it is an agreement to use the property as collateral for the loan. Trust deed and mortgages have very different foreclosure procedures. A trust deed uses a nonjudicial foreclosure which does not require a court to be involved while a mortgage uses a judicial foreclosure which means the lender sues the borrower. Once the lender has control of the property, they typically sell the property at an auction.

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.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Friday, June 12, 2020

Trust Deed Investing Arizona

A lesser-known option for investing in is trust deeds. They have high returns, a low entry point, and more security than many investments.

Investing in trust deeds gives you an opportunity to invest with lower risk and a higher chance of great returns, often in double digits. When people invest in real estate, they are generally experts in the industry. However, with trust deed investing, you do not need experience because this is not a hands-on investment.

Exceptionally High Returns

The stock market is completely unpredictable. You can have the best portfolio but there are zero guarantees it will perform well. However, when it comes to investing in trust deeds, you are guaranteed a specific return over a specified period of time. Generally, these returns are much higher than other investments produce.

Low Entry Point

You do not need a huge amount of money in trust deed investing. Typically, you can begin with as little as $20,000. When you invest in your own property it costs much more. Flipping a house, for example, will cost you much more than $20,000. Trust deed investing will give you just as good of a return as flipping a house if not better, which is why this investment is so lucrative. Less money up front and just the same high returns as other investments.

Security

Another great part of trust deed investing is the security investors will experience. Investment, high returns, and security generally don’t go together. However, trust deed investments carry a fixed rate of return so you are aware of exactly how much money you will make. This type of investment is not affected by the market. If the market goes up or goes down, you will still receive the same amount of return. You will know from the beginning what you are investing in and what your return will be. Peace of mind comes with trust deed investing.

Inveseting in Foreclosure Properties–How To Do It

How To Invest in Foreclosures

You’ve seen the TV programs where attractive young couples buy foreclosed homes, renovate them, and flip them for huge profits. They make it look easy.

While of course, the process of purchasing, renovating, and flipping foreclosed properties is a bit more complicated than it appears on TV, it is doable and you can make a profit from it. Here’s what you need to know before spending one dime on a foreclosed property.

Drive-By the Property

When the sales list comes out, peruse the list, and identify potential properties for purchase. You’ll want to visit them prior to the sale. Of course, you will want to get an idea of the condition of the property, but you also want to inspect the neighborhood.

First, research the property online. You will be able to determine how old it is, how many bedrooms and bathrooms it has, how many owners it had, how long the previous owner had it, what the property taxes are, and in many cases, whether permits were pulled to perform any renovations and what they were.

If the property is vacant you want to get as close as you can, without trespassing, to determine as best you can what condition the property is in. It is typical for foreclosed homes to show some degree of deferred maintenance because if the previous owner did not have the funds to pay the mortgage chances are they did not have the funds to make repairs or updates.

Look at the roof, the siding, the foundation, and the state of the yard. The exterior will likely give you an idea of what to expect in the interior. Expect to update all surfaces and renovate the kitchen and baths. Of the flooring, the roof, and the foundation, expect there will some work to do and budget for this contingency.

Determine Your Maximum Purchase Price - and Stick to It!

After you’ve visited the property and determined you can handle a renovation, you must determine your maximum bid. Your maximum bid should not be based upon what you can afford, but should be based on several objective factors, including the sale price of comparables on the market, what a potential buyer would expect in the property, what renovations bringing the property up to meet those expectations will cost you and how much value those renovations will add to the property.

Bear in mind that most sheriff’s or trustee’s sales are all-cash transactions.

Know Your Buyer

Here’s where your visit to the neighborhood pays off. Who will buy your renovated property? An established professional who commutes? A married couple with kids? A young first-time homebuyer? This will determine the type of renovations you do and the style in which you do them.

You will likely need to update most surfaces, including flooring, paint, and countertops. If the home is older, the kitchen and bathrooms may need updating. Who your prospective buyer is will determine the style.

Determine How to Add Value to the Property

Besides updating surfaces, you may need to make more significant changes to the property. For example, if the property is located in a neighborhood of homes with three bedrooms and two baths and the property you are considering only has one bath, you’d better believe you are going to need to add a bath. If homes with an open floor plan are selling in that neighborhood and the property you are considering is a warren of small rooms, you should consider taking down some interior walls.

When you drove by, you should have been able to see serious foundation issues or if the roof needs to be replaced, and whether you will need to improve the landscaping. Also, if you are considering purchasing an older home, you must be prepared to update the electric and remediate lead paint and asbestos.

Set aside at least 10% of your renovation budget for unexpected costs.

Research Comparables

You’ve seen the neighborhood, figured out who your buyer is, and determined what the home needs as far as you can. Now is the time to research properties that have recently sold that are comparable to your vision of your renovated property.

Once you have your recent comps, set a range of expected sale prices as the market will fluctuate in the time you take to renovate.

Set a Budget

Your budget should include the anticipated cost of renovations plus a 10% cushion and carrying costs. Your budget plus the purchase price of the property should be well below your ultimate sale price range. If it is not, you should pass on this property.

Be Prepared to Rent if the Property Does Not Sell

Not every property sells right away, and you have to be prepared in case yours does not. When researching comparable properties, also research what comparable rental properties rent for. This should factor into your decision whether to purchase because if you can’t rent for the number of your carrying costs, you will be in the red as long as you own the property.

Be conservative in your spending and realistic in your sale price, and you should do well. Good luck!

About the Author

Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy Philadelphia bankruptcy attorney.