Investors are always looking for the next best investments. Trust deed investing is one of the best ways to build a passive income. Passive income involves minimum oversight, and it will continue to add revenue streams.
We know investing with private money can be scary, so we’ve created a beginner’s guide to trust deed investing to help investors understand what trust deed investing is, its benefits, and the basic steps to starting your first investment.
What Is Trust Deed Investing?
Trust deed investments are available in California and 19 other states. It involves buying commercial or residential loans backed by real estate, like banks investing in mortgages. The loans can be short or long term, depending on the strategy of the investor or fund manager.
To get into the trust deed investing market, you can directly create individual loans for homebuyers or purchase loans from brokers who made the loans.
Opportunities for trust deed investment can vary depending on your investment goals. From land to rental homes to flips, properties can differ, and all mortgage notes are therefore different and have varying levels of risk.
Advantages of Trust Deed Investing
One of the most significant advantages of investing in trust deed investment is that, unlike stock investments, which can disappear at any time, this investment is secured by property with real value. Other advantages of trust deed investing include:
- Monthly income: Trust deed investing is for you if you’re looking for extra monthly income for your retirement fund, living expenses, or savings account.
- Rollover options: You can roll over your investments automatically so that you don’t miss out on earning interest or opportunities.
- IRA friendly: Trust deed investing provides opportunities for investors to use their self-directed IRAs or Roth IRAs.
Quick Guide to Trust Deed Investing
Now that you know the basics of trust deed investments, follow these steps to start your first investment:
Find a Mortgage Note Broker
The key to trust deed investing is finding the perfect note. Different lenders will offer various property types and prices. You need to find a mortgage note broker that aligns with your price point and real estate.
Evaluation & Underwriting
After finding your mortgage note broker, you have to apply for note investing. When you apply, you have to provide information on your ideal price range, preferred property types, and investment history. You may have to show proof of income, funds, or collateral. Once approved, you can choose a note to purchase.
Purchase & Earn From Your Investment
The broker will send you a list of active mortgage notes to select from once you’re approved. The broker’s list of notes will include:
- The property’s description
- The loan amount
- The annual interest rate
- The duration of the loan
- The loan-to-value ratio
- An exit strategy
This information is essential to selecting a trust deed investment. After you choose your investment, you can begin earning on the interest immediately.
Investing in trust deeds is a great way to earn monthly income and begin your real estate investment journey. Knowing the basics of trust deeds, finding a good broker, and choosing the best note are essential to trust deed investing.
We hope this beginner’s guide to trust deed investing helps you on your real estate investment journey. If you’re ready to start investing, apply with us at Val-Chris Investments for a safe, secure, comfortable journey to success.