When deciding where to invest your money, every investor must analyze the risk vs. reward of their possible choices. If trust deed investing has come across your radar and you want to know more about it, it is important to weigh all of the factors. Not only the potential benefits and returns, but how this investment works at the core.
What is a trust deed investment?
The basic premise of a trust deed investment is a loan is provided to an individual who requests it, but it is specifically backed by real estate collateral. The individual who requests a loan pays back interest at regular intervals, and then eventually the principal on the loan maturation date. Since the loan is backed by real property, the investor is secured by the value of this property.
The Bottom Line: Investor Benefits
Investors know that there is one major benefit that they are most concerned with, and that is simply return on investment. How much percentage can you get back after investing X amount of dollars. With trust deed investments, the interest rates paid by borrowers are higher than conventional home loans from banks. This is due to the fast turnaround times, simpler loan structure, and much easier access to the money. The borrower is getting the valuable service of a quick, easy to obtain loan, and the investor receives the benefit of higher interest rates returned to them. Other benefits:
- Review appraisals and do due diligence yourself, guided by an investment company
- Receive double-digit interest and loan principal payments every month from the borrower or the designated servicing company
- Hold the 1st trust deed to the property the entire time while waiting for the loan to be paid back
The Trust Deed Investment Cycle
Many private money loans are short term, while the buyer secures more traditional financing. This means the investor stands to gain monthly interest payments and then their full investment back once the buyer is able to get that traditional loan from a bank. As the investor, you get your money back, ready to be recycled back into another round of trust deed investing. In this way, the money that you invest will constantly be working at higher than average interest rates. The security lies in the fact that you have a 1st trust deed the entire investment period, and are typically bought out from the loan by a conventional bank.
When analyzing these factors for investment it is important to understand the structure and know what to expect. Trust deed investing offers excellent return rates backed by real property, but does require you to have an experienced lender backing you. Call us today for an investor packet and to weigh the benefits of this valuable service.