Learn To Be A Fix & Flip Investor: How to Make Money with Trust Deed Investing

Thursday, October 8, 2015

How to Make Money with Trust Deed Investing

Trust deed investing can provide substantial rewards with minimal risks for investors. There are a few different ways to get started in trustdeed investing and finding the right financial professional to help you can make all the difference.

Most investors know about stocks, bonds, and real estate investing. Real estate investing can be a very lucrative way to build your investment portfolio. You can invest in real estate in a number of ways like buying a fixer-upper, or purchasing a home to rent out. While almost everyone knows about making money on a fix and flip or as a landlord, there is another, less common type of real estate investing called trust deed investing. Trust deed investing involves three parties, the borrower, the bank, and the trustee. If you are investing in deeds of trust, your role is that of the trustee and you act as an intermediary between the borrower and the lender. You hold the legal title to the property until the loan is paid off or unless there is a foreclosure.

As the trustee, your job is basically to protect the lender in the event of default. If the borrower defaults on the loan, the lender would have to take the borrower to court and could not foreclose on the property until after a lengthy legal process. By using a trustee, the lender has a second option. The trustee can foreclose on the property on the lender’s behalf and help the lender recoup its investment. In the event of a foreclosure, some of the sale proceeds go to you as the trustee to help recoup your investment as well.

While you can earn back your investment in the event of a foreclosure, the real benefit of trust deed investing is when all is going well. The bank or lender will pay you interest rates into the double digits to hold the title to the property. As long as the borrower is making on time payments, you are earning interest every month. Once the loan is paid in full, you also get your initial investment back. You can purchase deeds of trust through a private lender or other investment professional.

Pitfalls of Trust Deed Investing and How to Risk Less

Trust deed investing is generally considered a relatively safe investment because it is backed by real property than can be used as collateral in the event of default. However, like any investment there are risks. Namely, deeds of trust are not insured by the FDIC so there is not guarantee that you will get your money back. Also, if the borrower declares bankruptcy then the home cannot be easily foreclosed on without a lengthy legal process. Depending on the outcome of this process, it is possible to lose some or all of your investment.

These risks are not unique to trust deed investing as every type of investment does have some inherent risk. There are a few ways to minimize these risks and maximize your profits. First and foremost, work with a private lender or equity firm that is experienced in trust deed investing. Make sure that your lender has loaned on deeds of trust before and can explain the process to you, including any and all risks.

You can also help mitigate risks by doing your due diligence. Research a property’s title status and market value. This will help you make sure there are no issues with the title that would prevent a foreclosure. Knowing the market value will help you ensure that the property will be worth the amount of the loan or more in the event of default. This is especially important because the bank will get paid back before you do so you want to be sure there is enough money to recoup your investment.

Find the right lender to guide youthrough the process of trust deedinvesting!

The right lender is key to helping you navigate the world of trust deed investing. Make sure you choose someone who is experienced and knowledgeable about deeds of trust and how the investment process works.