Trust Deed Investing - How to Invest - Risks and Rewards

By Dennis Baranowski, Esq.

Geraci Law Firm

Investing in trust deeds is nothing new. Investors have often sought investment in either fractional or entire trust deeds because of the better than average rate of return and the security that comes in the form of pledged real property.

Unlike stocks or bonds, where the investor is relying on market conditions to dictate returns, investing in a trust deed typically offers a fixed rate of return in the form of monthly payments and in most cases a return of capital at maturity. This type of investment generally provides higher yields on capital with less risk than other market offerings.

The basic components of a trust deed investment are

1) a promissory note signed by the borrower and

2) a deed of trust which secures payment of the promissory note by establishing a lien 
against real property upon the recording of the deed of trust in the county where the real property is located.

The trust deed holder is the lender, just like a bank, credit union or other financial institution. Trust deed investment allows an investor to participate in a loan secured by real property by purchasing all or a portion of the note and trust deed attached to a particular property and borrower.

The investor can either purchase the entire loan or a just fractional share. An investor that has adequate capital will often finance all of a trust deed loan. An investor that is the sole holder of a trust deed loan will enjoy more control over their investment in that the investor will be the sole decision maker with respect to collection of late payments, foreclosure, modifications and forbearances. Fractional participation in a trust deed loan will result in less control over the investment than owning the entire trust deed loan, but it provides an excellent vehicle to introduce investors to investing in trust deed loans. With a fractional trust deed loan, the total investment required is often less than owning 100% of the trust deed loan and the risk of the trust deed loan is shared by two or more investors. The fractional trust deed investor trades off the decreased exposure to loss with the sharing of control over the oversight and management of the investment with the other investors.
Investors that prefer fractional trust deed investments often will participate in multiple fractional trust deed loans in order to spread the risk of loss rather than placing all of their eggs in a single basket.

Investment in trust deed loans offers an array of variables for each investment, including varying returns, property types, length of the loans, and risk profile. In most instances, a greater yield will be realized by investing in higher risk trust deed loans, such as second or third position deeds of trust and loans where the total amount of loans secured by the property represent a larger percentage of the value of the property, as opposed to investment in loans that are secured by first trust deeds with low loan to value ratios. Investing in multiple trust deed loans provides an excellent opportunity for consistent cash flow, since the chances that all borrowers will stop making payments is not likely, especially if the loans are properly underwritten.

Whether there is a single investor or multiple investors, a trust deed loan needs a loan servicer to manage the loan, including the collection of monthly payments on behalf of the investors and to disburse such payments, less fees and costs, to the investors pro rata. The loan servicer is often the broker who arranged the trust deed loan for the investors, but could also be a third party provider. The arrangement with the loan servicer is governed by a loan servicing agreement between the investors and the loan servicer. Typically the loan servicing agreement delegates authority to the servicing agent to receive payments, pay distributions to the individual investors, and communicate with and provide documentation to the borrower. The loan servicing agreement also provides instructions about the collection and deposit of funds, instructions on handling delinquent accounts, and limited power of attorney to enforce the deed of trust contract. The primary job of the servicer is to manage the trust deed investment account and protect the interests of all investors. This responsibility may include managing accounts that are not performing or are in default, and initiating collection activities. When investing in trust deed loans, emphasis should be on engaging a servicing agent who is experienced, competent, and lends confidence that he or she is looking out for your interest.

Most established servicing agents are good at what they do. They already have established systems in place to support the investors' interests actively. Part of that system is online tracking software that allows investors to view payment activity, confirm trust deed loan details, and determine the status of their investments at any given time.

By working with a broker that understands the private trust deed market, and contracting with an experienced and highly competent servicing agent, trust deed investments can be a lucrative endeavor. These types of investment typically demand an 8% to 14% annual interest rate, with loan terms ranging from 1 to 20 years. Investment returns will vary based on the type of property, the condition of the asset, location, type of loan, and qualifying factors of the borrower. 

With the right team in place and a proper amount of due diligence on each deal, a qualified investor can participate in the trust deed marketplace with confidence that they will achieve positive results.



Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com
http://www.Level4Funding.com
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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

4 Ways to Make Non-Performing Notes Work for YOU!

Note investing is a little known investment strategy that allows you to basically be the bank. As a note investor, you purchase debts from financial institutions and then collect interest on the debt until it is repaid. Some types of notes you can purchase are credit card notes, store financing debts, auto loans, and even home mortgages. Once you own the note, you collect the interest. Depending on what type of note you purchase, note investing is a very safe and passive investing strategy. You buy a note and sit back and make money.

However, not all notes are created equal. Credit card notes and store debts are unsecured, meaning there is not collateral to fall back on in the case of default. They usually earn you higher interest but come with a much higher risk. Mortgage notes are usually fairly safe because the physical property can be used as collateral in the event of default.

If you are interested in purchasing mortgage notes, you can make your money work double or even triple by purchasing non-performing notes. Non-performing notes are pretty much exactly what they sound like, debts that are currently in default. While this may sound like a crazy idea, it has many benefits. Here are a few benefits of purchasing non-performing notes that you NEED to consider.

1. Non-performing notes can maximize your profits while minimizing your initial investment. A $200,000 note will cost you significantly less because it is currently in default, meaning the borrower is not repaying their debt.

2. Once you own the note, you can set about the process of rehabbing it. Just like you would fix up a house, you can fix up a note. Depending on your end goals, there are a few ways to go about this. If the note is for a property you would like to own as an investment, you can foreclose and take possession of the property. Since you got the note at a discount this means you get the property for a significant discount as well.

3. If owning the property is not your end goal, you can re-negotiate the terms of the non-performing note with the borrower. This basically involves changing the terms of the note so that the borrower is able to start making payments and get out of default on the note.

4. Once the non-performing note is performing again, you can either hold onto it and earn interest, or you can sell it as a performing note for a considerable profit.

While non-performing notes are a great way to make money, it is important to remember that there is still risk involved, especially if this is your first time investing in notes. The laws and regulations surrounding note investing are complex so don't try to go it alone. Call the professionals at Level 4 Funding today to get started purchasing non-performing notes.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

How to Make Money: 3 tips for Investing in Notes

Whether you know it or not, you are already investing in notes, just probably on the wrong side of it. Note investing is the process of buying a debt that is owed and earning interest on that debt until the principal is repaid. If you interested in investing in notes, it is important that you learn all the facts so you know what you are getting into. Here are 3 quick tips to make investing in notes easier and more successful.


1. Do your research and decide which type of note you want to buy. If you are investing in notes, you can purchase credit card notes, auto loan notes, and mortgage notes among a few others. Credit card notes have the potential to earn high interest rates (just think of how much you end up paying if you carry a balance) but are also higher risk because the debt is unsecured. With an auto or home loan, the note is secured by collateral. Many experts prefer mortgage notes when investing in notes because they are a relatively safe options with the potential to make high profits over time.

2. Consider buying non-performing notes. A non-performing note is a note that is in default, meaning the borrower is not making payments on the debt. Non-performing notes can often be purchased at discounted rates and can be rehabbed. Just like a fix and flip property, you can fix and flip a note by either re-negotiating the terms with the borrower, or foreclosing and selling the collateral. This is only an option if the note is a secured debt. Once the note is current again, you can sell the note and make a nice profit.

3. Always work with a financial professional. Investing in notes can be complicated and there are many different laws, regulations, loop holes, and other details that the average person doesn't know about. Use a broker or financial professional to help make sure your investment is secure.

If investing in notes sounds like a great investment strategy, that's because it is. It can be an effective way to earn high interest each month without having to worry about the ups and downs of the stock market. If you are ready to start investing in notes, call us at Level 4 Funding today! We specialize in alternative investment strategies and can help you every step of the way!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

How to Earn More and Work Less with Note Investing

Whether you know it or not, you are probably already involved in note investing but on the wrong side of it. Investing in notes is the process of buying debt in the form of credit cards, student loans, mortgages, or car loans. But instead of making payments, you collect payments from the borrower, which include a higher than average interest rate.

Many investors think that note investing sounds too good to be true, or may even think it is a scam. This could not be further from the truth. Note investing is simply the process of purchasing debts that borrowers owe. Once you purchase the debt, you earn interest each month until the debt is paid in full by the borrower. This interest can range anywhere from 3% on a mortgage note to well over 15% on a debt like a credit card. The interest rate is not subject to changing market conditions so you earn the same rate over the life of the loan, which can be anywhere from a few months to 30 years, depending on the terms of your investment.

While there are many types of note investing like credit cards or car loans, there are some specific advantages that come with investing in real estate notes. Investing in notes that are tied to the real estate market is very similar to trust deed investing. Basically, you purchase a mortgage debt from a bank. The bank benefits because there is less of a risk of loss in the case of default because it has capital from you. You benefit because you can now start earning the interest that is paid by the borrower each month. While this may be a relatively low rate, it is usually a high payment due to the amount of money involved in the transaction. You can earn hundreds every month compared to a credit card note which may have a higher interest rate but generally a lower balance so the monthly interest payment is less.

Higher monthly payments makes real estate note investing one popular way to start investingin notes is to invest in real estate notes. In this situation you basically buy a promissory note that is part of a mortgage. You hold the note and earn interest. You receive payments each month until the mortgage is paid in full and then you get back your initial investment. You don’t have to work for your payments, you sit back and let the cash flow in.

Risks and Benefits of Non-Performing Notes

Real estate note investing also has an extra opportunity for smart investors to earn high returns, non-performing notes. A non-performing note is exactly what it sounds like, a debt that is currently not being paid. When a mortgage is not being paid, the bank has two options, foreclose on the property or sell the note to an investor. While several years ago foreclosure was the first choice, many banks are now opting to sell non-performing notes.  By selling the note rather than going through the expensive and sometimes drawn out process of foreclosing, a bank stays out of the chain of title, doesn’t become liable for the property’s environmental conditions and doesn’t have to worry about ownership issues. The sale of non-performing notes is a cheaper alternative to foreclosure.

Once you own a non-performing note, you basically fix up the note the same way you would fix up a property. You can renegotiate the terms of the note with the borrower if you goal is long term monthly payments and interest earning. Or, if you would prefer to own the actual property that you hold the note on, you can foreclose on it and take possession. From here you can rent it out, fix and flip it, or hold onto it until it appraises for the amount you want to sell it for. Regardless of which avenue you take, you will make a profit on your non-performing note.

The greatest risk with non-performing notes is that you will lose money during foreclosure. You can help make this less likely by knowing all the laws related to foreclosure in the state where you own the note. Make sure to take into account any extra expenses the foreclosure process may entail.

Call us today to get started with note investing and non-performing notes!

At Level 4 Funding, we specialize in alternative investment strategies like investing in notes. We can help you through the process to help you start working less and earning more!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Investing in Non-Performing Notes: A Win-Win for Borrowers and Investors

Investing in notes is a relatively safe investment strategy that pays consistently high interest rates with low risks. While note investing can yield high returns, investing in non-performing notes can have even bigger payouts. However, there are more risks involved in non-performing notes so it is important for investors to be aware of all risks and benefits.

Have you ever heard of investing in notes? Probably not, but you are most likely already doing it. If you have a credit card, car payment, student loan, or mortgage, you are in the note investing business. But, you are on the wrong side of it. You are paying interest on a note to a bank or note holder instead of earning high interest rates by being the bank. When you purchase a note you become the bank and have many of the advantages like high interest rates and security that the bank has. This includes the ability to renegotiate the terms of the note in some cases, earn higher than average interest rates, and have a consistent interest income that is not dependent on market conditions. If this sounds like it is too good to be true, it is not. Note investing is a little known but very legitimate type of investment that money savvy investors and banks take advantage of regularly.

One popular type of note is a real estate note. Real estate notes are generally safe investments because they are backed by actual physical collateral, the property that they represent the title to. Real estate note investing also has an extra opportunity for smart investors to earn high returns, non-performing notes. A non-performing note is exactly what it sounds like, a debt that is currently not being paid. When a mortgage is not being paid, the bank has two options, foreclose on the property or sell the note to an investor. While several years ago foreclosure was the first choice, many banks are now opting to sell non-performing notes.  By selling the note rather than going through the expensive and sometimes drawn out process of foreclosing, a bank stays out of the chain of title, doesn’t become liable for the property’s environmental conditions and doesn’t have to worry about ownership issues. The sale of non-performing notes is a cheaper alternative to foreclosure.

Benefits for Investors and Borrowers

As an investor, you can purchase the non-performing note from the bank for a discounted price. Once the note is purchased, the investor goes about rehabbing the note to turn it into a performing note that can greatly increase in price. As the investor you have a couple options when it comes to rehabbing the non-performing note. You can work with the borrower to negotiate different loan terms. This is a good option if you don’t want to own the actual property but you want to earn monthly payments, including interest. It can also work out well for the borrower who can avoid foreclosure and further negative marks on his/her credit.

A second option to rehab a non-performing note is to foreclose on the property. This is a good option if you want to sell the property for a profit or if you are a developer looking for cheap land and buildings for a new project. This is only a good option if you want to own the actual physical property at a discounted price. Many experts advise that this can be a great strategy to get a multi-family or commercial property for much less than the appraised value.

Danger, Buyer Beware!

Like any investment, non-performing notes have some risks associated with the investment. You can help yourself risk less by taking a few critical steps to protect your investment:

·         Know the foreclosure laws in the state where you purchase the property. Some states require you to go to court and go through the process of judicial foreclosure with takes longer and can cost more money. If you are getting a great deal it may still be worth it, but it is important to know about all the issues upfront.

·         Get as much information about the physical asset as possible. Know the location, market value, condition, and any other pertinent details about the property.

·         If possible, get a home inspection and appraisal done prior to purchasing the note, especially if you want to own the actual property. This will help protect your money.

·         Find the right lender who knows the ins and outs of the non-performing note business. Not just any bank will do, make sure your financial professional understand note investing and has done it before.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Take the Advice of Financial Experts, Start Investing in Notes Today!

Investing in notes is a way to invest in real estate without the hassle of actually buying a property. It has many advantages including less maintenance, higher interest, and more versatility than purchasing an actual property.

Smart investors know that it is better to get a mortgage payment than a rent check. This means that they understand that investingin notes is more lucrative than purchasing a property and dealing with tenants. With notes you can get monthly cash flow and also have the potential to earn higher returns. With real estate, as opposed to notes, it’s not as passive because you have to deal with tenants, maintenance, broken leases, and a number of other headaches. Even if you buy a property to fix and flip, you still have to fix up the property and sell it, which is much more work than simply purchasing a note investment and letting your money do the work for you.

If investing in notes sounds intriguing, there are a few things you should know about the logistics of noteinvesting before you get started. When you buy a note, you basically are buying someone’s debt or mortgage. Each month, you earn the interest payment on the mortgage note. You earn a consistent rate that is stable for the lifetime of the note. This means you investment is protected from market fluctuations or crashes in that the interest rate won’t drop. Since the note is backed by the actual property, you are even protected in the event of borrower default.

Many new note buyers are afraid of Foreclosure. However, if you are note investing, you are often more protected than if you are a landlord. For example, if a tenant of a rental property doesn’t pay rent, you have to take the tenant to court by filing for eviction. Not only do you lose rent, but you have to evict them, pay court costs, fix the property and re-rent the unit. Usually, these expenses will never be reimbursed because many tenants do not have assets (usually the reason they are renting instead of buying). With a homeowner, if they miss any payments and there’s equity in the property, you can collect the missed payments, late fees, corporate advances and any attorney fees. You can draw up your note documents to cover these fees using equity in the property. There’s also a significant difference between a homeowner’s mentality and a tenant’s mindset. The homeowner usually has more invested into the property due to pride of ownership. Most people do not want to lose their home and will make paying their mortgage a priority, even during times of financial stress.

3 Easy Ways to Risk Less with Note Investing

While real estate note investing is a relatively safe investment strategy because it is backed by physical collateral, there are still risks involved. Mainly, there is a risk that the borrower will default and the home will have no equity. This will lead to you losing money. While this is a risk, there are ways to make this risk less likely.

1.       Do your research on the note you are buying. Don’t buy a note on a house that you would not want to own. Now, this does not mean you would want to live there, but only purchase notes that would also be good real estate investments. Choose properties that are in good areas of town and that have consistently appreciated in value. This will help ensure that there is equity in the property if it ends up needing to be foreclosed on. The more equity in the property, the more likely you will be to get all of your money back as well as any fees incurred during the foreclosure process.

2.       Work with a financial professional. Note investing can be very lucrative, it is not something most people can manage on their own. It is well worth the small monthly fee you pay to a private investor to help you manage your note portfolio.

3.       Know your options. There are many ways to make money investing in notes. You can rehab a note, buy non-performing notes, sell your notes, or even borrow against your notes. Make sure you know all the ways your note can work for you.

If note investing soundslike a great way to earn money, that’s because it is!

Follow the advice of smart investors and financial advisors by investing in notes. Call Level 4 Funding today to find out the types of notes that will fit into your budget and start making your money work for you!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

How to Be Successful and Make Money with Note Investing

Whether you know it or not, you are probably already involved in note investing but on the wrong side of it. Investing in notes is the process of buying debt in the form of credit cards, student loans, mortgages, or car loans. But instead of making payments, you collect payments from the borrower, which include a higher than average interest rate.

Many investors think that note investing sounds too good to be true, or may even think it is a scam. This could not be further from the truth. Note investing is simply the process of purchasing debts that borrowers owe. Once you purchase the debt, you earn interest each month until the debt is paid in full by the borrower. This interest can range anywhere from 3% on a mortgage note to well over 15% on a debt like a credit card. The interest rate is not subject to changing market conditions so you earn the same rate over the life of the loan, which can be anywhere from a few months to 30 years, depending on the terms of your investment.

While there are many types of note investing like credit cards or car loans, there are some specific advantages that come with investing in real estate notes. Investing in notes that are tied to the real estate market is very similar to trust deed investing. Basically, you purchase a mortgage debt from a bank. The bank benefits because there is less of a risk of loss in the case of default because it has capital from you. You benefit because you can now start earning the interest that is paid by the borrower each month. While this may be a relatively low rate, it is usually a high payment due to the amount of money involved in the transaction. Even at 3.5%, you can earn hundreds every month compared to a credit card note which may have a higher interest rate but generally a lower balance so the monthly interest payment is less.

Benefits of Real Estate Note Investing

As discussed above, high monthly payments are one key benefit of investing in notes that are related to real estate. In addition to high payments, there are several other benefits that are unique to real estate note investing.

1.       Borrowers are less likely to default completely on their home loan. While foreclosure does happen and is a risk, most borrower are emotionally tied to their home. Even if other debts end up being defaulted on, they are less likely to want to risk losing their home so a mortgage payment will often be a priority, even during times of financial stress.

2.       The note is backed by a real, tangible asset. In the event of default, the property can be foreclosed on and some of your investment can be recouped. This is simply not the case in many other types of note investing. Take credit cards for example, if a borrower defaults, his credit will be impacted but credit cards are unsecured debt, meaning that there are no physical assets that can be used to recoup your funds.

3.       Note investing can be very profitable. Especially if you buy a non-performing note and spend time to rehab it. This means you buy a note that is close to or in default and renegotiate the terms of the loan with the borrower to avoid foreclosure. You then earn interest and the note itself becomes more valuable. In some cases, these notes can be worth nearly 12% interest each month.

4.       Less competition. Investing in notes is a niche investment market. There are only a few private equity firms and hedge firms that use this investment strategy and the pool of individual investors is even smaller. This means no bidding wars and often puts you in a great position to negotiate price and terms.

5.       Easy, passive investing. You can have a financial company manage your note for you for a flat fee that is usually quite small. In addition, if the note is performing there is almost not managing necessary. You get to sit back and earn money every single month.

Call Level 4 Funding to learn more about investing in notes today!

Note investing is a great strategy to build your investment portfolio and has the potential to help you earn big bucks. Call us today to get started!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027