TRUST DEED INVESTMENT
Trust deed investments are high-yield real estate loans that are secured by real property. These are individual investments and recorded on individual properties.
Trust deed investing is loaning money collateralize by real estate. In other words, they are privately funded mortgages. The investor loans money to the borrower and the loan is secured by real property. In many cases, loan is secured by the borrower’s personal guarantee. The “deed of trust” is the document used to secure the loan against the assets. It acts like a mortgage and is used as security for reimbursement of the loan. If the borrower defaults, the lender can take possession of the property.
Trust deeds are always attached to a note with a set interest rate, from 7.00% to 9.00%. Loans are usually interest-only loans or fully amortized for long term investment. Loan terms are from 3 to 20 years depending on investor preference. Real estate as collateral protects your investment funds and less risk.
Two ways to invest in trust deeds; Individual or fictionalized trust deed investing.
Individual: This type of trust deed investing refers to an investor that fully funds a loan on one particular property. As the note is paid, the investor receives their rate of return stated on the note.
Fictionalized: This type of investing refers to a group of investors, each funding a certain percentage of the full amount of the loan; Note is split up into different investors, each contributing equal amount, earning same rate of return. All investors are vested on the recorded security document and share profits based on ROI of initial contribution.