Trust deed investing is a great way to invest with very little risks and substantial rewards. Investors have two possible routes to go with investing in these deeds. The correct background and information makes it easy to decide which option is most suited to an individual's needs.
The two options to consider is to buy an already existing promissory note or to make a direct loan. The process can be likened to a traditional mortgage but with a slight difference involved. In these deeds there are 3 parties involved; the lender, the trustee and the borrower. The trustee is a separate entity that holds the rights of the property by law until the person who made the loan can repay it completely.
Real estate professionals are very much in the business of buying properties at foreclosure prices. These properties are obtained at bargain prices. They spend time and money fixing up these properties to the desired level and then resell them for usually a relatively decent profit.
The only problem with this in today's economic climate is that banks are not willing to loan to these real estate professionals. Very often the property which they wish to use as security needs to have work done to it and the bank sees it as a risky investment. Banks have also suffered greatly with not enough care being taken in loan agreements in the previous year, resulting in bad loans in their books. They usually do not want to be put at risk of having these figures pushed even higher.
Some of the risks that are involved with insufficient research can be disastrous. Things like the litigation and title deeds need to be sufficiently researched for at least 3 months prior to requiring the property. If the property is involved in legal proceedings of any kind it can also become a problem later on. Worst case scenario the investor ends up in a timely lawsuit that they need to pay all costs of and the property is lost to another title holder.
Investing in whole deeds is also possible; the promissory note is then 100% in the ownership of the investor. To make this possible the investor must have enough money to cover the whole loan amount. A promissory note is handed to the lender so the insurance can be made out in the name of the purchaser.
When these investments are fractionalized the deed is effectively shared between no more than 10 investors equally. This option is much more accessible to most first time investors and investors who don't have sufficient capital to invest in whole deeds.
When considering trust deed investing there are multiple factors to include in the decision making process. Be aware of all the pitfalls and make a wise and informed decision as the effects can be detrimental if proper research is ignored.
The two options to consider is to buy an already existing promissory note or to make a direct loan. The process can be likened to a traditional mortgage but with a slight difference involved. In these deeds there are 3 parties involved; the lender, the trustee and the borrower. The trustee is a separate entity that holds the rights of the property by law until the person who made the loan can repay it completely.
Real estate professionals are very much in the business of buying properties at foreclosure prices. These properties are obtained at bargain prices. They spend time and money fixing up these properties to the desired level and then resell them for usually a relatively decent profit.
The only problem with this in today's economic climate is that banks are not willing to loan to these real estate professionals. Very often the property which they wish to use as security needs to have work done to it and the bank sees it as a risky investment. Banks have also suffered greatly with not enough care being taken in loan agreements in the previous year, resulting in bad loans in their books. They usually do not want to be put at risk of having these figures pushed even higher.
Some of the risks that are involved with insufficient research can be disastrous. Things like the litigation and title deeds need to be sufficiently researched for at least 3 months prior to requiring the property. If the property is involved in legal proceedings of any kind it can also become a problem later on. Worst case scenario the investor ends up in a timely lawsuit that they need to pay all costs of and the property is lost to another title holder.
Investing in whole deeds is also possible; the promissory note is then 100% in the ownership of the investor. To make this possible the investor must have enough money to cover the whole loan amount. A promissory note is handed to the lender so the insurance can be made out in the name of the purchaser.
When these investments are fractionalized the deed is effectively shared between no more than 10 investors equally. This option is much more accessible to most first time investors and investors who don't have sufficient capital to invest in whole deeds.
When considering trust deed investing there are multiple factors to include in the decision making process. Be aware of all the pitfalls and make a wise and informed decision as the effects can be detrimental if proper research is ignored.
About the Author:
If you want information about trust deed investing, visit the home pages online at www.investtrustdeeds.com today. You can see details about services at http://www.investtrustdeeds.com now.
No comments:
Post a Comment