Important Facts About Trust Deed Investments
With the current economic times, having an extra source of income on top of what you already earn is a sure way of having a financially secure future. Trust deed investments are among the lucrative investments that one can go for when looking for places to invest. It is characterized by high maturity rates of not more than five years, and precisely less than two years. The reason for trust deed investing is because of the limited sources of funds for real estate investors.
The borrowers in these investments are normally real estate investors with ready plans for making huge returns from their deals. Therefore, when they have a deal that is likely to mature into something big within a short time, they look for loans to finance their plans. The only thing that they have to assure the loaner is that they are willing to pay back the full loan given to them plus some interests.
A trust deed investment is different from other loans, savings and bank deposits. This is because the latter are normally secured by insurance from federal agencies. The principal in this case is therefore not insured. The loan given has to be repaid back within a given period of time which is predetermined before the actual issuance.
Trust deed investing is much more attractive because when structured properly the returns are really attractive. This is coupled up with a relatively low risk. The investors normally get single-digit returns on the high end every year. This investment is therefore more favorable when compared with other investing options within the same risk profile. The margin of safety found in trust deed investment normally mitigates the risk of making losses.
A margin of safety is created by the difference between loan amount and the property value. If the borrower defaults in payment, then the lender has the option of foreclosing the property and selling it. The proceeds from this sale should give him back his investment and the interest that has accrued.
These investments are normally associated with conservative loans. This is to mean that the value of the property is more than the amount issued out as loan. Losses are therefore hard to occur in such a situation. If planned well, the investor has the ability to get a loan-to-value of more than 65%.
It is imperative that one understands some facts about the investment prior to choosing it. First, it is hard to turn the investment into cash by simply deciding to ask back for the invested amount, thus not liquid. You therefore have to wait until the loan is repaid back by the borrower. This is however the opposite of what happens with municipal bonds and blue chips.
There are four ways through which one can venture in trust deed investments. The simplest one is by looking for an individual loan and then lending it to the real estate investor. The other option is to invest in funds aimed at trust deed or buying loans from brokers with real estate as security. You can as well join a group that is going for this type of investment.
The borrowers in these investments are normally real estate investors with ready plans for making huge returns from their deals. Therefore, when they have a deal that is likely to mature into something big within a short time, they look for loans to finance their plans. The only thing that they have to assure the loaner is that they are willing to pay back the full loan given to them plus some interests.
A trust deed investment is different from other loans, savings and bank deposits. This is because the latter are normally secured by insurance from federal agencies. The principal in this case is therefore not insured. The loan given has to be repaid back within a given period of time which is predetermined before the actual issuance.
Trust deed investing is much more attractive because when structured properly the returns are really attractive. This is coupled up with a relatively low risk. The investors normally get single-digit returns on the high end every year. This investment is therefore more favorable when compared with other investing options within the same risk profile. The margin of safety found in trust deed investment normally mitigates the risk of making losses.
A margin of safety is created by the difference between loan amount and the property value. If the borrower defaults in payment, then the lender has the option of foreclosing the property and selling it. The proceeds from this sale should give him back his investment and the interest that has accrued.
These investments are normally associated with conservative loans. This is to mean that the value of the property is more than the amount issued out as loan. Losses are therefore hard to occur in such a situation. If planned well, the investor has the ability to get a loan-to-value of more than 65%.
It is imperative that one understands some facts about the investment prior to choosing it. First, it is hard to turn the investment into cash by simply deciding to ask back for the invested amount, thus not liquid. You therefore have to wait until the loan is repaid back by the borrower. This is however the opposite of what happens with municipal bonds and blue chips.
There are four ways through which one can venture in trust deed investments. The simplest one is by looking for an individual loan and then lending it to the real estate investor. The other option is to invest in funds aimed at trust deed or buying loans from brokers with real estate as security. You can as well join a group that is going for this type of investment.
About the Author:
To receive advice about the options offered by trust deed investments you should pay a visit to www.investtrustdeeds.com. All the relevant contact information is displayed right here on http://www.investtrustdeeds.com.
posted by Vittoria @ December 17, 2013
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home