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Hard money lending depends on
individuals who invest in trust deeds.
In simple terms, investing in trust
deeds means lending money using real estate as the collateral. As
a trust deed investor, you become the bank.
If you have money in a standard savings
account or CD's, you are likely realizing less than 5% return on your
money. In addition, the bank you have that money with pools your
money with other peoples money and lends it for a higher rate of return.
The difference between what they are paying you and what they are
collecting on that money is how the bank makes a profit.
By investing in trust deeds directly,
you effectively cut out the middle man, allowing you to realize a
greater rate of return on your money.
When done properly, trust deed
investing can be a very save investment. Each deed of trust should
be insured by a reputable title company. This insures that your
deed of trust is recorded properly, insures against title defects and
insures that the owner/borrower actually has valid title to the subject
property. In addition, each property secured by a deed of trust
should be covered by fire insurance, paid for by the borrower, and in a
sufficient amount to cover the loan made.
Since the property is the collateral
for a trust deed investment, proper valuation of the property is
important. Obtaining a professional, independent appraisal of the
property helps to ensure a proper valuation.
In addition, by keeping the loan to
value at a conservative number, you are able to be comfortable that your
investment is, in fact, secure.
The servicing of trust deeds can be
done by the individual investors, or can be done by a third party.
Typically the cost for a third party to service a loan is 1% or less.
If you have any questions on trust deed
investing, please do not hesitate to contact us at any time.
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