Trust Deed Investing—What are the Advantages? The Pitfalls?

Is this method of funding one you should take on? Again, do the needed research and find out what is best for your planned investment because these are different from most well-known funding packages.
These investments, if done correctly, can give a well-defined yield with the investor’s risk being a low one. Single digit returns, as high as 10 percent, can be registered on a monthly basis here.

Safety margins—the difference between the value of property and the total amount of the loan—border the possibility of loss in this kind of investing. Failure to repay funding by the borrower can result in the lender’s re-possessing the property in order to regain any losses along with any interest that may have been attached to the loan. Investments can have a LtV (Loan-to-Value) up to 65 percent, which is certainly a positive point for a borrower.

Trust deed investments do not, however, appreciate in their value as do typical real estate investment properties. Still, income can be generated by them.

Banks, on the whole, typically do not want to do this type investing since they are looking to make as much money as possible from their loans—six to 12-month payoff times do absolutely nothing for these institutions. The banking industry’s loans are set to expand over a lengthy time period up to and including 30 years in more than a few instances.

Lawsuits involving the property title, real estate values that drop suddenly and sharply, assessment errors made and overlooked during appraisal that change the property value are just some of the things that make this type investing termed as somewhat dangerous to both borrower and lender.

Traditional investors want solid ground under their feet at all times and the rules they work by are designed to make that as close to reality as possible. Investors that are in the ‘hard money’ areas are thought to be a better choice for trust deed investing since they can and do work outside the regular boundaries of investing. They also charge higher rates of interest and origination fees than conventional lenders.

Deep study and careful consideration of all factors is a must when it comes to this type investment—after all you want to make money, not lose it. Be assured that all the desired legal demands have been met and double checked, and that the property appraisal is correct to the last penny. Be certain of the whole as well as the sum of the details. These investments cannot be converted back into liquid cash in a couple of weeks if you have a change of mind as can bonds or blue-chip stocks.

If you are seriously interested in trust deed investing, however, along with your regular research, talk to an attorney or a certified public accountant whose opinion you value. If you have friends in the business, check with them as well. Once you possess all the facts, if you still want to invest in this area, find the lender who is best for you and work with them to make your experience a positive one.


Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701

About the Author: 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 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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