Frequently Asked Questions about Trust Deed Investing
What is a Trust Deed?
Wikipedia says this: In real estate in the United States, a trust deed or deed of trust is a deed wherein legal title in real property is transferred to a trustee, which holds it as security for a loan (debt) between a borrower and lender. The borrower is referred to as the trustor, while the lender is referred to as the beneficiary of the trust deed. Private Lending refers to a person loaning money as individuals with either a Trust Deed or Mortgage as the security.
Do I need much money to start?
The minimum amount you should have available is usually around $25,000, but there are times when a lower amount will work, too.
Can I use IRA, or other retirement funds for to invest in real estate?
Yes, but you’ll need to make it a Self-Directed IRA. Please see my recent guest post about SDIRA’s here.
What kind of yield can I get?
It is always dependent on the project. There is a range from as low as 6% all the way up to 12% and sometimes higher.
What is ‘pooling money’?
Pooling is another term for the process of creating a security overseen by the SEC. If you’re looking to put money into a fund, there are many options available to you. But make certain that you’re dealing with an experienced SEC attorney.
How safe is investing with trust deeds?
Safety is a major component to all investing. If it’s not relatively safe, why do it? There are so many safe deals, to risk it all, right? To answer the question: Safety depends on how you look at risk. We only partner on ultra-safe properties with a minimum of 35% Protective Equity. This way, if we need to take a project over from our partner, there’s plenty of room available to sell the property quickly. This helps us get back our principal, plus interest and any additional fees. Also, we only do short term projects. I don’t know where my crystal ball is, so I cannot see the future of real estate. The ‘term’ of the project (term means the length of time) is another way we keep things safe: we keep our projects to 12 months or less.
What is Loan-To-Value?
LTV is calculated like this: Loan Amount divided by Value. (Loan Amount/Value = LTV). Here’s an example: a 58% LTV means: On a $100,000 property, there is a loan of $58,000 on it. Or it could mean this: on a $265,000 property, the loan amount is $153,700 ( 153,700/265,000 = Still a 58% LTV).
Do you do 2nd or 3rd deeds of trust?
Never. In fact, we don’t make loans at all. We only use a trust structure as the foundation of all partnerships. There’s much more safety as real estate investors using trusts to hold properties.
Do you require fire insurance on the property?
Absolutely! This is yet another way that risk is minimized when doing any form of real estate investing.
I still have more questions. Can I contact you?
Of course! We welcome being able to answer all of you questions. Feel free to email us at info@DiscreetInvestors.com