David Kirkpatrick

October 29, 2009

Pros and cons for trust deed investments

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 3:25 am

Are you looking for an investment vehicle combining strong return-on-investment and still considered a secure bet?  Trust deed investments may be the answer. Trust deed investments have the potential to offer high returns relatively safely, but this investment vehicle isn’t for everyone. Like with any investment you should take the time to learn about the pros and cons of trust deed investment.

Trust deed investments come with one major entry on the con side of the balance sheet — very little liquidity. If you need your investment money at a certain time or on short notice trust deed investments are not for you. Another potential con is you might end up owning the property behind your trust deed investment.

The pro side has its one major entry as well, and it’s pretty strong — trust deed investments are one of the safest high-yield investment vehicles out there. With trust deed investments your investment is secured by a deed of trust against a property owned by the borrower of your money. A trust deed investment allows you put money into real estate through an intermediary and typically you only deal with the outlay and return aspect of investing in property.

From the link, eight points from Federal Home Loans Corporation on trust deed investments:

Having provided all the pitfalls and negatives, you should not lose your money in trust deeds. Let’s recap:

  1. Keep your money in the bank if you need it.
  2. You may end up owning the property.
  3. Keep your broker honest; use the title company.
  4. Demand paperwork in your name.
  5. Understand how value is determined.
  6. Invest in first trust deeds only.
  7. Be aware of the occasional requirement for the temporary investment of additional funds.
  8. Adjust with the market.

October 21, 2009

A trust deed investment primer

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 1:45 pm

Trust deed investments can offer high returns relatively safety, but this investment vehicle isn’t for everyone. Like with any investment you should take the time to learn about the pros and cons of trust deed investment. Understanding the risks involved and the upside to any investment should be a major part of your investment strategy.

With trust deed investments your investment is secured by a deed of trust against a property owned by the borrower of your money. This promissory note involves risk to your investment, defines a time period for the return of your investment and is not covered by any federal insurance.

If the borrower default on this promissory note you will acquire the property through foreclosure. This could be a pro or a con depending on your view of directly owning and investing in real estate. Before a foreclosure you are buffered from direct real estate investment by the trustee of your investment.

Here are some points to consider with trust deed investment:

  • Trust deed investments are high-yield and and relatively safe, but they aren’t liquid. Don’t make trust deed investments a part of your overall portfolio if you need access to your money at a specific time.
  • Be sure to use a title company, and not your broker, to deposit your investment and receive your return when the loan is paid off. Allowing your broker to handle the funds make trust deed investment much more risky than necessary.
  • Appraisal shouldn’t be the only method you use to value a property, but it is a major tool in your valuation toolbox. An appraisal will give you a wealth of important information about the property.
  • Only invest in first trust deeds. You should never put money in a second, or even more junior, position in a trust deed investment.