Trust deeds allow one to invest conservatively in real estate with minimum risk and considerable returns. Trust deeds allow the investor to diversify into real estate holdings without the headaches of buying and selling properties, dealing with tenants, repairs & maintenance issues. There’s no need to hire a property management company nor worry about paying property taxes and insurance premiums. In essence, you are not investing in the actual real estate product. You’re merely playing the role of the bank and lending money to the current owner of the subject property.
The owner of the real estate maintains and cares for his property the same way any property owner does. Your loan is secured by a recorded deed of trust at the local county recorder’s office. Instead of paying a major lender his monthly mortgage payment, the borrower pays you instead.
In the last decade, market yields have been underwhelming to say the least while trust deed investments have consistently paid above average returns. A 12% return on a trust deed doubles in value after nearly 6 years.
We specialize in trust deed investments with low loan-to-value ratios on properties in areas known to our investors. Whether or not you’re interested in owning a complete trust deed by yourself or owning a fractionalized portion of several, we offer a wide array of trust deed opportunities to invest in that allow you to diversify across an entire portfolio or stick to a particular property type.
By fractionalizing one’s participation in this market, an investor can diversify across different types of real estate such as homes, apartments, commercial and industrial properties.
We handle the entire origination process from application and underwriting all the way through the document preparation process, escrow, title and recording.
We work with a specialized loan servicing company, Superior Loan Servicing to handle all of our servicing needs from start to finish. They are even located in the same office building as our own.
What most people overlook is the fact that trust deed investments are IRA eligible. The only thing better than earning double digit yield rates on your investments is doing so tax deferred!
You can review our recently funded loans to see a sample of some of the many loans that our investors have participated in earning handsome returns without the turbulent up & downs of the stock market.
Trust Deed FAQ
- What is a trust deed investment?
A Trust Deed, in its simplest form, consists in buying ownership of a loan that is secured against real estate.
- Who should be investing in trust deeds?
Trust Deeds are a great way to diversify your portfolio; however, there are a few things you need to consider when investing in Trust Deeds: Trust Deeds are not insured, so the investor’s understanding of the Real Estate Market and lending processes would be key in helping them assess the convenience of the specific investment Because a
Trust Deed means ownership in a loan, the value of the property is key in assessing the viability of the investment. This is why investors should be comfortable with the appraisal of the property.
- Are Trust Deed investments guaranteed?
The guarantee of a Trust Deed is the equity that is in the property. Because the borrower is also invested in the property, it is in his own interest that the house is sold for a higher value than it was purchased. In addition, the lack of “institutionalized” guarantees, such as FDIC or similar, is what makes Trust Deeds yields to be higher than other options in the market such as CDs or bonds, and certainly much less volatile than stocks.
- What is a fractional interest in a Trust Deed?
A Trust Deed can be divided among several owners, especially when the loaned amount is large. In these cases, the monthly payments will be divided by the number of Trust Deed owners, in their respective percentages of participation. For instance, if a Trust Deed has 3 owners, that have invested 20%, 30% and 50% of the total loan respectively, the total monthly payments made by the borrower will be divided in this same proportion.
- What happens if the borrower stops making payments?
Because the borrower has a stake in the equity of the property, it is in his own interest to bring the loan current. If he is unable to do so, then second best choice would be to sell the property quickly so he can save his own investment. If foreclosure is inevitable, investors would recover all foreclosure costs, late charges and back interest as well as the remaining principal that is obtained from the sale. In the rare cases where there are no bids for the property, then it will be posted for sale in the open market.
- Are there any upfront fees or costs to invest in a trust deed?
There are no upfront costs to invest with us. However, your financial institution may charge you fees for transferring the money to us. The only cost to you would be the monthly servicing fees, but they start accruing once the loan is in place and you start collecting your monthly payments.
- What happens if I need my money before the term of the loan is up?
Should you need to recover your money before the term of the loan is up, there are some companies that can help you liquidate your investment. However, bear in mind that you may need to sell at a discount and that other costs and fees may apply. If this situation arises, Open Door Lending will work with you to try to resolve the situation satisfactorily.
- Are Trust Deeds good investments?
One of the most notable advantages of Trust Deeds are their high rates of return, which range between 9%-12%, depending on the property and the borrower among other factors. While Trust Deeds don’t have institutionalized guarantees, like the FDIC for CDs, the investment is protected by the equity in the property. Moreover, if the borrower finds himself unable to keep up with the payments, because they are also invested in the property they’ll sell the property and pay off the loan rather than letting it go to foreclosure and risk losing their equity.