Trust deed investing has its benefits, but often many people have to face the downsides, as well. The rates could go up unexpectedly or there could be a mistake made on the documents that the borrower and lender have drawn up may have made an error. This can cause a mountain of issues that will need to be taken care of.
Variables are things that you should always think about when you are investing in commercial real estate. There is a myriad of things that could go wrong when you are dealing with commercial real estate. Things could go extremely well for a period of time, but what happens when your business plan fails? What happens when the dice roll a different way? The real question is what should you look out for when you are investing.
Trust deed investing is not fool proof. As an entrepreneur, you should make backup plans for your backup plans. Details, especially in trust deed investing, are the single most important things to any deal. One of the most common mishaps that cause trust deeds to fail is a missed number, name or small detail. For example, say you find a property that you estimated a certain value.
Now say the property value is not as high as you thought. The margin of safety could potentially be insufficient to cover the entirety of the expenses that may incur. We all know when it comes to real estate changes in property can happen at any moment. Now add in a random godly act, such as a tropical storm or flood, you may not be able to cover the needed repairs. This could end up leaving you in the hole of debt.
Do I still have to worry property value when it comes to trust deed investing?
Sadly yes, as stated before there could be something that could happen out of nowhere. Once this happens the borrower has to take the first loss on the investment. They are still required to pay back all the loan amount. If the borrower is unable to pay the loan back then foreclosure usually follows soon after. It is in the investor’s best interest to sell the property at a price that is less than the value of the loan, as well.
This will not always ensure that you will get your money back in full, but there is a strong chance that you will be able to get some form of payment for the investment. Make sure that the property value is sufficient to support the margin of safety.
Can bankruptcy affect trust deed investing?
Once again yes, bankruptcy can affect your trust deed investment. This will cause a few hiccups in the when you are trying to move ahead with foreclosing. In general, a foreclosure usually takes a couple of months to settle. When bankruptcy is involved an additional number of months to an already long process. Bankruptcy judges are also allowed to change certain things documents related to the trust deed. The interest, for example, can be changed to alleviate some of the circumstances the borrower is facing.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.