Trust deed investing is still widely used in about 20 states and Arizona is one of them. Learn about this under-the-radar investment strategy and how much you can make.
First, let’s look at what a trust deed is and the role it plays in a real estate transaction. Trust deeds, sometimes called deeds of trust, are documents that bring in a third party (aside from the borrower and lender) in a property purchase. This third party (the trustee, which could be a bank, an escrow company or a title company) has no vested interest in the transaction; they just hold the property as collateral until the borrower pays off the debt in full. The borrower still takes control of the property but should he or she default, the trust deed would ensure that the property went back to the lender.
Private investors can get in on this game by lending money to a developer and using a trust deed to secure the loan. They can also purchase trust deeds from firms that specialize in this area. In essence,trust deed investing allows investors to get into real estate without knowing anything about real estate.
Pros and Cons to Trust Deed Investing
There are some pros and cons to this approach:
● Pros. Purchasing trust deeds allows investors to diversify their portfolios. Rather than be at the whims of the stock market, they can put money into an area that typically offers steady growth. They’re also well protected. If the borrower pays off the loan, the investor pockets all or most of the interest. If the borrower doesn’t repay, they can sell the property to recoup the money.
● Cons. In the stock market, you can pull your money out and become liquid at any time. This type of investing is less liquid; your money is tied up in the deed. In addition, if the borrower pays off the loan, you’ll get a nice, steady return but you might not see any capital appreciation.
Interested in diversifying your portfolio with a real estate investment? Level 4 Funding handles trust deed investing transactions and we take some precautions to make it safer. We do call-offs, which means every transaction is one borrower and one lender. You also get to keep all the interest; we only charge a small fee to broker the deal. What are you waiting for? Give us a call or get on our email list to be notified of new deals.
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.