Most investors know about their investment options regarding stocks, bonds and some real estate transactions. One lesser known strategy is investing in trust deeds, a specific type of real estate investment that is low risk and high return.
Smart investors know that having a well-rounded portfolio is a key component of successful investing. One investment that most people take advantage of is a stock investment. With this type of investment an investor purchases parts, or shares, of a company. When the company makes money, so does the investor. If the company loses money, so does the investor. The risks and rewards of stock investing varies by the specific companies the investor chooses to invest in. There is not insurance against loss. To help make this investment less risky, investors can do their research. Make sure they know about the finances of the company they are investing in and choose companies that show stability over time.
Another type of investment is bonds. There are a variety of different types of bonds that can be purchased from the United States government. Depending on the bond type it takes a specified amount of time to mature. Once the bond is matured the government will purchase it back for a guaranteed interest rate. Bonds are extremely safe investments as they are backed by the U.S. Department of Treasury. The main downfalls of bonds are that they earn fairly low interest rates, usually in the single digits and often as low as 2%, and they take a significant amount of time to mature. Bonds are a safe investment but don’t offer very high or timely returns.
A third investment that can help diversify an investor’s portfolio is known as trust deed investing. In this type of investment, the investor purchases an interest in a mortgage that is given by a bank. The borrower purchases a property, the bank lends money, and the investor (known as the trustee) invests money for the privilege of holding the financial deed to the property. The trustee holds the deed for a specified amount of time from months to years, depending on the terms of the investment. As long as the trustee holds the deed, he/she earns interest from the bank and has almost no responsibilities as long as the borrower is current on payments. Interest rates on trust deeds are between 9 and 12 percent.
Minimizing Risk When Investing in Deeds of Trust
Like all investments, investing in trust deeds does have an element of risk. The main risk for the trust deed investor is that the borrower will default on his/her loan. If the borrower stops making payments, it is then the responsibility of the trustee to sell the property on behalf of the lender. This process is called non-judicial foreclosure. Once the property is sold, the lender takes back its initial investment. If there is any money left over, the trustee is then paid.
If you are interested in investing in deeds of trust, there are a number of steps you can take to insure that you are making a safe investment. First and foremost, make sure that you work with a reputable, established lender. A bank or mortgage broker that has been around for a while with a good reputation doesn’t give out loans to borrowers who are not able to repay them. Of course there are always exceptions, but generally reputable lenders are more selective with their loans than lenders who are just starting out.
Secondly, when you are investing in trust deeds, you can help insure you money against loss by having a fair and accurate appraisal before the borrower purchases. If the property is appraised well then you can be confident of its value moving forward. Then if the borrower does end up defaulting on the loan, you can sell the property for a high enough price to pay yourself back. This is perhaps one of the greatest benefits of trust deed investing because your investment is backed by real estate that has real monetary value, not just company profits like a stock. You can use the real estate to recoup your funds if necessary.
Trust deed investing is a great investment tool to earn high interest rates with little risk of losing money because your investment is backed by real estate.
Make sure to talk with a broker before you attempt investing in deeds of trust. A broker can work with you to find the best loan lengths, terms, and interest rates. He or she can also help you navigate the ins and outs of the specific laws and regulations in your state.
Using Trust Deed Investing to Fund Your Child’s Education
Trust deed investing is a little known high yield investment opportunity. With rates of return as high as 12%, it can be a great way to fund your child’s college education.
As a parent, your child’s future is always on your mind. One of the biggest concerns for most parents is how to pay for college. With rising tuition costs, books, housing, and other details, the cost can really add up. In fact, reports from the College Board indicated that the tuition cost alone can be upwards of $20,000 for a four year degree. This is for in-state tuition. This number rises dramatically with out of state schools and private institutions. For most families, this is a number that seems out of reach. However, with the right investments you can grow your money in such a way as to make paying for your child’s college education an attainable goal.
One type of investment that many parents take advantage of is bonds. There are a variety of different types of bonds that can be purchased from the United States government. Depending on the bond type it takes a specified amount of time to mature. Once the bond is matured the government will purchase it back for a guaranteed interest rate. Bonds are extremely safe investments as they are backed by the U.S. Department of Treasury. The main downfalls of bonds are that they earn fairly low interest rates, usually in the single digits and often as low as 2%, and they take a significant amount of time to mature. Bonds are a safe investment but don’t offer very high or timely returns.
Another investment that many parents use is a stock investment. With this type of investment an investor purchases parts, or shares, of a company. When the company makes money, so does the investor. If the company loses money, so does the investor. The risks and rewards of stock investing varies by the specific companies the investor chooses to invest in. There is not insurance against loss. To help make this investment less risky, investors can do their research. Make sure they know about the finances of the company they are investing in and choose companies that show stability over time.
A third investment that can help earn funds for college at a very high interest rate is known as trust deed investing. In this type of investment, the investor purchases an interest in a mortgage that is given by a bank. The borrower purchases a property, the bank lends money, and the investor (known as the trustee) invests money for the privilege of holding the financial deed to the property. The trustee holds the deed for a specified amount of time from months to years, depending on the terms of the investment. As long as the trustee holds the deed, he/she earns interest from the bank and has almost no responsibilities as long as the borrower is current on payments. Interest rates on trust deeds are between 9 and 12 percent.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: 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.
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