When working with a hard money lender in Los Angeles, you may be intrigued about possibly investing via “trust deeds.” If you are unfamiliar with trust deed investing, then this article is for you. We explain some of the potential benefits of trust deed investing and the process of securing a trust deed.
What is a Trust Deed?
A trust deed is considered to be a type of agreement securing a real estate loan that is made between a lender and borrower to have a piece of property held in a trust by an independent and neutral third party until the loan is paid off. The third party (i.e. the trustee) is typically an escrow company, title company, or bank that will receive the property in question via a transfer. Even though trust deeds are not as common as they once were, they are still utilized in 20 states, including California.
Investing in trust deeds means that you will be investing in a loan that is secured by real estate. The majority of these investments are short-term loans, typically 5 years or less, which means that it won’t take long for you to determine if the investment was a smart decision. Trust deed investing fills a void in the real estate lending market because banks typically only provide long-term mortgages, as opposed to short-term bridge loans. As a trust deed investor, you effectively replace the bank in this void by making short term real estate secured loans.
Benefits of Trust Deed Investment
There are numerous benefits associated with trust deed investing that make it an attractive investment vehicle for specific, high net worth individuals who want to diversify their portfolio. One of the biggest benefits of a trust deeds is that your investment is typically made at a significant discount to the actual value of the property.
For example, it is fairly common for trust deed loans in California to be made for 70 percent or less of the property value. This means if a borrower is purchasing a property valued at $1 million, a trust deed loan secured by that property will typically be worth around $700,000 or less. That fact provides a safety cushion to account for market corrections or other expenses that may be incurred in the event of a default.
Another benefit identified with trust deed investing is that your investment is secured by tangible property that you can take title to in the event of a default by a borrower. This is unlike a stock investment where you don’t have recourse to the assets of the company if your stock doesn’t perform well.
In the event a borrower fails to make regular payments on the loan, there are certain laws in place that make it easier for the trustee to reclaim and sell the property to satisfy the unpaid debt.
Interested in Learning more about Trust Deed? Contact PB Financial Group Today
If you have been working successfully with a hard money lender in Los Angeles and want to potentially explore trust deed investing, contact PB Financial Group today. Experience is a key component to closing real estate loans, including trust deed loans.PB Financial Group is a premier direct hard money, private money, and bridge lender, who has been providing quick funding since 2006 and have funded over 2700 hard money/private money loans.Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient and effective manner.
PB Financial NMLS #357614/DRE #01522495