Investing in Deeds of Trust
Trust deeds are an excellent way to invest in real estate without having to worry about managing property. When you invest in a trust deed, you are actually buying the lien on a mortgaged property – in other words, you’re funding a new mortgage or buying an existing one. You receive a promissory note entitling you to the loan’s principal and interest payments. Loanatik is a licensed intermediary that sells deeds of trusts to investors. We handle the billing, collection and distribution of payments on your behalf – from your point of view, it’s a passive way to earn relatively high interest income without lifting a finger.
Access to High Returns
Let’s face it, right now we are in a punk period for income investing. With 30-year Treasuries yielding less than 1.5 percent and short-term rates hardy worth anything, it’s hard to get a decent return on a fixed income investment unless you buy crazy risky junk bonds, which of course are uncollateralized and can go into default at any time.
Enter trust deed investing. Loanatik offers deeds paying 8% to 18% percent, collateralized by the underlying property. This is a very handsome return available to both accredited and non-accredited individuals.
Where do you find Deeds paying high rates of return?
Well, it’s no secret. Check out our investing page to find all of the loans we have available at the moment.
And, check back often because there are new transactions on an almost daily basis.
Hard Money Investing
Trust deeds are hard money investments, which means you get a very favorable loan-to-value ratio on the underlying mortgage. Typically, the LTV on the mortgage will be 60 to 70 percent, as opposed to 80 to 95 percent on conventional mortgages. That’s great for you, because the lower the ratio, the easier it is to recoup your investment in the unlikely event you have to foreclose on the property.
The value portion of the ratio refers to how much the property would fetch on the open market today. So say you invest in a trust deed in which the mortgage represents 60 percent of the current value. If the house would sell for $100,000 in an auction, your investment would be $60,000. That’s a $40,000 cushion protecting your investment.
Investing in real estate is a great way to diversify your investment portfolio beyond stocks, bonds and the usual cast of characters. When you widen the asset mix in your portfolio, you reduce its overall riskiness, because some investments might go up when others go down.
Within the world of real estate investing, trust deeds are much easier to understand than complicated mortgage backed securities, real estate investment trusts, collateralized mortgage obligations, and other arcane investments. You’re like the bank: you collect monthly income and repayment of principal. You’re not the landlord or property manager. The only “work” you have to do is fill out a little paperwork.
When you buy into a REIT or purchase an MBS, you have no say on the actual underlying properties. Investing in deeds of trust give you the opportunity to hand pick your properties. You might prefer to invest in a particular neighborhood or type of property. You can actually view what you’re buying before your buy it, if you like. On the other hand, you can simply rely on Loanatik to match you up with a property that meets your particular criteria for risk and return. We also offer deed pools if you’d prefer to spread your investment over several properties.
The income flows in month after month, notwithstanding the latest shenanigans on Wall Street or Washington. Homeowners will usually do whatever they can to protect their homes, and that’s another reason why low LTVs help you. The lower the LTV, the more skin the homeowner has in the game – that is, the more equity they have in their home. These homeowners are not going to walk away from their obligations and forfeit all that equity without doing everything possible to prevent foreclosure. That means they are most likely to make their monthly payments on time. If they are late, the mortgage servicer, not you, performs all collection tasks. All these factors favor high-quality cash flows from first lien deeds of trust.
We Lay It Out for You
The world of trust deed investing is full of opportunities, and you don’t need a PhD in finance to get involved. Loanatik has made it easy for your by preparing our free guide, Lending Money Secured by Real Estate, which explains in plain language what you need to know to get started. This impartial and authoritative guide will teach you the essential elements of trust deed investments. If you’d like a free copy, just fill in this short request form and its yours! We’ll be happy to answer any questions you have and discuss the investment options open to you at Loanatik. Get your guide now!