Research

What Exactly is Trust Deed Investing? - October 10, 2013

Since starting at Sterling Pacific Financial, I’ve lost count of the number of times I’ve been asked, “So what does the company do?” It’s easy to just say real estate investment and leave it at that because it’s simple to understand and doesn’t require too much explanation beyond that. But the biggest issue with this descriptor is that is misses so much of what it is Sterling Pacific Financial does, and what trust deed investment actually is. Googling trust deed investment can lead you to a Wikipedia page about trust deed investment companies (and if you keep scrolling down some content from us here at Sterl Pac), but this short wiki page still fails to cover the nuances of trust deed investment, and how individuals can get involved. And it’s about time someone remedies this, so here goes.

In a trust deed investment deal, there are three main parties. The most obvious, in our instance, is Sterling Pacific Financial, the trust deed investment company and certified private money lender. The trust deed investment company is the loan coordinator, underwriter and the loan servicer. The other two parties to the investment are the borrower, and the investor lenders. The whole process starts when a potential borrower comes to us looking to receive a loan on a piece of property. These borrowers generally come to us when their needs can not be met by a traditional bank loan, be it because of the quick turnaround, or the type of property, or a variety of other reasons.¬† So be it undeveloped land, producing agricultural land, commercial or residential real estate, we’re willing to evaluate a potential loan package. And if we eventually deem that the property is a sound investment and set up the deal, it’s time for us to find investors to back it, and this is where you come in as the investor.

Investors are what allow us to complete deals. Through a couple of different plans, you can use money from a self-directed IRA, direct investment from personal savings, or other investment vehicle to help fund entirely or in part one of these deals we put together. Through a traditional fractional note or a mortgage pool program, investors can put up the money for the loans we organize and be a part of the returns they garner. Annual yields from these investments tend to range from 9-12.5% on a 12-36 month loan. This makes trust deed investment a strong investment in terms of return on principal. Due to our conservative lending guidelines, trust deed investment also possesses a low risk factor  as we set limits on what percentage of the property value the loan can equal.

So therein lies the short, nutshell version of what trust deed investing is. And better yet, it’s something that you could be a part of right away. We’ve prepared several resources for those looking to find out more, and feel that our guide “9 Things to Consider When Considering a Trust Deed Investment” is by far the best starter guide. By clicking the button below, you’ll have to opportunity to download it and find out even more about what it is trust deed investment companies do.

 

trust_deed_investing
Photo Credit: thinkpanama via Compfight cc
View All Articles