Investing in almost everything can be tricky, no matter how financially savvy you are. With the current
state of the real estate market, it is no wonder that people have questions about the soundness of trust
deed investing.
What Is Trust Deed Investing?
When an individual or entity loans money to another individual or entity collateralized and secured by
real property, it’s called a trust deed investment. The real estate can be nearly any type of property the
Borrower owns or is buying, whether it is vacant land, residential or commercial property. It can be owner
occupied or investment property, first or second mortgage. When you invest in a trust deed, you are
lending a private mortgage against real estate. It is a recorded lien against the property.
The Pros and Cons of Trust Deed Investments
As with any investment, trust deed investing carries a risk. Investing in Trust Deeds will depend on your
level of investment experience and risk aversion. Here are some of the factors to consider when looking
at this type of investment.
The Pros
Most Trust Deed investors own property. They have typically had some experience in real estate matters,
either through their personal purchases of home residences over the years or buying their work buildings
or investing in investment properties.
Trust deed investments are secured by real property. The properties we at Cushner Capital Group offer
have strong equity positions. This means that If a loan were to go into default, you have the legal recourse
and right to foreclose on the property. With a tangible commodity like real estate, you can either sell the
property at the steps and recoup your investment and the unpaid interest or get the property back via
foreclosure at a sizeable discount of retail value.
These are typically shorter-term notes (deeds of trusts or promissory notes) that are secured by strong
equity in California real estate. Coastal real estate has had a wonderful record of growth over the past 100
years! These are temporary or bridge situations for borrowers.
Generally, there’s a wonderful rate of return for my investors 8.0%-12%, depending upon the risk and the
desirability of the trust deed. This really depends on the property, location, terms, and loan to value ratio.
The Cons
Although unlikely, foreclosure can be lengthy and legally complicated. The Borrower can, by law, declare
bankruptcy. It can be a long legal process to foreclose on that property. Cushner Capital Group can be an
indispensable resource for you, whether by helping you navigate the loan process or by providing vital
information and vetting that can help you decide whether to invest or pass on a particular deal.
The FDIC does not insure trust deeds. This means that there is no guarantee you will get all of your
investment back. This is yet another reason why working with an experienced broker can be your key to
success. A broker can advise you on the best course of action for your trust deed investments. As opposed
to working directly with a Borrower, whose interests may definitely conflict with yours, an experienced
and strong brokerage house like Cushner Capital can help you assess the entire loan scenario and
breakdown the virtues and the dangers of each loan.
The real estate market ebbs and flows, sometimes unpredictably. The state of the real estate market may
affect a Borrower’s ability to pay off the debt timely. While many investors, as mentioned above, have
some knowledge of the real estate market, if there is something unique or special about the property,
circumstances, or agreement, you really need to know your stuff. Having a licensed broker with
experience in trust deed investing and real estate can prevent you from making a bad investment since
they can provide important insight and the means to properly assess a property’s value. You need to be
able to make informed decisions.
Often these decisions need to be made quickly. We at Cushner Capital Group see folks who have lost their
loan with a bank and need to close quickly. California real estate investing has been such a boom for most
folks! There are, however, cycles where properties do go down. Investing in a 10% trust deed will yield
10%, whether the market ascends, descends, or stays flat.
Whether you need to diversify your portfolio (stock market has as of 11/21/2018 is up 0% in 2018), or just
get more interest on your nest egg, call us at Cushner Capital Group – (760) 845-9035. We can help you
navigate the Trust Deed Investing market and make great income!
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