Equity, Equity, Equity
Oh so important, when investing in trust deeds!
Looking back at the different cycles throughout the years of the California real estate market, sometimes it shoots up faster than a speeding bullet. Other times, it plummets before we realize what is happening. Knowing that trust deed investing is based on a real estate market that’s beyond our control, people often wonder if trust deeds are even a good investment.
While risk is inherent with any investment, my experience in the past 18 years that I have been investing in trust deeds is, that I personally consider Trust Deed investing to be one of the safest investments that one can make as long as there is at least 35% to 40% equity in the property. I cannot stress EQUITY, EQUITY, EQUITY enough.
Yes the California real estate market does go up and down, but that is the reason the main requirement with any Trust Deed Investment is the amount of EQUITY in the property.
Due to the amount of equity in the property, if the market does go down, by having 35% to 40% equity in the property you have less risk of losing your principal – or you lose very little principal, and this gives you the peace of mind to hold the trust deed if the Borrower is making timely payments.
But if the Borrower decides that he cannot make the payments to you any longer, the Borrower can sell the property and retain whatever equity is left in the property after paying you whatever money and fees he owes you.
Even if the property does go to foreclosure in a good or bad market, there is enough equity in the property to cover any foreclosure costs and lost payments and interest and fees you may have. But let’s say you do happen to acquire the property, you can rent it out until the market regains its strength and you regain your full equity.
In my opinion, trust deeds are not just a good investment, they are a great investment! Yes, even when the real estate market suffers.
If you would like to learn more about investing in trust deeds and why it can be a very smart investment, give me a call at (818) 782-6398. I would be happy to answer any questions you may have. Looking forward to speaking with you.
Private Financial, Inc.
Real Estate Broker
CA. BRE # 01952914 / 01047826
NMLS # 1172916 / 290528