Trust Deeds to Diversify Your Investment Portfolio

Do you ever ask yourself, how can I diversify my investments so that they are safe, secure and still have an above average rate of return?  It may be time to consider Trust Deeds as a way to diversify your investment portfolio.  

Yes, we all know that real estate is really one of the safest and best investments there is as long as you buy it right and you pay attention to the cycles.  But with the intention of rounding out your portfolio to make sure that your money is safe, do you ever ask yourself:  Where can I put my money that I know that it will be safe, my capital will be preserved, and I don’t have to go through all of the ups and downs of the stock market?

Do you ever ask yourself:  Is there any other investment that is safe and secure that I do not have to feel like I am stagnating with some of the low interest rates of bonds and CD’s?

Investing can be mighty risky, confusing and sometimes disappointing.  People do make money in the stock market, but they know what they are doing – still it is risky and at times you have to have nerves of steel and even the experts lose money in the stock market.  With stocks there is a false transparency, since no one really knows what is actually going on inside the large public companies.Diversify with Trust Deeds

With CD’s, they are safe but very low returns of approximately 1% to 2%.  And what are the real fees with Mutual Funds?  Large loads and inefficient distribution reduce returns.  One needs to trust the rating agencies when it comes to Bonds, but who pays the rating agencies?  The Bond insurer.  Interesting!  Yes, the list goes on and on.  No wonder a lot of people are confused about all of the financial products out there.  There was a time when I was one of those people.

Although I am a firm believer in real estate, another investment opportunity that we at Private Financial have found is, investing in Trust Deeds.  We have found it to be a secured investment that earns consistent residual monthly above-market returns of approximately 8% to 10%.

What exactly is a Trust Deed?  A Trust Deed is where an individual (or it can be a company like Private Financial, Inc.) actually acts as a bank and lends their own private money.  A piece of real estate is the collateral for the loan.  In other words, the investor actually holds the mortgage on the property – in California it is actually called a Deed of Trust – that is notarized and recorded with the County Recorder’s office.

Some of the reasons that make Trust Deed investing secure are:

  • A trust deed is secured by a piece of Prime California real estate.
  • There is at least 35% to 40% or more equity in the property that is the collateral for your loan.
  • Investors typically earn a net rate of return from 8% to 10% for a term of 1 to 3 years.
  • Since you are only investing in investment properties, usually the rent from the investment property covers the monthly payment for the loan.
  • If for some reason the borrower stops making payments for more than 30 days, then you have the right to initiate the foreclosure process. With non-owner investment properties it takes approximately four months to complete the foreclosure process (unless the borrower initiates delay tactics and then it can take up to one year) and for your money to be returned to you with all of the payments plus interest and expenses due.  During the time of the foreclosure process, you are also being paid default interest along with your regular interest, which is being added to the loan.  In most cases, the borrower does not want to lose his / her equity and sells the property before completion of the foreclosure process.
  • If a borrower is late on their payment, there is a 10% late charge. With 35% to 40% or more equity in the property, the majority of borrowers want to preserve their equity by paying their monthly payments on time, plus they don’t want to pay the late charge.

For more information on Trust Deed Investing give me a call at 818-782-6398

Jeralyn Sommers
Private Financial, Inc.
Real Estate Broker
CA. BRE # 01952914 / 01047826
NMLS # 1172916 / 290528