Prudent investors are looking for investments that provide preservation of capital with a solid, consistent rate of return and relatively low risk. There are many opportunities available to investors in today’s business world with varied degrees of risk and return. The risks associated with stocks and mutual funds and the low returns of bonds and CD’s can be balanced out by including trust deed investments in your portfolio.
Investing in Trust Deeds is a secured investment that earns consistent above-market returns and provides a diversification for investors in their investment or retirement portfolio that increases the overall return and reduces exposure
Unlike other investments, your investment is secured by a notarized Trust Deed signed by the borrower that is recorded against the property that is being used as collateral for the loan and a PromissoryNote signed by the borrower that secures the Deed of Trust. In other words, you are acting as a bank and holding as your security for the loan a Deed of Trust (mortgage) and Promissory Note on a piece of real estate with at least 35% or more equity in the property.
Our focus at Private Financial, Inc. is preservation of capital for our lenders. We underwrite loans secured by a substantial equity in the property. Typically we do not exceed 65% loan–to-value, which is a successful conservative approach. We have a rigorous underwriting process so our lenders can relax and feel safe with their trust deed investment.
BENEFITS OF INVESTING IN TRUST DEEDS
The benefits of investing in trust deeds include stable monthly income that investors receive monthly interest payments at an agreed upon interest rate for the term of the Note. Investors typically earn a net rate of return from 8% – 10% for a term of 1 to 3 years. Depending on the type of property and the priority of the Trust Deed and the Borrower, this rate of return and term varies.
Private Financial, Inc. offers Trust Deed investments to individuals, trusts, self-directed IRA’s and Sep IRA’s. According to California law, investors must meet certain minimum standards of income and/or net worth and be a resident of California.
SECURITY OF INVESTMENT
For the security of our investors, the amount of substantial equity the borrower has in the property the more secure the investment. At Private Financial, Inc. we try typically not to exceed 65% loan-to-value of the property’s appraised market value. What is loan-to-value? It is determined by dividing the total encumbrance by the value of the property. A very simple example, if a property were to appraise at $100,000.00, we would only lend up to $65,000.00 on it.
Your investment is secured by a notarized Trust Deed signed by the borrower that is recorded against the property that is being used as collateral and a Promissory Note signed by the borrower that secures the Deed of Trust. All loans go through a strict review process from approval to closing, and the following conditions must be satisfied before a loan is funded and then closed.
- A full Appraisal review
- A complete and thorough Title search to see if any judgments or liens are outstanding
- A full Title Insurance Policy is to be issued
- All outstanding property taxes MUST be paid through escrow
- Property insurance must be in place for 12 months
Once a loan is closed, we handle the collection of the borrower’s monthly payments and make sure the property insurance is up-to-date and property taxes are current and handle any other unforeseen actions that are necessary so that you are left with the feeling that your investment is being watched over closely.