Trust Deed Investing with Hard Money Loans and Private Money Loans
Trust Deed Investments are a great alternative to the stock and bond market, or even purchasing real estate. Trust Deed investments offer attractive returns from a more passive investment vehicle, yet maintain the security of real estate. In order to make a wise investment decision, an investor must utilize market knowledge, common sense, experience and patience.
The most exciting and rewarding aspects of Trust Deed Investing is that there are no “Tenants From Hell” that have to be dealt with, the listening to tenant problems, collecting rents, repairs or dealing with contractors, just to name a few. And if the borrower defaults, you take back the property at 60% of the value and gain the equity in the property and repeat the process again.
TripleNet Investors prefers to deal only in loans/trust deeds below $200,000 in the residential market.
A trust deed investment is where an investor makes or purchases a loan to a borrower which is evidenced by a promissory note. The loan is secured by a deed of trust (i.e. trust deed) that encumbers real property.
What is a Private Money Loan? It is a loan made to a real estate investor that is secured by the real estate. In return, these Private Money Loan Investors are given (take) a first or second mortgage that secures their legal interest in the property thus securing their investment. This is also called Hard Money Lending when banks and savings and loans will not make the loan but private investors do.
Understanding Trust Deeds
Starting in 1974, TripleNet Investors has been helping professionals and individuals invest internationally with confidence for many years.
TripleNet Investors provides a “private banking” solution to property investment. We provide a “cradle-to-grave” solution to both local and international wealth creation. We are the market leader in wealth migration
Basically, when you invest in trust deeds you are becoming the bank/lender. That is to say, you are making money the same way banks make their money. They take in your money and give you 0% to 2% on your deposits and then they lend it out at a 6% to 10% rate giving them a hefty profit even after covering operating costs. What’s more, these loans are collateralized by a promissory note secured by a recorded Deed of Trust. There is certainly a reason why banks make their money lending against collateralized property and not by investing in the stock market. And, the reason is the safety in having a secured investment.
We believe that investing in extremely well underwritten First Trust Deeds always makes sense. However, due to the current market place, this makes this investment even more attractive. Restricted lending by banks is creating greater access to high quality borrowers. Our collateral has already been through historic declines and we are only lending at 60% of today’s appraised value. And, the interest rates available today to you as the investor, are far better than what the banks are offering. Our UPS (Unique Selling Proposition) is that we react quickly to loan requests and can underwrite and process a loan in a matter of days unlike a bank that often takes between 45-90 days. In addition, the borrower may not be able to obtain a non-owner occupied property loan due to tightened banking lending policies.
Banks primarily use high Loan-To-Value (LTV) ratios on homes. We offer low LTV ratios to our Private Loan Investor to increase security of the loan. Our standard LTV ratios are under 60% of the value of the property securing the loan and frequently as low as 60% to 65%. This means additional security on the investment.
For example, if a property is valued at $100,000, you as the Private Loan Investor will never have to loan more than $60,000 to $65,000 dollars on the property. That’s a 60 to 65% loan-to-value ratio. Obviously, this offers a much safer approach from that taken by conventional lenders. It is TripleNet Investors’s considered opinion, that banks have gotten and will keep getting into trouble because they make loans at an 85%, 90%, or even 100% loan-to-value ratio leaving them no equity for transfer costs, if they are ever forced into a position where they have to take back the collateral property. South Africa’s lenders, for the most part, instituted precautionary measures and missed the US home debacle.
The Terminology applicable to Trust Deed Investing
A trust deed or deed of trust (a.k.a. mortgage) is a document recorded with the county that creates a lien on the property; the lien secures the property as collateral to ensure the borrower’s obligations under the promissory note.
A promissory note is a written promise to pay or repay certain amounts of money by a certain time (or in installments) to the note holder. Specified within the note:
- Amount of the loan (principal)
- Interest rate (interest)
- Amount and frequency of payments (debt service)
- When the borrower must repay the principal (maturity date)
- Penalties imposed if borrower does not repay per agreement
- How do you obtain a promissory note?
A lien priority indicates the order in which the creditors are paid when the assets of a borrower are liquidated; lien holders are paid in the order their claims were filed, starting with the earliest recorded lien.
With regard to Trust Deeds, we find and meet with the borrowers, analyze their requirements and balance sheets, originate, underwrite, document, fund, and set-up the servicing of the loans. Additionally, we continue to monitor the performance of the loans and provide guidance to our investors throughout the life of the loan.
Our most preferred borrower is the borrower who may have bad credit, is self-employed and prefers not to divulge his assets in any form, but has sufficient cash on hand for the difference in equity.
Our primary borrowers are experienced businesses or business people that purchase fixer uppers (rehab properties) well below market value from banks, estates (probate) and other lending institutions, etc. for the express purpose of resale for a profit. They buy these houses or multiple unit buildings at a substantial discount, fix them up in a timely fashion and have an excellent marketing program for resale – usually in a time frame of about 8 months. Most of our borrowers obtain loans on a repeated basis – using TripleNet Investors as their primary source of real estate related acquisition financing.
All loans are appraised by an independent OREA licensed appraisal company. We personally sight inspect every single property to assess not only the property physically, but also the neighborhood and community. Our primary concern is to evaluate the marketability of the property.
Each loan is covered by a full extended ALTA lenders title policy from Lawyer’s Title, to insure that the title holder/owner has a valid title to the property, is in first lien position and protected against any other title defects. A copy of the preliminary title report will be provided for your records.
Borrowers are required to maintain homeowners insurance in an amount to cover the loan and replacement cost of the improvements. You, the lender, are always listed as the loss payee on the insurance policy.
All transactions are funded directly to a licensed, bonded and insured title/escrow company such as Lawyer’s Title & Escrow, and your vesting (how title is held) is on each promissory note, personal guarantee, recorded Deed of Trust, or Assignment.
All loan payments are made directly to a nationally recognized, insured, bonded, and licensed loan servicing company. Your payments can be automatically deposited into your account and you will receive monthly statements. This is analogous to “clipping coupons”.
Have more questions? Please call or email (Find our Contact Info here) at your convenience. There is a 9-10 hour time difference between JHB and California.
*This is not an offer to sell securities. Any person, entity, or organization must first be qualified by the company and read all of the offering documents and attest to reading and fully understanding such documents. TripleNet Investors. and its affiliates are not licensed securities dealers or brokers and as such, do not hold themselves to be. This website should be construed as informational and not as an advertisement soliciting for any particular purpose. All securities herein discussed have not been registered or approved by any securities regulatory agency in accordance with the securities act of 1933 or any state securities laws.
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