Trust Deed Investing

TRUST DEED INVESTING

The Basics
For the investor, to make a trust deed investment is to make a loan to a borrower secured by real estate as collateral. Or put simply, the investor takes the place of the bank. In a conventional real estate transaction, the borrower goes to the bank and fills out an application for a loan. If approved, the bank schedules a closing, prepares the loan documents, and funds the loan using the bank’s money. In a private hard money loan, the borrower comes to Silver Jack Capital and requests a loan. If approved, we schedule a closing, prepare the loan documents and fund the loan using the funds of private investors like you.

The Options
There are two types of vehicles for investing in trust deeds, individual trust deeds and fractionalized trust deeds.

Individual Trust Deeds
In this option, one investor funds the entire amount of the loan secured by the property.

Fractionalized Trust Deeds
This refers to a group of investors, each funding a percentage of the total loan amount. Each investor would own a Tenancy in Common interest in the total amount of the loan and receive a monthly check in that percentage of the total. For example, if the loan amount is $250,000 and there are 5 investors who loan $50,000 each, they would each own a 20% interest in the trust deed. Assuming that the interest rate was 12%, then the monthly payment would be $2,500 and they would each receive a 20% share of that amount or $500.

The Advantages
Trust Deed investments offer several advantages:

Diversity. Any investment portfolio should be diversified. Mutual funds, stocks, and real estate offer the investor the potential for appreciation. Trust Deeds offer the investor a fixed income alternative with monthly cash flow.

Yield. The Trust Deeds offered by Silver Jack Capital typically offer the investor a rate of return between 10% and 12%. In today’s investment climate, this is considerably higher than the yields available in other fixed income investments such as bonds or Certificates of Deposit.

Security. Trust Deed investments offered by Silver Jack Capital are secured by first Trust Deeds recorded against real estate. These first Trust Deeds are at LTV’s (Loan to Value Ratios) that do not exceed 65%. Because the borrowers have a lot of equity to lose, they are motivated to keep payments current.