Fractionalized trust deed investments are a certain type of trust deed investment where multiple investors contribute funds to the loan and share the interest on the trust deeds. Essentially, no single investor contributes funds for the entire loan. It is split up between multiple individuals. This type of investment works for people who want to invest but do not want to invest a large amount of money. Mortgage pools of investors are similar to mutual funds of fractionalized trust deed investments but it is different from stocks and bonds trust deeds.
In a regular trust deed investment, the investor claims 100% of the investment and owns the promissory note, the trust deed, the title policy and fire insurance policy – each in its original form. With a fractionalized trust deed investments, the broker retains the documents and merely gives lenders a copy to evidence their ownership.
Working with multiple members can be difficult but as long as the members communicate clearly with each other, it will help smooth out any problems that may come up. Here are a few ways to make your fractionalized trust deed investment go as smoothly as possible:
- Make sure you have regular meetings with each member of your group being involved. Do not end these meetings until you have a clear sense of direction and until you uniformly agree on all matters.
- Make sure your group is as small as possible. Eight or nine people the maximum.
- If possible, hire a qualified real estate attorney to advise and represent your group.
Every type of investment has its pros and cons and trust deed investments are no different. Fractionalized trust deeds provide investors with streams of revenue from different pools which helps yield higher profits. Since there are more people involved in a fractionalized trust deed investment, there are more minds working together to make good investment decisions.