What Are the Trust Deed Investment Risks And How Can They Be Avoided? First of all–what is a trust deed investment? A trust deed investment is a loan made to an individual or a business can be secured by real estate or real property. Basically, when you invest in trust deeds, you become the bank which means you get to change interest and make passive income. Sounds great, right? What are the risks of trust deed investing?
First, it requires a lot of knowledge of real estate, and in some cases, property management experience. However, trust deed investing is a great way to avoid the hassles of being a landlord. Of course, there is a risk of foreclosure if the borrower doesn’t pay back the loan. This process can be long or short depended on the state. If you do take the property, you will be able to sell it and recoup your initial investment. However, if everything goes according to plan, you won’t have to worry about that.
How do you mitigate these risks?
In order to avoid the risks, always rely on due diligence. When it comes to investments, you can never do enough research. Most of the issues can be overcome along as you do your research. Your due diligence should include:
- The transaction where the note was originated
- The property value and condition
- Title search with lender’s coverage
- Past loan servicing records and verifications with the borrower
- Loan compliance
- Insurance review
- Escrow account audited
- Basic borrower qualification issues and credit
- Payment history and keeping with loans
- Purchase agreement
If you find a good hard money lender and team up with them, you are likely to make a lot of money. Trust deed investing is a very profitable investment strategy and hard money lenders are the key to making passive income. Find out my by clicking here.