This post is in retort to a recent article written by Alex Pollock entitled ‘Commercial’ Bank Is Misnomer. ‘Real Estate’ Bank Is More Apt exposing the systemic risk present in our commercial banking system, and my observations as to how a trust deed investor can avoid the next bump. The take-away here reinforces the importance of sound underwriting and how Trust Deed Investors can hedge their investments secured by real estate with conservative valuations and low loan-to-values. Mr. Pollock’s article discusses the evolution of the banking system from being principally business banks to being principally real estate banks and its

When considering the possibility of investing in a trust deed many investors turn instead to the trust deed’s third cousin twice-removed, Real Estate Investment Trusts (REITs). Unfortunately many of these investors don’t fully understand the difference between trust deeds and REITs and don’t know that, by running to the more often discussed investment, they are losing out on many of the advantages trust deeds offer that REITs simply can’t match. REIT Overviews A REIT (Real Estate Investment Trust) is a real estate company that manages a pool of properties and sells stock in the pool. Those who buy the stock

The most important part of making an investment decision does not involve deciding how much money to put into it, finding out what the return could be or determining what income it will throw off. The most important part of making all of your investment decisions is due diligence. Due diligence is the process of thoroughly evaluating and examining the vehicle you are about to invest in. Not just kicking the tires, dreaming of fantastic returns and looking at performance history, but actually getting to know all the moving parts involved and vetting them to make sure they are above

While true stories abound of trust deed investors who have been quite successful, there are also those who lost nearly everything as a result of too little investigating or inquiring into the investment. The high rates of return offered by trust deeds can be alluring, but that doesn’t mean they shouldn’t be thoroughly vetted as you would any other investment. In addition to vetting this financial instrument, investors should also learn everything they can about their rights. As an investor there are certain rights that you enjoy and in order to exercise them and ensure they are recognized, you need

Unless you keep all of your investments in IRAs or other qualified accounts, you will need to pay taxes on the gains you realize each year. With a trust deed investment, you must pay taxes on the interest that you are paid by the borrower. Many trust deed investors wonder if their investment income will be treated as a capital gain or as ordinary income tax. Before we answer that question, let’s discuss what constitutes a taxable gain in the investment world and explore the difference between ordinary income and capital gains. Realized and Unrealized Gains An investment can increase

In these days of risky stock bets, promised high returns that don’t deliver, and confusing bundled investment strategies it is difficult to find a safe short-term, fixed investment with a reasonable rate of return. It’s even harder to find one that is backed by an asset that prevents the loss of your entire investment. There is one opportunity that answers all of these requests by providing a safe option for the conservative investor who wants to secure moderate growth on a short-term investment, and that is trust deed investing. What is Trust Deed Investing? Trust deed investing a.k.a private money

As much as you may want to think that your fixed investments will always grow uneventfully until maturity while throwing off the anticipated interest, this is not the reality of every investor’s experience. Even fixed investments like bonds and trust deeds have some risk of default. But unlike bonds, trust deeds expose you less to loss of principal. In the unlikely event that the borrower of your trust deed investment stops making payments to you on the loan, you can initiate a foreclosure. Of course, non-payment of loan is not the only situation in which a foreclosure is appropriate. If

When investing in trust deeds, investors have two options. They can invest in a new origination note or they can buy an existing note at a discount and have the deed and insurance documents assigned to them. Each of these choices brings with it its own unique set of processes and benefits. Underwriting Underwriting includes all the analysis necessary to confirm valuation, income, property condition and the borrower’s capacity to execute on its repayment strategy.  When you invest in a new origination, you have the benefit of reviewing the buyer, the property and any associated risks before you agree to