As any knowledgeable investor knows, high yield investments are almost always associated with high risk to the invested capital. In particular, junk bonds can be downgraded and high-yielding dividends can be cut resulting in capital depreciation. IPOs are great for insiders, but even the individuals lucky enough to buy at the opening price are sometimes confronted with significant losses as the market does not see the same value in the stock as the underwriter.
Direct investing in real estate suffers from the same problem. No one can tell the future and a particular housing market can turn bad due to the overall economy and can ruin expected rents, and therefore, the gains on a particular project.
Trust Deed Investments
Fortunately, there is one financial vehicle, trust deed investments, that avoids these pitfalls while still providing a significantly greater yield than either CDs or bank deposits. The major advantages of trust deed investments are twofold; higher returns combined with exceptional security.
Higher Returns
Investment in a real estate project secured by a first deed is the essence of trust deed investing. The investment, depending on the caliber of the property and of the financial strength of the borrower, typically yields in the 7 to 11 percent range. The returns are paid on a monthly basis and are guaranteed over the life of the loan.
Exceptional Security
The security of the loan is guaranteed in three ways. Most importantly, the deal is secured by a first trust deed on a real asset, the property. Secondly, all the conventional safeguards including the use of escrow accounts, title searches, appraisals and insurance are required before the consummation of the deal. Lastly, the loan to value ratio is typically 60-70% of the appraised value of the property.
Are Trust Deed Investments for You?
A prudent investor always examines deals in multiple ways and tries to compare them to similar investments. The use of a trusted private money lender makes this process simple and easy. They examine the properties, borrowers and deals ensuring that the facts are accurate. An accredited investor can then pick and choose from among the deals available. This process can match your investment needs and risk tolerance. Every practical investor looking for superior returns should consider trust deed investments.