As a seasoned investor, you should be concerned about the uncertainty inherent in stocks, bonds and their derivatives. While all promise the world when it comes to returns and security, none of them are really worth more than the paper they are printed on. For that kind of security, you need a “real” asset like real estate.

Some investors, however, are leery of becoming a landlord and having to actively manage a real estate property. There seems to be no end to the details that must be managed and dealing with “bad” tenants is also not their “cup of tea.” Fortunately, for those in the know, there is an ideal combination of the two with real security and above average returns in a passive investment vehicle – first trust deeds.

First Trust Deeds

Typically offered by private investment firms, first trust deeds are loans made by an investor against the collateral of a real property such as a non-owner occupied SFR, commercial building or a multi-family dwelling. They come in a variety of terms, interest rates and, most importantly, can be customized to fit the needs of both the investor and the borrower. Simply put, they are a great investment.

Security is Paramount

First trust deeds offer unparalleled security. First, they are written and executed with the same legal safeguards and due diligence as traditional mortgages. Appraisals, inspection and escrow money are involved in every transaction. They are a legally binding contract in every way, shape and form.

Secondly, the deed is secured by the property and cannot be superseded by any other private individual. In other words, the investors’ interest in the property is safeguarded like no others. If a default occurs, the investor can foreclose and then sell the property himself. Even better, the loan-to-value ratio is usually in the 60-70 percent range so the investor can actually have a “fire sale” and still make a decent return for their trouble.

Lastly, the people involved in these transactions – from the investors and borrowers to the intermediaries - are usually seasoned investors and can spot any peculiarities in a deal and handle them before they become a problem. In short, first trust deeds offer an excellent investment opportunity for those people looking for an uncomplicated but great investment with very real collateral and a superior return.