One of the most under-appreciated financial instruments available to the California real estate investor is the trust deed and the “hard money” associated with them. They are an excellent option used by experienced investors when a real estate deal is too unconventional for traditional lending institutions. In addition, they offer the same legal safeguards as traditional mortgages and usually come with a better degree of security.

What Are Trust Deeds?

A first trust deed is a financial document that transfers legal title of a piece of real estate to a trustee in return for a loan against the property by the trustee. A contract is signed that details the arrangement and if the borrower is unable to fulfill their part of the bargain, the property transfers to the lender.

Since traditional banks are not involved, the terms of these contracts can be almost anything that satisfies the borrower and the lender. Since the deals may involve some added risk, trust deed contracts generally have a slightly higher interest rate and require a lower loan to asset value.

How Do They Work?

Again, the terms can be almost anything that satisfies both the lender and the borrower. However, the rest of the process is very similar to that of a traditional mortgage. Appraisers, inspectors, earnest money and all other legal precautions are used to protect both parties in the transaction.

Then, once the terms are established, a contract is drawn up, both parties do their due diligence and escrow is opened. Once all the experts sign off, the loan is made. In the case of a default by the borrower, the lender can foreclose and in a much shorter period of time than with a traditional mortgage.

Where Do You Find Hard Money?

Even the most seasoned investors might consider it difficult to find willing lenders for a real estate project while more novice ones would probably have little recourse other than family and friends. Fortunately, Hard Money Lending companies resolve this issue by providing a consolidated platform where all borrowers and trust deed investors can meet.

Hard Money Lenders not only vet the deals but also the investors. In addition, they provide access to a reputable network of associated real estate professionals that are needed to consummate any deal. In short, if you have found the ideal real estate deal but are feeling stymied by your bank, consider the options afforded by an experienced and reputable Hard Money Lender.