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Why You Need First Trust Deed Investments To Complement Your Portfolio

Posted by Ken Meyer on Thu, May 22, 2014

shutterstock_10534687In today’s investing arena the performance of most fixed income portions of investment portfolios is, at best, anemic. While the low interest rate environment is a boon to those seeking capital, for investors, the returns from the fixed income portion of their investments is unable to keep up with inflation.

Trust Deeds can be a viable alternative, offering substantially higher returns available in the real estate market, with considerably less risk and without the hassles of acquiring, maintaining and managing real estate holdings.

Investing in trust deeds is also an outstanding way to diversify your portfolio into the lucrative area of real estate. Besides offering a convenient and prudent entry into the real estate market, trust deeds provide a consistent and dependable flow of income.

Because of today's somewhat restrictive lending environment, real estate investors and developers are turning to private lenders to capitalize their projects. The lack of traditional lending sources allows private lenders to ask for higher interest rates on the funds they loan. Trust deeds provide much higher returns, typically in the 10% to 12% range. Trust deeds also offer a truly fixed income, as opposed to the floating rates of most other fixed income instruments. A trust deed offers a consistent yield; an investor underwriting a $100,000 loan at a 10% interest rate would earn $10,000 a year in interest income.

With rates of return in the 2% to 4% range, not including expenses, it would seem most investors are paying a premium for safety. But there is no reason to sacrifice returns for low risk. As with a traditional mortgage, a trust deed is recorded in the county registrar’s office so the property cannot be sold while the loan remains due.

The security of trust deeds is enhanced by writing loans with low loan to value ratios. In other words, if the loan is foreclosed on the underlying property value will be sufficient for the lender to recoup their funds. Additionally a borrower has a great deal to lose now and in the future from defaulting on a secured loan. The risk of losing property and damaging their credit rating is strong incentive for the borrower to keep current on their obligations. Reaching your investment and retirement goals requires hard work and more than a bit of sacrifice. It only makes sense to have your money working just as hard to ensure your future. Investing in first trust deeds offers investors the opportunity to receive higher than average returns on a fully secured deed of trust; offering income and security rarely found in other investment vehicles.

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