General

When a loan is completed on a home, there are two parts to the transaction: the Promissory Note and the Deed of Trust. This Deed of Trust is also referred to as a ‘Trust Deed’ and is a Recorded ownership interest in a property. This Trust Deed is the legal document that shows who is due to get paid on the ‘promissory note’ that is on a property.

In other words, A Trust Deed is a security instrument which gives the lender an interest in the property the borrower has pledged as security for the performance of a promissory note. Simply stated, when one invests in a loan, the collateral is real estate secured by the Deed of Trust recorded in the County where the property is located.

CrowdTrustDeed provides investors the opportunities to participate as a lender of record in a property through a whole or fractionalized investment. A whole or fractionalized interest is an investment usually secured by a single property.

CrowdTrustDeed is an online marketplace for Trust Deed investors/lenders, enabling lenders to buy and sell sponsored Trust Deeds, including fractional interests, while simplifying an online real-time investing experience. This website allows registered investors to buy and sell high yield current monthly income California Trust Deeds and creates liquidity for all Trust Deed lenders.

Investors in Trust Deeds understand and appreciate the value of real estate as well as certain fundamentals about real estate lending. They like the fact that real estate is a tangible asset. An investor can visually inspect the property securing the loan — they can actually walk through it, examine it and touch it. There is simply no mystery. CrowdTrustDeed believes that the Trust Deed Investor should have sufficient knowledge and the understanding necessary to make intelligent decisions about how to choose their investments.

In addition to owning a tangible asset, Investors who require diversification and consistent returns also benefit from Trust Deed ownership. These Investors could include: financial managers, IRA/401k holders, family trusts, high net worth individuals and smaller investors seeking to balance and diversify their investment portfolios.

A Sponsor is an approved and vetted person or company that lists and sells their Trust Deed on the CrowdTrustDeed marketplace.

CrowdTrustDeed is not a broker, advisor, or other kind of middleman. We provide technology to Sponsors so they can efficiently buy and sell Trust Deeds online.

Yes. CrowdTrustDeed offers a variety of Trust Deed investments including fractional or whole interests. In these investments you would own an undivided interest (either a partial or whole interest) in a specific property, with the Note describing the terms of repayment by the borrower and the Deed of Trust providing the security.

The Company will sell 1st and 2nd Trust Deeds. Typically Trust Deeds scenarios will be from underserved lending segments; including credit impaired and reduced income documentation loans. Sponsors will originate deeds of trust for residential properties and other types of properties maintaining high equity positions. The marketplace will primarily be involved with Non Owner Occupied residential properties, however in special circumstances, the Company will lend on Owner Occupied homes.

The CrowdTrustDeed marketplace fees are: The marketplace fee is .25% (25 basis points (bps)) to the Sponsor (Seller). The minimum fee for a seller $250. The sale of a note, or fractional interest, of less then $100,000 will result in the minimum fee being assessed. Title, escrow and closing charges are not included in the marketplace fee. Once the loan is sold, the Sponsor can either Service the loan themselves or pay 50 bps out of the spread and CrowdTrustDeed will service the loan for the Sponsor.

The Marketplace only markets California Trust Deeds.

The minimum Trust Deed Investment or fractional interest size is $20,000 and the Maximum loan size is $5.0 million. Rehab loans are limited in size to $2.5 million.

Trust Deed terms will be determined based on the type of Trust Deed being completed. Smaller balance residential transactions will typically be 1-3 years Interest Only with a balloon. Loan terms can be as short as 12 months or as long as 7 years.

All offerings at CrowdTrustDeed are a sale of interests in notes secured by real property to not more than 10 persons. This "multi-lender rule" is defined by the CA Bureau of Real Estate as Section 10229 of the Business and Professions Code and applies only to the exemption from securities qualification claimed under Section 25102.5 of the Corporations Code.

Qualified California Residents can invest through our marketplace. Investors need to reside in California, or for entities your principal place of business needs to be in California. You don't need to be an accredited investor, however you do need to qualify based on a number of factors including: Net worth, income and capacity to understand the investment.

Sponsors serve as the mortgage lender or seller on the transaction. Originating Sponsors apply stringent underwriting guidelines, and standardized processes and procedures. After the loan has closed, CrowdTrustDeed will make the loan available for purchase to qualified third parties. We have partnered with FCI Lender Services, a professional servicing company, to handle all of the servicing (payment collection and borrower interaction) as it relates to the trust Deed that you own. We work with FCI to handle all the interaction with the borrower so the owner of the loan can relax and just receive their monthly payments.

Most loans are brought to CrowdTrustDeed by Sponsors who are originating or who have originated a loan. Borrowers are typically real estate investors that need extra cash and do not qualify for traditional bank loans. Once CrowdTrustDeed qualifies the Sponsor and the property, we then seek outside investors who might want to participate in the loan. Typical investment amounts are in increments of $20k, but may be larger depending upon the loan amount.

For example, if you decide to invest $100,000 in a 12% Interest OnlyTrust Deed with a 10.5% payment and a term of 36 months, you would receive a monthly check in the amount of $875.00 for 36 months with payment of your $100,000 principal investment at the end of the loan term.

CrowdTrustDeed investors can pick and choose the loans they wish to participate in. Once they express interest in a loan, we provide the investor with all the information on the loan including the loan application, a recent appraisal and a preliminary title report. All loans are escrowed by local title companies which record the Trust Deed with the name of each investor listed on the Trust Deed.

Questions by Trust Deed Investment Sponsors

Absolutely! A buyer can access available inventory at any time. If you think you want to list a TrustDeed for sale during the next few months, you should get a head start by creating your Sponsor profile and promoting your new marketplace channel page among your business and personal connections. That way, once your Trust Deed materializes, your fundraising process will be a breeze.

It is a phone or personal interview to meet your team and chat about your experience, qualifications, background, and objectives.

As long as you are raising debt, all kinds of real estate scenarios are welcome: residential, commercial, or mixed-use; acquisition, refinancing, or development. Just note that you cannot submit a listing to finance your home or non-real estate collateral.

Our terms of use include confidentiality provisions that are intended to protect Trust Deed sponsors from users’ misuse of their Trust Deed information. You could also submit your own confidentiality agreement for investors to sign. However, we cannot assure you users will comply with these provisions. We strongly recommend that you do not list any Trust Deed information unless you are comfortable with it being public.

The fractionalized Trust Deed interests cannot be sold to more than 10 persons who meet one or both of the qualifications based on income or net worth.

With the delay of Title III of the JOBS Act and states continuing to roll out their own legislation around crowdfunding, we will see continued growth of platforms that have state-specific offerings. What are Maximum loan to value ratios?

At CrowdTrustDeed, we ensure that Sponsors are most interested in the preservation of an Investors principal investments, and because of this, we seek out Sponsors that originate extremely conservative loans. The key to underwriting secure loans is substantial equity in the property, which is demonstrated in low Loan-to-Value ratios. Typically, a financial institution will lend up to 80%, 90%, 100% or even more of the value of the real estate securing the loan, leaving little or no equity protection. At CrowdTrustDeed, the LTV’s are subject to the limits below, resulting in a higher average protective equity cushion for our Investors. The LTV ratio is determined by dividing the total encumbrance (Loan) by the value of the property.

The aggregate principal amounts of the notes or interests sold, including the balance of any senior encumbrances, are subject to maximum loan to value percentages. The percentages are based on the current market value of the property as determined by the broker or appraiser as required by Section 10232.6. The maximum loan-to-value (LTV) percentages are:

  • Single-family, owner-occupied - 80%
  • Single-family, not owner-occupied - 75%
  • Commercial and income-producing properties - 65%
  • Single-family residentially zoned lot or parcel which as installed offsite improvements including drainage, gutters, sidewalks, paved roads, and utilities as required - 65%
  • Land that has been zoned (and, if required, approved for subdivision as) commercial or residential development - 50%
  • Other real property - 35%

The percentages above can be exceeded when and to the extent that the broker determines that exceeding the percentages is reasonable and prudent considering all relevant factors pertaining to the property; however, in no event can the aggregate principal amounts of the notes or interests sold, including any senior encumbrances, exceed 80% of the current market value of improved real property or 50% of the current market value of unimproved real property

We are here to help. However, at CrowdTrustDeed, sponsors are in the driver’s seat and set the Trust Deed terms, fees, minimum investment amounts, funding goal, closing timeline, etc. We give you total control and flexibility to manage your capital raise from start to finish and leverage our technology to make the process efficient.

The Sponsor will work with the investors on a case by case basis in the event of a Default.

Retaining legal counsel is at the discretion of investors and Sponsors.

Investor Questions

Sponsors provide valuations. The realistic market value of the property is determined by an appraisal effort that compares the subject property to other similar properties in the same community. Sponsors work with specialized teams which in many cases includes a qualified real estate appraiser who will look at recent sale prices of comparable properties, and make adjustments to the value of the subject property based on factors such as size, location and physical condition. CrowdTrustDeed Sponsors, depending on the property, leverages Licensed Third Party Appraisers, Broker Price Opinions (BPO’s), Automated Valuation Models (AVM’s) and personal inspections of properties to determine accurate values.

Yes. To learn more about how we treat and protect your information, you should take a look at our privacy policy. Also, keep in mind that CrowdTrustDeed does not see, record, or have access to any information that you provide to third party service providers, including your bank account information, proof of accreditation status, and Trust Deed subscription information. All we can see and capture is the account information on your CrowdTrustDeed profile and whether or not an action (e.g. pledge, follow, etc.) has been taken.

No. We hate spam just like you do. We currently send one monthly newsletter to all our users. You can easily unsubscribe from our newsletter with just one click. We will, of course, continue sending you emails for which you specifically sign up, as required by law (e.g. changes to our terms of use), or as necessary for doing what we are here to do (i.e. provide you our services). In short: we won’t spam you.

CrowdTrustDeed does not and will not make any investment recommendations or provide legal, tax, or financial advice. Before committing to any Trust Deed, investors should talk to their own advisors and conduct their own due diligence to ensure that the investment meets their criteria and objectives.

This is set by the Trust Deed Sponsor. Investment minimums will usually start at $20,000.

When you invest, you own a fractional interest in a Trust Deed that is created specifically to invest in the asset that is being funded. The specific investment of this company will be described by the Trust Deed sponsor on a Trust Deed-by-Trust Deed basis, but generally it will be a a debt investment in the real estate asset itself.

Generally, the Trust Deed sponsor will be managing the investment vehicle (i.e. the Trust Deed created to invest in the real estate asset). You should carefully review the Trust Deed information to make sure you understand who will be on the driver’s seat.

In the world of finance, these are called “passive” investments for a reason: your voting rights are very limited and you will generally have no say in the decision making of the investment vehicle (the entity created to invest in the asset) or the real estate asset.

This will vary, but Trust Deed sponsors will generally submit periodic reports concerning the status of the Trust Deed. Also, the manager of the investment vehicle (the one created specifically to invest in the asset) will send financial statements to investors at least annually. Finally, investors will receive their tax forms (e.g. form K-1) every year so they can report their income to the IRS.

The nature of these investments is generally “buy and hold,” which means you should plan to hold on your investment through its lifespan.

We cannot give you tax advice and recommend you talk to a pro about investing with CrowdTrustDeed. What we can tell you is this: the investments listed on our website are generally in so-called “pass-through” entities for tax purposes. This means that investors will be responsible for paying taxes on the income of the investment vehicle. After the end of each year, investors will be sent a K-1 form so they can add this information to their tax returns.

CrowdTrustDeed has a two-step process to onboard Trust Deed sponsors on our site. First, we will actually meet the Trust Deed sponsor (in person, if possible) and chat about his experience, qualifications, background, and objectives. If we think a Trust Deed sponsor fits the bill, we will let it list a Trust Deed. Once a Trust Deed is scheduled to close, we retain a third party to run a background check on the Trust Deed sponsor and its principals.

CrowdTrustDeed is a disintermediated (i.e. direct) investment platform. This means investors and sponsors get to skip traditional industry middlemen and save time and money in the process. However, this also means investors must conduct their own due diligence and ensure that the investment meets their objectives. We also encourage investors (especially those unfamiliar with passive real estate investments of this kind) to retain their own advisors to assist them in this process.

Generally, no, but this will depend on the Trust Deed terms, which you should carefully review before investing. You should note that even when investors are not obligated to make additional contributions, when there is a shortfall, new or existing investors could provide additional capital. If this is the case, the non-contributing existing investors would be diluted, thereby getting the proverbial “smaller piece of the pie.”

We do not make investment recommendations. You should make up your own mind about the Trust Deeds listed on our site, based on your investment objectives and criteria. Listed Trust Deeds involve risks. If you do not have sufficient experience to evaluate the investments listed on our site, you should talk to an investment advisor, lawyer, accountant, psychiatrist, or other professional.

Most REITs will have a discretionary component and invest in multiple assets. At CrowdTrustDeed, all investments are single asset and single purpose: you decide how your money gets allocated. In addition, at CrowdTrustDeed, you get to skip the REIT itself and invest directly with the Trust Deed sponsor. This saves a significant layer of fees and expenses.

There are also many “crowdfunding” companies out there. These companies have replaced traditional intermediaries (REIT, etc.) with themselves and built online portals to obtain funding. In essence, they are perpetuating the old model of financial intermediation. This may be great for those who don’t mind paying significant fees and expenses to a middleman to do their homework. However, at CrowdTrustDeed, we decided to forgo the old model altogether and give investors a chance to deal directly with the Trust Deed sponsor. You are always free to retain your own advisor. But now this is your choice, rather than ours.

It’s simple: when a Trust Deed is ready to fund, you will initiate a wire transfer to the Escrow company handling the transaction. Likewise, when a Trust Deed sponsor is ready to distribute funds to investors, they will initiate a wire transfer directly to your account. CrowdTrustDeed does not see your account information and cannot access or control your money.

The typical borrower for these loans is a real estate investor requiring a bridge loan to help them acquire or refinance an investment. These investors are attempting to quickly take advantage of an opportunity and don’t have the time or can’t qualify for a conventional loan. Sometimes borrowers self-employed and don’t’t have a qualifying “stated” income. Other times borrowers are experiencing a life event; divorce, loss of job, illness, or death of a family member. These events cause a need for non-traditional financing, and due to the current credit crisis, private money becomes their only option.

The basics of trust deed investments are relatively easy to understand:

  1. Establish the value of the property being provided as collateral
  2. Evaluate the amount of the loan request
  3. Include any loans senior to the loan you are being asked to make
  4. Determine the loan-to-value
  5. Determine the Net Equity
  6. Carefully evaluate the borrower’s track record and ability to repay the debt
  7. Perform Due Diligence on the property, borrower and loan application
  8. Make funding decision
  9. Originate Loan
  10. Service the loan and make payments to the Investor

In addition to the detailed review of the underlying collateral to form an accurate market valuation of the property being secured, CrowdTrustDeed Sponsors will be using standard credit underwriting procedures in determining a borrower’s ability to repay the loan. A typical loan package will include a loan application, credit report, preliminary title report and income/asset verification and appraisal. Underwriting processes may include the review of the borrower’s credit report, employment history, income history, exit strategy and personal reserves to determine the creditworthiness of the applicant.

Ouch! That would suck. While we certainly are planning on being here for the long haul, we can’t deny this could happen. All of the Trust Deeds listed on our site are available as fractional interest investments that are operated by the Trust Deed sponsor. CrowdTrustDeed’s existence (or non-existence) will not affect your investment.

Some questions are sure to arise. Call us. We’re always eager to talk about Trust Deeds and explore how they might fit your financial picture. In fact, our team prides itself on the creation of innovative solutions that best suit the individual needs of our clients. We also know from experience that everyone’s needs are different, so we encourage you to confer with your legal and financial advisors when making any investment decisions.

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