PROFILE OF A TRUST DEED INVESTOR

By May 12, 2018Blog
Are you currently or are you thinking about becoming a Trust Deed (TD) Investor?  What are the characteristics and profile of a Trust Deed Investor?  Are there any common threads amongst current investors that can help others decide whether to enter this Current Income, Non-Correlated Alternative Asset Class? The author accumulated the TD Investor Profile highlights listed below from over 300 successful Hard Money Loans and Trust Deed Investments through Mortgage Vintage and CrowdTrustDeed:

1.       High Yield: 1st Trust Deeds generally pay a current annualized yield between 9-10% and 2nd Trust Deeds pay 10-11.50%.  In today’s low yield environment, these secured returns are highly sought after.  The efficiency and low friction of a Trust Deed Investment provide for these high yields as compared to overhead laden Mortgage Funds or other Investment structures where high management fees and costs strip 100-200 basis points from the yield.  CrowdTrustDeed Investors who have averaged a 10.02% yield over the last 3 years truly feel, with empirical evidence substantiation, that they receive outsized returns relative to risk.

2.       Current Income:  Trust Deed Investors typically like to gain their investment yield through current income vs. a projected yield after a 3 year or 5 year or longer hold period.  Current income pays for lifestyle and day to day expenses while also providing an additional savings boost.  Investors enjoy seeing the deposit email notifications.

3.       Understand Real Estate:  Wise investors invest in things that they know about.  This “invest in what you know” mantra holds true for Trust Deeds.

4.       Secured Investment: Unlike investments in stocks, bonds, borrower dependent notes, companies or other un-secured investments, A Trust Deed provides specific and obtainable collateral that can be sold or rented should a default occur.

5.       Non-Judicial Foreclosure State:  Our investors like the protection of California’s Non-Judicial Foreclosure process.  Should a default occur, California laws and statutes dictate the foreclosure process and timeline.  Recently, despite 9 mos. of delinquency, a San Clemente house was sold and the TD paid off providing a 14%+ yield to investors.

6.       Control:  Investors like to have control of the decision to invest or not.  They like to decide on property type, real Loan to Value, location, rate, ability to pay and other important investment parameters.  TD Investors don’t like being subject to a Fund Managers inflated valuations and pressure to “place the money”.

7.       Manage a TD Portfolio: Smart TD Investors build and maintain their own Trust Deed Portfolio.  They manage maturity dates on existing loans with new Trust Deed offerings to provide a steady cash flow.

8.       Diversification: TD Investors enjoy the many aspects of diversification provided by Trust Deed Investments.  Typically, investors already have a Wall Street Portfolio of Stocks and Bonds and many have substantial Real Estate Equity investments.  This Real Estate Debt asset class rounds out a portfolio and provides an essential non-correlated component.

9.       Competitive:  TD Investors are competitive.  They like to win.  They like to feel the accomplishment of a successful investment during the monthly payments and ultimately when the loan pays off.

10.   Social and Economic Aspect:  Fix and Flip and Fix and Rent loans secured by Trust Deeds increase construction jobs, improve neighborhoods and offer enhanced living conditions for current and future residents.  Business purpose loans provide needed capital to fuel business investment and expansion that drive our local economy.

11.   Trusted Crowd Experience:  TD Investors enjoy the collaborative TD vetting and buying experience.  Many times the additional due diligence provided by the lenders improves the terms and security for the loan.  The managed fractional ownership experience provides a deserved comfort by allowing all investors to benefit from the knowledge, experience and due diligence offered by the other lenders in the TD investment.

12.  Mail Box Money: TD Investors, whether retired or not, like to travel, play sports, go on vacation, enjoy their children and have fun.  They are not interested in “hands on” management of an investment like having to deal with plumbing issues in a rental at 2am.  They enjoy the proverbial “mail box” money that provides liquidity for their lifestyle without the hassle.

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