Real estate is one of the most secure ways to invest your savings. However, sometimes you want to put your money into an investment property without ever owning, repairing, or managing it. One of the most rewarding ways to do this is by investing in a high-yield trust deed because you don’t have to purchase any property in this case. Instead, you lend your money to investors that are looking for real estate financing.
In turn, the borrower will repay you at an attractive interest rate that can even reach 10% or higher. Would you like to invest in a commercial or rental property without “getting your hands dirty”? Here are tips for investing in trust deeds that generate a healthy return.
- Invest with a Trustee
Instead of going it alone, find a trustee company that can link you up with the right investors. This way, you don’t have to go looking for potential buyers. The third-party company will do this for you, ensuring you’re lending to qualified and vetted borrowers. They’ll handle the marketing and application processes and can help with servicing the loan, making life a lot easier for you as a trust deed investor.
- Negotiate a Reasonable LTV
Investors can acquire property without making any down payment on the mortgage, with the property serving as collateral. This protects them from loss if the investment doesn’t turn out well, making them an unacceptable credit risk for you as a lender/investor. This is why it’s a good idea to involve a third party that can pair you with investors willing to take the risk and make some upfront payment. A buyer that makes a 30% to 40% down payment on the loan is better motivated to protect their investment by honoring their part of the bargain.
- Prioritize Properties with Upside Potential
Property with upside potential is more likely to appreciate in value and generate higher rental income with time. Lending on such property with a trust deed increases your chances of recouping your investment with high interest. It works out for all parties since the buyer, too, will be getting more from their real estate investment. As such, they’re motivated to pay off the loan so they can eventually own the property.
- Do Your Homework–Know the Buyer and the Property
Due your due diligence to avoid lending on a property that’s highly likely to face foreclosure. This includes looking into the investor and checking out the property yourself. A little homework can provide the reassurance you need to make a good loan that will pay off as promised.
- Protect Your Investment
To cover your assets, ask for rental property insurance to be included in the trust deed. It’s also crucial to obtain a lender’s title insurance cover from the borrower. Doing this helps to protect your investment should something happen to the property.
- Involve a Loan Servicing Company
A loan servicer can simplify life for a trust deed investor. They handle all the paperwork and send you the borrower’s check, so you don’t have to collect it yourself. This reduces your involvement to simply providing the funds and cashing the proceeds’ check.
Invest in High Trust Deeds with Fidelity Mortgage Lenders Today!
Are you ready to invest in high-yield trust deeds without the day-to-day hassle of real estate management? If so, contact our team at Fidelity Mortgage Lenders to get started!