California Trust Deed Investments; How to Invest in First Trust Deed Loans:
Why buy California Trust Deeds?
To get better returns. Far more than the so-called “interest” that banks hope you'll accept. The extra return you get from investing in trust deeds, compounded over time, can add up to a small fortune.
Why Read This?
To invest in GOOD California trust deeds.
Even if you’re an experienced investor – you need to be careful not to make mistakes. Warren Buffet talks about the importance of not LOSING MONEY. You may reduce the chances of investment losses by putting certain precautions into practice.
Following are six categories of information for trust deed investors, which, among other areas of information, may be considered as you determine how to invest in trust deeds.
Here are some of the basics when considering how to invest in trust deeds. Of course, there may be more to know and not everything provided here applies to every California trust deed investment.
Remember, not all loans are the same. Please read the "General Information About Trust Deeds" below, as it applies to all parts of this webpage.
Property (Collateral) / Appraisal
The collateral, the real estate, usually has to be worth a certain amount relative to the property that secures the trust deed investment.
What is the value? Some investors check both the comparable sales and the comparable listings in the area. You may be able to obtain a list of ALL recent sales in the area and ALL recent listings. Be careful of the use of only selected comparables that indicate a higher value.
Sources for lists of sales can be title insurance companies, county recorders, and real estate brokerages, among others.
Some investors obtain the actual printout of comparable sales from the provider, such as the title company.
Is the collateral saleable? One bedroom condominiums, houses in far away areas and properties with a lot of land may be more difficult to sell, in some circumstances. You can get independent opinions about property, other than from the person offering the trust deed investments.
California Title Insurance / Condition of Title
Your trust deed investment is only as good as what is recorded against the property. Title insurance can give you protection against liens you're unaware of, incorrect ownership and a host of other problems. When considering trust deed investments, will an actual assignment of the trust deed be recorded in your name at the county recorder? This can affect your security. There are many important details with title insurance, so always obtain and read the actual title insurance policy. It can be worthwhile to learn the difference between a preliminary title report and an actual policy of title insurance.
It’s common to hear the question, “why would someone with so much equity pay a higher rate, when bank rates are so much lower?"
Good question. Answer: Banks don’t make loans just because there’s lots of equity. Banks, mortgage bankers, credit unions and all the other “institutional lenders” require credit, documented income with likelihood of continuance, verification of assets, and compliance with a host of banking rules and laws.
There are many good borrowers who don’t meet all those requirements. They’re the customer we look for.
Although many trust deed investments are based on equity alone, we don't make loans without considering certain other aspects of the loan, at least to some degree.
Credit: It doesn’t have to be perfect, but the credit report and related credit information can provide valuable information about certain borrowers.
Income: Some loans are made without investigation of a borrower's income. Even when the income can’t be verified by traditional tax returns or pay stubs, there are a number of ways that may be useful in trying to determine if the borrower has funds available to pay. Bank statements, proof of gross income and leases, invoices or contracts can help confirm the cash flow necessary to make payments.
Purpose/Plans/Projections: It may be of value to find out and analyze what the purpose of the loan is; what the borrower's future plans are (to the extent you can find out); and what projections they have for their finances and the property. Getting and analyzing this information requires a higher level of work and skill, but in some cases may pay off through improved lending/investment decisions.
When analyzing first trust deed investments, there are questions relating to how the loan transaction was set up or originated that could be asked.
If it was a purchase, can you verify that the down payment was actually paid?
If it was a refinance or equity loan and not part of a purchase transaction, one may consider asking:
Was the loan “owner occupied?” If so, then there are a host of laws to investigate. Unless the maker or arranger of the loan is knowledgeable, there are factors to consider in deciding whether or not to loan to borrowers who occupy the properties that are collateral for the loan.
Non-owner occupied loans are subject to far fewer laws. Even then, if the loan was for consumer purposes, there are some laws relating to consumer lending that must be followed.
Whatever type of loan transaction, you will have to be sure that the right disclosures and documents were used and that applicable laws were followed.
“As with many things in life, getting in is easier than getting out.”
Aside from the borrower simply paying off the loan, how will you (or your heirs) eventually get out of this loan? If the borrower is unable to make any of the required loan payments, including the final payment, what will happen?
Could the borrower (or you) sell the property? Back to appraisal/collateral, you could look at the market and potential market for the property in the future.
When investing in trust deeds, California has many active, highly developed markets – and some markets and areas that are not as developed or not as economically stable. You must determine what types of areas best suit your investment objectives.
Could the property be leased out? Sometimes, if a property can’t be sold, it can be leased out until better times. Find out the local lease market for similar properties. Is the type of tenant occupancy increasing or declining? What improvements are necessary and how much “down time” is there in leasing vacancies out?
All of these questions may be considered, depending on the investment and the property.
Yet another area to consider is the servicing agent. Who is servicing the loan, collecting payments, handling delinquencies or, if necessary, foreclosing?
It's easier when payments are coming in on time, property taxes and insurance are paid current, and the property is being well maintained, but what happens when you hit a bump in the road? At this point, the skill and quality of the “loan servicing manager” may make a significant difference in the success of the real estate loan investment.
There are many loans that would have been OK, were it not for the errors of a loan servicer who lacked the experience, qualifications or interest in resolving loan problems.
Take advantage of trust deed investments. California offers you a great opportunity to earn higher interest rates, increase retirement income, and build financial security. Call us. Let’s discuss your questions and requirements.
You can get started with as little as $15,000.
Get information about trust deeds for sale:
Call us at (818) 366-5200. Ask for Joffrey Long.
Or, e-mail us at firstname.lastname@example.org
For more information about trust deed investments, please see:
Southwest Bancorp (dba Southwestern Mortgage)
Joffrey Long (818) 366-5200 email@example.com
17045 Chatsworth Street, Suite 101, Granada Hills, CA 91344-5845
Calif. Dept. of Real Estate Licenses:
00898122 (Southwest Bancorp) and 00525142 (Joffrey Long)
National Mortgage Licensing System (NMLS) Endorsements:
285731 (Southwest Bancorp) and 207272 (Joffrey Long)
Private Money (Hard Money) Lender / FHA and Conventional Loans /
Reverse Mortgages / Trust Deed Investments / Loan Servicing
Joffrey Long also provides consultation and testifies as a mortgage expert witness in disputes relating to mortgage lending and loan servicing. Expert Witness testimony is also provided as a hard money expert witness or mortgage loan servicing expert witness.