Trust deed investing is simply investing in real estate and being added to the title deed to secure your investment. Most trust deed investments are relatively short-term loans made with hard money by high value/worth individuals. In the current economic climate professional real estate investors are buying properties at foreclosure sales for bargain basement prices, fixing-up these properties, and reselling them for a profit. Banks are reluctant to lend to this market not because the loans are particularly risky, but because banks have a great deal of bad real estate loans on their balance sheets as a consequence of the loose lending practices of recent years. Presently, banks are unwilling to make real estate loans unless they fit a very strict set of criteria. They often do not want to lend to opportunistic real estate investors because the property which is security for the loan is not “move-in ready” at the time of loan funding‚ it usually needs some work. For this reason, real estate investors have limited financing options available to them, and lenders to this market are able to command relatively high-interest rates.
Trust deed investments offer an attractive return with relatively low risk. With STISIG trust deed investors usually earn double-digit annual returns, paid monthly or at the end of each deal. In some cases, returns above 10% are possible. These returns are very favorable relative to other investment options with similar risk profiles. The risk of losing money in a trust deed investment is mitigated because of our conservative rules for acquiring properties.
Trust deed investments are not liquid. In other words, you cannot decide you want your money back one day and quickly convert your investment into cash, as you could with a municipal bond or shares in a blue chip company. You need to be willing to stick with your investment until the borrower pays off the loan, or, in case of default, until you have foreclosed and sold the underlying property.
There are four main options for an individual to invest in a trust deeds: (1) personally source individual loans and lend money directly to real estate investors; (2) purchase loans backed by real estate from brokers; (3) invest in a fund that invests in trust deeds; and (4) identify people who are directly investing in trust deeds as a group and invest along with them.
The minimum depends on which investment you would like to make. Most investors starting out prefer the secured investment with being added to the trust deed of a property. Some investment firms allow investments as small as $10,000 while others require $100,000 or more. As a practical matter, the minimum generally will be $100,000 in order to gain a significant return and be eligible to be added to the trust deed.
Investing in individual trust deeds will yield a higher return than investing in a fund. This is the preferred approach for very active investors who have the type of money to invest in real estate. Each loan requires a great deal of analysis and due diligence on the property. Investing in individual trust deeds requires constant sourcing of deals so that when one property sell, the money can be reinvested quickly in another.
It is not a question of which is better. Investing directly in real estate equity and investing in trust deeds are simply two different types of investments, each with advantages and disadvantages.
In short, this isn’t ever going to happen with STISIG. We buy properties in full with cash. Our investors put money into these properties, get their name on the title deed and get paid when the property sells. Our properties usually sell in 3-4 months.
A hard money lender is a non-bank lender that makes loans or investments that fall “outside the box” of bank lending standards. To compensate themselves for moving quickly and funding loans banks won’t fund, hard money lenders charge higher rates than banks. They also charge a fee to the borrower at the time loan funds. This is called an origination fee and is expressed in points. Each point corresponds to 1% of the loan amount. Hard money lenders are frequently successful real estate investors who have extra cash. They prefer to lend money rather than leave the cash in a bank account or money market fund earning 1% interest or less.
The terms bridge lender and hard money lender are sometimes used interchangeably. Both types of lenders focus on making short-term real estate loans. Sometimes the term hard money loan signifies a loan where the borrower’s credit is not good, whereas bridge loans are frequently loans where the borrower’s credit is good but the property is not in a condition to qualify for a traditional bank loan. Hard money loans are always expensive whereas bridge loans can sometimes carry interest rates close to those on traditional/permanent bank loans. — We aren’t using investor money to bridge any of our deals. You are investing in a property, being added to the trust deed and getting paid on the sale of that property which usually takes 3-4 months.
The key technique is to look at recent sales of similar properties nearby. Sales more than six months old are not reliable, because the market might have changed. Look at the absolute price at which the properties sold, as well as the price per square foot. Assuming you can find homes of similar size and quality that sold nearby recently, the amount of your loan should be much lower than the typical selling price of the other homes—both in absolute dollars in dollars per square foot of living space.
When a property sells all expenses are considered and profits are paid based on the ratios paid into the investment property. We go looking for another profitable deal for our investors.
STISIG – FAQ – Click a question to expand
What is Trust Deed Investing with STISIG?
Trust deed investing is simply investing in real estate and being added to the title deed to secure your investment. Most trust deed investments are relatively short-term loans made with hard money by high value/worth individuals. In the current economic climate professional real estate investors are buying properties at foreclosure sales for bargain basement prices, fixing-up these properties, and reselling them for a profit. Banks are reluctant to lend to this market not because the loans are particularly risky, but because banks have a great deal of bad real estate loans on their balance sheets as a consequence of the loose lending practices of recent years. Presently, banks are unwilling to make real estate loans unless they fit a very strict set of criteria. They often do not want to lend to opportunistic real estate investors because the property which is security for the loan is not “move-in ready” at the time of loan funding‚ it usually needs some work. For this reason, real estate investors have limited financing options available to them, and lenders to this market are able to command relatively high-interest rates.
What makes trust deed investing attractive?
Trust deed investments offer an attractive return with relatively low risk. With STISIG trust deed investors usually earn double-digit annual returns, paid monthly or at the end of each deal. In some cases, returns above 10% are possible. These returns are very favorable relative to other investment options with similar risk profiles. The risk of losing money in a trust deed investment is mitigated because of our conservative rules for acquiring properties.
What are the disadvantages and risks with trust deed investing?
Trust deed investments are not liquid. In other words, you cannot decide you want your money back one day and quickly convert your investment into cash, as you could with a municipal bond or shares in a blue chip company. You need to be willing to stick with your investment until the borrower pays off the loan, or, in case of default, until you have foreclosed and sold the underlying property.
How can I invest in trust deeds?
There are four main options for an individual to invest in a trust deeds: (1) personally source individual loans and lend money directly to real estate investors; (2) purchase loans backed by real estate from brokers; (3) invest in a fund that invests in trust deeds; and (4) identify people who are directly investing in trust deeds as a group and invest along with them.
What is the minimum to invest with STISIG?
The minimum depends on which investment you would like to make. Most investors starting out prefer the secured investment with being added to the trust deed of a property. Some investment firms allow investments as small as $10,000 while others require $100,000 or more. As a practical matter, the minimum generally will be $100,000 in order to gain a significant return and be eligible to be added to the trust deed.
Should I invest in an individual trust deed or in a trust deed fund?
Investing in individual trust deeds will yield a higher return than investing in a fund. This is the preferred approach for very active investors who have the type of money to invest in real estate. Each loan requires a great deal of analysis and due diligence on the property. Investing in individual trust deeds requires constant sourcing of deals so that when one property sell, the money can be reinvested quickly in another.
Which is better, investing in trust deeds or investing in real estate?
It is not a question of which is better. Investing directly in real estate equity and investing in trust deeds are simply two different types of investments, each with advantages and disadvantages.
What happens if the borrower files for bankruptcy?
In short, this isn’t ever going to happen with STISIG. We buy properties in full with cash. Our investors put money into these properties, get their name on the title deed and get paid when the property sells. Our properties usually sell in 3-4 months.
What is a hard money lender?
A hard money lender is a non-bank lender that makes loans or investments that fall “outside the box” of bank lending standards. To compensate themselves for moving quickly and funding loans banks won’t fund, hard money lenders charge higher rates than banks. They also charge a fee to the borrower at the time loan funds. This is called an origination fee and is expressed in points. Each point corresponds to 1% of the loan amount. Hard money lenders are frequently successful real estate investors who have extra cash. They prefer to lend money rather than leave the cash in a bank account or money market fund earning 1% interest or less.
Is there a difference between bridge lenders and hard money lenders?
The terms bridge lender and hard money lender are sometimes used interchangeably. Both types of lenders focus on making short-term real estate loans. Sometimes the term hard money loan signifies a loan where the borrower’s credit is not good, whereas bridge loans are frequently loans where the borrower’s credit is good but the property is not in a condition to qualify for a traditional bank loan. Hard money loans are always expensive whereas bridge loans can sometimes carry interest rates close to those on traditional/permanent bank loans. — We aren’t using investor money to bridge any of our deals. You are investing in a property, being added to the trust deed and getting paid on the sale of that property which usually takes 3-4 months.
How do I perform a value assessment of the property?
The key technique is to look at recent sales of similar properties nearby. Sales more than six months old are not reliable, because the market might have changed. Look at the absolute price at which the properties sold, as well as the price per square foot. Assuming you can find homes of similar size and quality that sold nearby recently, the amount of your loan should be much lower than the typical selling price of the other homes—both in absolute dollars in dollars per square foot of living space.
What happens when a property sells?
When a property sells all expenses are considered and profits are paid based on the ratios paid into the investment property. We go looking for another profitable deal for our investors.