Trust deed investing is simply investing in loans secured by real estate. Most trust deed investments are relatively short term loans (maturity under five years, with many loans two years or less) made to professional real estate investors. 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.

The margin of safety is the difference between the loan amount, and the value of the underlying property. The core concept of trust deed investing is that if the borrower does not perform, the lender can foreclose on the property and sell it to recoup the investment, plus any past due interest. If the loan is sufficiently conservative, i.e. the property value is high relative to the loan amount, then the investment should not lose money even if the borrower defaults on the loan. A well structured trust deed investment might have a loan-to-value of 65%.

Individual trust deed investments are relatively small when compared to government or corporate bond issuance. For this reason it would be difficult for large institutional investors to put a lot of money to work into trust deeds. Therefore, the trust deed market is left to smaller investors who also have the expertise to distinguish good trust deed investments from bad ones. It turns out that the universe of such investors is fairly small compared to the universe of borrowers who are seeking private money loans.

A Real Estate Investment Trust, or REIT, is a special type of company set up specifically to hold a portfolio of investments in properties or in some cases mortgages secured by property. There are a number of very professional FAQs about REITs available on the Internet. In this FAQ, we will reference those other FAQs, and also add in our own perspective on REITs–the investor’s perspective. Our approach is to de-mystify REITs but also to point out some of the risks and pitfalls that investors should be aware of, when evaluating a REIT investment.

First, let’s define how yields are calculated for single family investors. Suppose you purchase a home for $85,000 and spend $15,000 on renovations such as paint, flooring and updating the kitchen. Your total cost basis for this property is $100,000. A rule of thumb is that you should be able to rent out the property for a monthly rent of at least 1% of your cost ‚Äîin this case, $1,000 per month. If you achieve this rental income, your annual rent would be $12,000 (this is called the “gross potential rent”). Your actual rent collected may be a little less once you account for vacancy, occasional bad debt and the like. Let’s assume actual rent is $11,000 per year. Your operating expenses including property taxes, insurance, repair expenses and property management fees might be $5,000 per year. This would leave you with $11,000-$5,000=$6,000 per year in cash flow (“net operating income” or “NOI”), which represents a 6% yield on your cost basis of $100,000. In many markets today, for investors who purchase carefully and renovate cost effectively, these types of yields or “capitalization rates” are achievable and in some cases can be exceeded. This represents an unleveraged yield in which all of the investment is made in cash. Below we describe how yields change with the use of leverage.

Like owning apartments, owning leased homes features two significant tax advantages. First, the building can be depreciated so that a significant portion of net rental income is sheltered from taxation. Second, if and when a home is sold it qualifies for capital gains tax treatment rather than ordinary income treatment.

Commercial real estate such as shopping centers, office buildings and industrial buildings tend to feature a little more current cash flow than apartment buildings. One reason is that analysts expect apartment rents to rise more rapidly than rent for other property types. For example, shopping centers face ever increasing competition from online retailers, limiting growth in demand from “brick-and-mortar” stores. Also, investors prefer apartments because their income is perceived to be more stable. There is a perception that apartment vacancy issues can be resolved more easily than vacancy in other types of property. In general, there has been too much capital chasing a limited number of commercial real estate opportunities, resulting in high prices for commercial real estate, making single family investment more attractive, however this may change as capital pours into single family investment.

While today’s housing prices make single family home investing quite attractive, there will be a long-term need for quality single family housing units. Many investors and operators that we work with have been managing rental portfolios in their markets for 10, 20 even 30 years. They purchase their properties at a good price and manage and maintain the properties in a way that attracts and retains quality tenants. They have been able to continue to produce yield through holding their portfolio. Some investors consider their rental portfolio a key part of the retirement assets and seek to create a long term income stream that can supplement their earnings after retirement. The good news is that single family home investing has been a good source of income and investment returns for many years and should continue to be a good opportunity for both passive and active investors for many years to come. The change in today’s investment environment is that there are new ways to gain exposure to this sector through professionally managed investment funds that provide similar returns to active management of a rental portfolio without the other issues referenced above.

Instead of paying capital gains taxes, investors now have the option to invest in a Qualified Opportunity Fund (QOF), which in turn makes investments in Opportunity Zone Census Tracts. For example, in Los Angeles, many parts of Hollywood are in Qualified Opportunity Zones, as are areas near USC, West Adams, some parts of Silverlake, and many neighborhoods in Long Beach. Investors may set up their own QOFs and source and manage their own real estate projects, or they may choose a more passive approach, working with companies that have relevant investment management experience. In our view, most QOFs will be customized to meet the needs of a particular investor or groups of investors. For a variety of reasons, we do not see many large funds set up for the general public. The main challenge is that Opportunity Zone investments are subject to strict rules and timelines, which vary from one investor to the next. A large fund serving many unrelated investors, investing in a portfolio of various projects, will have trouble meeting everyone’s needs at once.

While buying an investment property and collecting monthly rent is perhaps the most classic example of investing in real estate, it’s only one option. It’s also possible to follow a fix-and-flip investment strategy, get involved with real estate wholesaling, or invest in a real estate investment trust (REIT).

Before you can start investing in real estate, get clear on your investment strategy, since each method of investing has different advantages and disadvantages. You’ll need to learn what type of real estate investing works best for you before you can try to take your first steps building a portfolio

Most people wait until they have plenty of real estate investing experience to think about investing in commercial real estate as an asset class, as the stakes with these types of properties are higher. Rather than investing a few hundred thousand dollars in a property, you could be on the hook for a few million.

But if you feel you’re ready to go this route, the first step would be to decide what type of commercial property you intend to invest in. After that, it’s about researching your financing options and putting together a team of experienced experts.

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. Mortgage Vintage embraces its role as a service provider and recognizes that this is the investor’s personal capital. We believe 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.

Yes. Mortgage Vintage 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.

Trust Deeds are a compelling alternative investment which provide attractive yields and passive monthly income as part of a risk-averse strategy.

$25,000 – our offerings are available as multi-beneficiary (fractional interest portions) or whole-note investments.

Trust deed investing and hard money lending are closely related. Trust deed investors are one of the sources of capital for the private money loans made by hard money lenders. Brokers work with trust deed investors to fund hard money loans for borrowers. In the case of funds that make private money loans, the funds can be said to be making trust deed investments when they fund a loan. For more information about trust deed investing, please see our Trust Deed Investing FAQ.

Private individuals with disposable income can invest in hard money loans through a process known as Trust Deed Investing. Such investors may invest in individual loans or in a fund that manages a portfolio of loans to mitigate the risk associated with any single loan going into default.

In finance, an investment strategy is a set of rules, behaviors or procedures, designed to guide an investor’s selection of an investment portfolio. Individuals have different profit objectives, and their individual skills make different tactics and strategies appropriate. Some common examples of investment strategies include but are not limited to stocks, bonds, mutual funds, money market accounts, certificate of deposit accounts and trust deed investing.

The margin of safety is the difference between the loan amount, and the value of the securing property, otherwise known as the Loan-to-Value Ratio. The core concept of trust deed investing is that if the borrower does not perform, the lender can foreclose on the property and sell it to recoup the investment, plus any pas due interest.

If the loan is sufficiently conservative, i.e. the property value is high relative to the loan amount, then the investment should not lose money even if the borrower defaults on the loan. A well structured trust deed investment might have a loan to value of 65%.

Both equity investments and contributions to Top Hard Money Loans general operations are tax-deductible. Debt capital investment or equity-equivalent investments are not. Financial institutions, however, can receive CRA investment and/or service test credit for either equity, equity-equivalent or debt capital investments. Contributions to Top Hard Money Loans general operations are tax deductible up to the limit of the law.

The Top Hard Money Loans pays interest annually on June 30 of each year.

The Top Hard Money Loans adheres to underwriting and lending policies that ensure financial safety and soundness. To protect Top Hard Money Loans and its investors, it maintains a healthy loan loss reserve and through prudent growth of capital it ensures a safe capital position for investors. Historical loan loss experience is a good indicator of the quality of Top Hard Money Loan srisk. Since inception in 1996 the organization has maintained an extremely low rate of loan losses. Please check with us for our current historical profile.

Yes, upon maturity. All debt investments carry a specific term that is typically 3 to 10 years. Top Hard Money Loans will notify you by letter prior to the maturity date with options to redeem your investment or renew the investment for an additional term.