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CA BRE #01904379

NMLS/MLO #355855

Bond #92F388716F

What you need to know about Trust Deed Investing

Types of Trust Deeds


 The term ‘trust deeds’ refers to home loans, which are promissory notes secured by a deed of trust. They are also referred to as ‘mortgages,’ ‘trust deeds,’ ‘loans’ or simply ‘notes.’ We may use all of these terms here interchangeably.


 A 1st trust deed is the first loan on a property recorded in the public record. It's also referred to as 'senior debt.' It is the first loan to get paid in a sale or foreclosure. Having priority over any subsequent loans makes it a more secure investment for a lender or investor. A 2nd trust deed means a loan recorded after the 1st loan, making it the 2nd loan or 'junior debt.' 

 

Trust deeds may be performing, re-performing or non-performing. Performing means the borrowers have made their payments as agreed with no issues. Re-performing notes are those where the borrower had been behind in their payments but have since resumed payments under a re-negotiated agreement.Non-performing means the borrowers have stopped paying for more than 90 days and the note is in default. 


Real Property Advisors will help you develop your own investment criteria, find, evaluate and select 1st or 2nd and performing or re-perfroming trust deed investments. Non-performing loans and trust deeds are only recommened for professional trust deed investors and beyond the scope of our services. 

Our Criteria


As you become familiar with the types of investments you will develop the criteria with which you are most comfortable. Overtime it may expand, depending on your comfort level and interest. Our own basic criteria is the mortgages must be:


  • In Trust Deed States  (vs. Judicial Foreclosure States)
  • Primarily 2nd Trust Deeds
  • Performing or re-performing
  • Fair Market Value in excess of the combined value of 1st & 2nd trust deeds
  • Clear title to the note and deed of trust
  • Well-maintained properties/collateral in well-maintained neighborhoods
  • Our purchase price is discounted from the amount of the unpaid balance owed by the borrower
  • Annual returns must exceed 10%
  • Monthly payments in excess of $500/month
Why We Prefer 2nd Trust Deed Investments

  • Higher Returns. Because they have a lower priority than a 1st trust deed and previously had payment issues, they command a higher return.
  • More Affordable. In California a 1st trust deed may cost $300,000 or more whereas you might purchase four re-performing 2nd trust deeds for $100,000 or less. 
  • Higher Re-sale Value. While many investors hold their notes to maturity, it may be necessary or desirable to sell earlier. As the current payment history of a note increases it becomes more valuable to other note investors.
Disclosure.The information contained herein is for informational and educational purposes only and does not constitute an offer or solicitation to buy or subscribe for any securities, nor should it or any part of it form the basis of, or be relied on in any connection with, any contract or commitment whatsoever. The information herein does not constitute legal, accounting, tax or investment advice; such advice should be obtained from a competent professional authorized to provide such advice.