First, you probably have the question all investors have…what exactly is trust deed investing and how does it work? In simplest terms, a trust deed is a simple document recorded with the county that creates a secure lien on real estate property. That property then becomes collateral for lenders and the trust deed holder.

Basically, this is how they work: a borrower needs a loan for real estate. (This can be property they already own or property they are hoping to purchase.) The proper documentation is created for a Promissory Note which is an agreement that the borrower will repay the lender on an agreed upon amount. The trust deed itself is what makes the contract binding. Since the property is used as collateral for the loan, the trust deed investor (person who lends the money) can use the property as a form of repayment to get their money back.

Generally, trust deed investingcomes at a bit higher price than traditional bank loans. The interest rates are higher, making them more difficult to pay back. So why would anyone participate in trust deed investing then? The reasons are abundant, actually.

First, a bank loan can take quite a while to process. With trust deed investing, the loan is quick and the borrower can receive the money more quickly than dealing with all the messy paperwork. Another reason people prefer these types of loans is because they are generally more short-term than bank loans, with the length of most loans ranging anywhere from 1-5 years.

One of the bigger factors people take into consideration when investigating trust deed investing is because they do not necessarily have the credit to qualify for a bank loan. When a bank turns a person down because of bad credit, they often feel they have nowhere to turn. However, with these loans, it makes their dreams of purchasing real estate with a low credit rating very possible.

Banks also consider the worth of the property when deciding to lend to a borrower. While trust deed investors also consider the property, they do not weigh it as heavily. Thus, these types of loans are easier to obtain.

Broker Level 4 Funding LLC