Lending on Trust Deed Investments
Over $200,000,000 Funded
Become a Trust Deed Investor
The Level 4 Funding Vision
Our goal is to provide Short-Term Hard Money Loans for Real Estate Borrowers purchasing Commercial properties, Multi-Family, Foreclosures, Bank Owned or Short Sale properties.
We target borrowers of a highly marketable range of Real Estate, has a solid loan-to-value ratio, and are competent in fulfilling the obligation of the note.
The borrower brings tremendous value to the marketplace by creating jobs, beautifying neighborhoods, increasing tax revenue, and turning neglected, vacant blight into valuable properties. For this, the borrower deserves a reasonable profit and should be seen as an important partner and solution in real estate development.
Who is Level 4 Funding, and why should you trust us with your money?
We always have Trust Deed Investments; if you want to be notified of future Trust Deed Investments, please enter your contact information below. Thank Dennis.
There are three parties mentioned in a deed of trust document:
- the beneficiary (Private Money Lender, You),
- the trustee, and (The trustor, usually the title company, a neutral party.)
- the trustor (the borrower).
The trustee is given certain powers in a Trust Deed. Should the borrower default, the trustee can follow a simplified foreclosure process called a trustee’s sale. The Trustee An individual or organization is authorized by the borrower to hold a trustee sale. This procedure is shorter and less expensive than a judicial foreclosure. When the trustee’s sale is conducted, the property can be purchased by what is known as a “third-party bidder,” or it can “revert” to the lender. In other words, after the trustee sale, property ownership is transferred to either the beneficiary or the winning bidder.
The Benefits of Deeds of Trust Investing Everyone wants to make money on their investments. Investing in Deeds of Trust generates a higher yield than the typical bank or savings account. The real estate collateral backs each Deed of Trust at a favorable Loan to value ratio, typically 70% or less. Most investors feel secure and confident in this type of investment since they are real estate-based. Investors achieve a high return on investment and generate 8 to 18% annually. Investors interested in Deeds of Trust can start investing as little as $50,000. Many investors eagerly seeking returns, paying more than the bank CDs of 1-2%, turn to deeds of trust. Unlike investments in the stock market or a mutual fund, with Deeds of Trust investing, you will know how much you are getting month after month. The payments are deposited directly into your bank account or sent to you monthly by check. This is not a get-rich-quick scheme, but it works similarly to a CD in that your money will be invested for a fixed term, such as 6 or 60 months, and you get your principal back.
A high yield Deed of Trust investment is perfect for private individuals, non-profits, cooperate, pension plans, retirement funds, 401Ks, IRAs, and SEP accounts.
Today, professional real estate investors secure properties at foreclosure bargained prices and resell the property for profit. In most cases, returns are favorable, offering a positive yield with relatively low risks. When comparing other options with similar risk profiles, the threat of losing money in Deed of Trust Investing is marginal.
In the event of a borrower default and there is a foreclosure, Deeds of Trust investing is protected by real estate. The investor would assume the title to the property of the residential property, and the investor would sell the property to recoup the investment. The investor becomes the lien holder, and the property secures the investment.
Why do people invest in Trust Deeds?
Monthly Cash Flow Trust Deed investments pay monthly interest payments while protecting your principal. In a recent survey of our investors, over 96% of our Trust Deed Investors rated consistent cash flow as the main reason they invested in Trust Deeds. If the monthly cash flow is not needed and is reinvested, even at a moderate return rate, returns can quickly turn a 9% base return into something more substantial.
Security is the second most important reason our investors, like Trust Deed Investing. When you invest in a first Trust Deed, your money is backed by a specific property. The investment is funded at 75% or less of the current market value, which builds equity protection.
Easy to Do If you have borrowed money from a bank, you understand the basics of Trust Deed investing. As a Trust Deed investor, you have simply switched seats to the lending side of the table. You are the bank.
Diversification Trust Deeds allow an investor to diversify into real estate assets without the hassle of being a landlord. The borrower of the funds handles the daily property management, including the repairs, maintenance, keeping the property rented, and dealing with renters. You receive a monthly check.
Less Volatile When your money is invested in a first Trust Deed with the help of a broker with a clientele with a proven track record of repayment, you will find Trust Deed investing very safe and stress-free. Compared to the stock market, Trust Deeds are less volatile. Much less volatile.
Guaranteed The property is backed up by Title Insurance, Property Insurance, and a personal guarantee from the borrower.
Who is your typical Trust Deed investor?
Level 4 Funding has millions of dollars of Trust Deed investments working daily. Every dollar comes from people, organizations, pensions, and nonprofits that have funds to invest and have taken the time to understand the benefits of being a private money lender. We have many Trust Deed Investors, and they fall into several categories. Below are the most common.
The Retired Looking for reasonable yield return and safety? Our Trust Deeds work for these investors because Trust Deeds provide monthly income with little chance of the principal being affected. This allows this group to live comfortably on their monthly interest while the principal remains untouched.
I am Too Busy (High-Earning Professionals) Lawyers, doctors, dentists, bankers, professors, city government employees, and numerous other professionals are busy earning high incomes with little time to personally manage their investments for growth. Trust Deed does not require hands-on management to deal with physical property assets.
Pensions & Employee-Sponsored Retirement Programs Many pension and employer-sponsored retirement programs have seen wild fluctuations in holdings and low yields on “safe” investments over the past few years.
Inherited Wealth This group consists of individuals who have inherited substantial money. Income.
Wealth Managers and Estate Planners Individuals in charge of managing large sums of money for wealthy individuals come to us to further diversify their clients’ investment portfolios through Trust Deed investments. Wealth managers like the cash flow and the real estate as collateral. Estate planners incorporate Trust Deeds to increase monthly income for wealthy individuals or their heirs and beneficiaries.
While the above list gives a glimpse into our core clientele, we find that most of our Trust Deed Investors, no matter their occupation or profile, have been referred to us by other satisfied clients. We find that happy clients make the best advertisers in the world.
So, you want to be a Trust Deed Investor?
Following is some basic information on being a Trust Deed Investor. This information was learned over the past 40 years of real estate investment, and some items were learned at a high cost. The guideline provides tips and good advice about how to go about investing in Deeds of Trusts and earning high yields on well-secured first position Loans. Remember, it is your money; you can walk from the deal, and plenty of deals are out there.
Are you sure that no one needs to ask for a little more cash down payment or even some additional real estate equity or collateral to adequately secure this Deed of Trust? Ask if they have other assets to use as collateral for the Loan. Motor home? Jet plane? Gold? Diamond? You will be surprised at the answer; sometimes, the answer is yes. If they have additional collateral, GET IT!
How will the borrower pay off the Loan in 6-24 months? What is their exit plan to get out of the deal and pay you back? Sometimes the borrower will say that when the home is finished, they plan to move in and make it their primary residence. Will they do a refinance and pay you off? Can they do this?
Ask yourself, can the borrower complete the deal or pay the Loan? Do they have the income and cash to complete the deal? If the borrower is in the fix/flip business, do they have the experience to get the home completed? Are they going to do sweat equity and do it their selves? Do they have the necessary skills to fix, market, and sell the home? Where are they getting their money from?
Everyone wants to be in the real estate business of buying and selling homes for profit. It’s on TV, radio, and their weekly seminars that will show you how to make big bucks in the real estate market. New investors will buy the property and want you to be the lender on the deal. They want you to be their dream cash provider. As the lender, you must ensure you do not get caught up in the hype of making money deals and protect your investment.
Following are some Don’ts:
Do not lend to inexperienced individuals. What is experience? Real Estate License, prior flips, contractor license, amount of education (did they graduate from college?)
Don’t’ lend unless they have their OWN cash in the deal. If you are lending 60%, where is the reaming 40% coming from? If they need to make improvements, where is the cash coming from? Ask to see bank statements. Maybe they are going to borrow the money on a credit card. Do not lend to them.
Do not lend if you do not like the property. When you feel wrong about this, it’s your Guardian Angel talking to you. Listen to the Angel and don’t do the deal.
Do not lend to bad people. What are bad people? The best indication of the quality of the borrower is found in the credit report. Get one and read it. But what is wrong? Look at the report and see what is causing the low score. A foreclosure on the record can be scary, but the borrower may be starting to improve. When looking at the investment, more weight is placed on the Loan to the value and condition of the property. And with a good LTV ratio, you should be adequately protected, but you must go beyond the credit report. Try to evaluate the ‘moral fiber' of the borrower. Foreclosure is terrible, but are there other items on the report? Did they try to resolve the credit issue, or did they ‘skip and run’? Who did they burn? A foreclosure or short sale is typical but skipping out on credit cards, not paying Pizza Hut for a bad check, or not paying a $25 phone bill indicates someone who does not care and will not care about you. Do not lend to low ‘moral fiber’ people.
Do not lend unless you Google their name. You will be surprised by what you find.
Do not lend to relatives or friends. Do not do it.
Don’t lend unless you are sure that the combined total of all real estate Loan proceeds plus any other financing or any other money being released to the buyer in this transaction does not exceed what you would be willing to pay for that property EXACTLY AS IT SITS TODAY??
Do not lend on Future Value. The future may not come as you expect it. Only lend on current value, not someone’s future dream. What will your equity position be if no improvements are made to the property? What is value? It is the value of the property? The value of the property is its current value as it stands NOW. Do not be sold on the future improved value. Only lend on what is -- not what will. Borrowers will say that when the home is completed, the value is $500,000 based on an LTV ratio of 60%, so you can lend $300,000. However, as the house stands today, its value is $100,000.
Do not lend on future value. Never lend on a promise to do something. Remember, it’s the money you are lending, and you must always consider the borrower's worst-case scenario. You must be prepared to foreclose and return the assets to protect your investment. You need enough cash reserves to complete the foreclosure and resell the property.
You need to consider the following points if you are the lender of a Deed of Trust.
- Is the Deed of Trust that you consider being brokered by an experienced, licensed, and reputable investment broker? What type of protection is being offered for your investment? To fund this loan, are you receiving the maximum title insurance available?
- You will need a title policy from the title company for the loan. This is called an ALTA Lender Title Policy. It has an insurance policy provided by the title company, ensuring that the title is as stated and that there are no other liens or attachments to the property. It looks for defects in the title, such as mechanics liens and other items. You need to read this document. Take time to read and familiarize yourself with each item in the prelim (preliminary title report) issued by the title company after opening escrow. Even though the loan is very well secured and the thought of taking back a $200K home for $100K might appeal to you, many investors like to read the prelim to become familiar with the property's easements, assessments, and mineral rights. Also, always obtain the maximum title insurance coverage update available whenever you rewrite, extend, alter, modify, or change any note and Deed of Trust.
- You need to see the homeowner’s insurance covering fire, damage, and liabilities. Make sure that you are the additional insured on the title policy. But there is one thing that you must look at when you examine the policy. Most standard insurance policies only cover the property for 30 days if the property goes vacant. If the borrower is in the process of fixing and repairing and the home will be empty for more than 30 days, the policy will not cover any loss after day 30. Make sure that the policy covers the property when the property is vacant. Require they purchase and prepay 12 months of the fire insurance premium paid in full at the close of escrow. Coverage could be canceled if you allow the borrower to write a check for it outside escrow, and his check bounces!
- Always make all your investment funding checks payable directly to the title company handling the escrow.
- Are you sure this Deed of Trust investment will NOT exceed more than 10 or 20% of your total investment portfolio?
- Are you confident that you have committed to the shortest possible loan term? Deeds of Trust terms vary from 6 months to up to 30 years. Are you comfortable holding on to the investment for the term of the Deed of Trust? If you must sell and get out, you may have difficulty finding a buyer and possibly selling at a loss. Make sure you are comfortable with the term of the Deed of Trust. Investors who want to fund a loan for 10-15, even 20 years, and under certain circumstances may find your note quite expensive to liquidate if an emergency arises. Most of our investors have found funding Loans for 1-2 or 3 years seem to work best.
- Become familiar with the steps necessary to tell the servicing company to file a notice of default if the borrower becomes delinquent in his payments. It does not happen very often. Occasionally borrowers will file a bankruptcy to stall for additional time. Learn the process of foreclosure.
- Never make any loan extensions, additional advances, modifications, or other changes of any kind, no matter how small to an existing real estate loan, without first obtaining written approval from any junior lien holders of record. Changing the terms of your note can move you to the second position, a wrong place to be if you were in 1st position.
- Can you ALWAYS be reached by mail at the address of record listed on the recorded documents? Can you always be called the quickest at the address used? If the servicing company needs to contact you, you do not be out of town and unavailable. The home may be on fire!
What about the Property You must look at the property you are considering investing in for any adverse conditions that might affect the property and that might not be of record or that can’t be revealed with a physical inspection. Ask the neighbors. Even though the broker will give you a statement of value, it’s always a good idea to physically inspect the real estate you are about to lend money. Check the property out yourself. Maybe you will see the 500,000KV power line in the backyard, the new high-speed rail line, or the junkyard next door. If you are not comfortable with the property, tell the broker that you will pass on this great opportunity but would like to see anymore in the future.
Establish YOUR OWN opinion on the value of the real estate collateral by using as many approaches to value as possible. Most agree that having more than one indication of a property's market value is better. Here are some indications of value you can check on yourself.
- ZILLOW.com provides a wealth of information relating to the value of the property.
Look at and read the appraisal.
- Ask your realtor for any info on closed sales of similar properties.
- Never take the value opinion of the borrower (they don’t tell the truth).
- Do not use personal property as the additional value on real estate. Learn to distinguish between real and personal property. Is that $10,000 hot tub coming with the home? Then why are the wheels on it?
- Never lend more than 70% LTV (Loan to Value Ratio) on even the most prime of owner-occupied homes, and not more than 60% LTV on non-owner-occupied speck’ homes. 60% LTV means that your Loan should never exceed approximately 60% of an owner-occupied property’s appraised value.
- Is the Deed of Trust secured by raw land income or “commercial” real estate are you confident that your Loan does not exceed a 35% LTV on raw land and never more than 40 to 50% on the best commercial real estate?
- Never fund second Deeds of Trust unless you know how to move into the first position if the borrower defaults.
Never fund second Deeds of Trust on raw land.
- Do I want or need any last-minute additional documentation before close? (such as but not limited to the following); final permit card signed off, certificate of occupancy, a notice of completion, well report, code compliance inspection, last recording of a lot split, copy of any existing lease rental agreement, proof of purchase price, any closing statements, copy of any additional current appraisals, other inspections, toxic reports, roof reports, termite inspection that may have already been made.
- Are you sure you and your trusted representatives have not overlooked or forgotten to include any essential clauses? (Acceleration or due on sale, late charge, timber clause, partial reconveyance, prepayment penalty, and many more). What about a loan servicing company? Also, who will hold the original note and Deed of Trust on fractionalized investments? Your broker cannot.
What about the second Deed of Trust? Not recommended unless you are very experienced. The fundamental problem with second Loans is that there is a Loan in the first position ahead of you. This means that to protect your investment, you must worry about the Loan ahead of you. For example, if the first Loan goes into default and takes action to take back the home and they are successful, your second position is wiped out. Gone for good! You must make the first position happy and protect your position in the second position. You need to, in legal terms, ‘make the first position whole’. How do you do this? You pay off the first position with YOUR money. Once you do this first position is gone, and you are now in the first position.
What other items? First, never overlook the value of professionals such as Attorneys, Real Estate Brokers, Accountants, and Home Inspectors. When in doubt, seek the advice of a competent professional (I do).
Second, do not do the deal if you are uncomfortable. If someone is pressuring you to do the deal and do it NOW, they are hiding something from you. It is your money; walk from the deal.
Third, keep emotions out of the deal. Stick to the facts and terms, and don’t let the emotional cries of others affect your judgment. Remember, it is their problem, not yours, and do not let them cry on your shoulder.
The Process of Investing Level 4 Funding offers high yielding ranges between 8% – 18% on 1st Deeds of Trust secured against Arizona residential and/or commercial real estate to qualified borrowers in Arizona. The investment goal for Deeds of Trust investments is a low Loan to Value Ratio based on an accurate appraisal. We perform thorough due diligence on every transaction to verify the Loan’s security.
Level 4 Funding offers to Lender Whole Loan Deeds of Trust. We do not fractionalize, pool, or assign investors’ money. Each investor owns the Deed of Trust and controls the Loan. You are funding the loan in escrow, and all the documents are written with your name on the papers. Your investment money flows from you to the escrow company and never to us.
The duration of the Loan varies from 6-60 months, with a rate from 8-18.
To be eligible to invest in Deed of Trust Investing with Level 4 Funding Loans:
- The Loan amount cannot exceed 10% of an Investor’s net worth (exclusive of home, furnishings, and automobiles) OR
- Types of Entities that can invest: Individuals, Self-Directed IRAs, Family Trusts, Corporations, Limited Partnership, General Partnership, Institutional Lenders, and Loan Partnership Pools.
How do I get started? Level 4 Funding seeks investors looking to diversify into high-yield Deeds of Trust investments. Contact us at (623)-582-4444 to schedule an appointment with our team to learn more about the Deeds of Trust Investing.
Frequently Asked Questions
The expression “hard money” refers to the terms of borrowed money backed up by a hard asset. The collateral that backs up the loan. If the borrower defaults, there is a hard asset that the lender can seize to recover the money loaned. Typically, the hard asset is real estate.
Who is Loan Servicing: Investors are strongly advised to use the services of a reputable Loan Servicing Company to handle the collection of payments from borrowers, disbursing payments to lenders or noteholders, mailing appropriate notices, maintaining adequate insurance coverage, monitoring the status of senior liens (if any), handling demands for payoffs and coordinating foreclosure proceedings.
The benefit to the investor of using an independent third-party servicing agent is that it creates an extra level of security for the investment. When a Loan is brokered from Level 4 Funding, one of the documents provided will be a servicing agreement outlining the duties to be performed by the servicer. Level 4 Funding currently utilizes Evergreen Note Servicing to handle all our servicing needs. Evergreen is an independent third party with no affiliation to Level 4 Funding.
Every month, the third-party servicing agent collects the payments from the borrower and sends a check to you, the Deeds of Trust investor. This will continue to occur until the Loan is paid off. The Evergreen also offers direct deposit.
How much money do I need to start? What is the minimum investment? The Level 4 Funding is actively seeking private money sources with at least $50,000 to start. Trust Deeds range from $50,000 to $2,000,000. However, the average range is between $150,000-200,000. Since Level 4 Funding does not include pool funds, you would be investing in an entire Trust Deed on your own.
Is there an available guarantee for my investment? There is no guarantee like having FDIC insurance on your deposits in the bank, but look at what those deposits yield today. If you open a 2-year CD today with a $100,000 deposit, you will do well to get 0.25%. A Deed of Trust has some element of risk, but a yield in the 8% to 18% range compensates greatly. The protective equity in the property is your shield against taking a loss. If your Loan is 65% of today’s value, the risk of the borrower defaulting and you eventually taking a loss is relatively small. If the borrower runs into difficulty, it is in the borrower’s best interest to sell the property and recover his equity rather than let it go into foreclosure and lose his equity. The property is backed up by Title Insurance, Property Insurance, and a Personal Guarantee from the borrower.
Who should be investing in Deeds of Trust? Any savvy investor looking to diversify their investment portfolio can benefit from investing in Deeds of Trust. Ideally, the investor should understand real estate and lending well or rely on a trusted advisor to guide them. Deeds of Trust investments are not guaranteed like a bank Certificate of Deposit backed by FDIC insurance. Therefore, the buyer of a Deeds of Trust needs to do their due diligence when purchasing a Deeds of Trust. The property's current value secured by the Deeds of Trust is of primary importance. Each Loan package will have an opinion of value, giving the value for the subject property. Buyers should review the opinion to be sure they agree with the value and take steps to verify its accuracy.
What makes a Deed of Trust a good investment? A Deeds of Trust investment can offer a steady income stream to an investor looking for a high rate of return. The risk to the investor is extremely low with the protective equity position the Deeds of Trust offers. Deeds of Trust are pretty simple to understand investments. Most investors will have had some experience being a borrower on a home loan. By owning a Deeds of Trust, you are taking the place of the bank or lender. The elements of risk are easy to understand. With a good equity position, borrowers in trouble will usually sell the property and pay off the Loan rather than letting it go to foreclosure and risk losing their equity.
How much is the minimum investment? There is no minimum investment. The amount you invest depends on the loan being offered. We do not fractionalize the acquisition, bringing others to complete the deal. You are the only one on the Deed of Trust, and you are in control. We do not sell or resell the Deed of Trust.
Who can purchase Deeds of Trust? Purchasers of Deeds of Trust investments can be individuals directly or through their retirement funds, family trusts, investment pools, and corporations. We do not sell Deeds of Trust.
What is a fractional interest in Deeds of Trust? An investment in a single Deed of Trust can be divided among several owners. For instance, a $400,000 note might have three buyers, one investing $200,000 and two other individuals investing $100,000 each. The Loan servicer would then divide the monthly payments with 50% going to one investor and 25% to each of the smaller investors. This can be an excellent way to invest in a quality Loan even if you do not have the available funds to purchase the entire Loan. Generally, the somewhat more significant Loan amounts lend themselves to being fractionalized. Unfortunately, Level 4 Funding does not have fractionalized deals. We do what is usually called one-offs. That is one Investor and One borrower on every deal.
Can I invest my retirement funds? Yes. Real estate Loans are an acceptable use for IRAs, 401-Ks, Keoghs, and other retirement plans. By opening a Self-Directed IRA account, you can put your funds to work in several real estate-related ways. As always, you should consult your Attorney or Tax Advisor before investing. Many companies specialize in setting up these kinds of accounts. Please inquire with our company for a list of companies that you can research.
How long is my money invested? Your investment time frame will be dependent on the specific Loan you purchase. The Loan terms in our portfolio generally range from 6 months – 5 years.
Can I use IRA funds? Yes. The Level 4 Funding actively places funds from IRAs, Self-Directed IRAs, and Roth IRAs. However, please contact your plan representative, as all IRAs have different rules and regulations.
What is the typical property you Loan on? The Level 4 Funding only lends to vacant, non-owner-occupied homes. We mainly focus on single-family homes and units (1-4 only).
What is the yield? Annualized yield varies from 8%-18%.
Do you pool my money with other investors? No, we do not have a pool We do what is usually called one-offs. That is one Investor and One borrower on every deal.
How does Level 4 Funding Make money? We usually charge a fee for processing the Loan and points to create the Loan. All the interest on the loan goes directly to the Lender.
Are the Loans amortized? Typically, the payments on the Loan are not amortized. The Loans are interest-only payments with the principal balance being unchanged. Typically a Loan consists of Principal and Interest as part of the payment. The Loans that Level 4 Funding develops are interest-only. The payment from the borrower is only the interest part of the Loan with no reduction in the balance due.
Is it safe? Every investment has risk. However, unlike many other investments, Deeds of Trust investing is unique because a private lender owns the first Deeds of Trust on a piece of real estate. You own the controlling interest in the property, and if the borrower fails, you take back the property and resell it to get your investment and interest back.
How much do you Loan? The Level 4 Funding has brokered Loans from $50,000 to over $40,000,000.
What is your Loan to value that you Loan on? The Level 4 Funding Loans up to 90% of the purchase price or value of the property.
Do you offer 2nd and 3rd Deeds of Trust? No. The Level 4 Funding only offers first Deeds of Trust on all our investments.
What are the points? Points are the fees The Level 4 Funding collects for acting as a broker in a hard money loan transaction.
Why don’t I skip you entirely and work with an investor directly? This is a great question, and yes, you can! You can avoid the broker, find your investors, and manage the Loan yourself. But unless you are an experienced real estate expert, you could end up with a Deed of Trust on the property where you are not adequately protected. You need to understand the real estate market's rules and the ins and outs. It is easy to think that avoiding a broker can save money. In the case of lending money, it is a little more complicated and very important to understand the rules and regulations.
Who in my network might be able to advise me on these types of investments outside of the Level 4 Funding?
An excellent team is always essential, and we suggest you check with your tax advisor, financial or retirement planner, accountant, and/or attorney.
Do you require fire insurance on the property? Yes. Not only do we require fire insurance, but we require the investor to inform the insurance company that the property is vacant. We need coverage in the amount of the Loan or replacement guarantee.
Do not know what to do? Confused? Is This Legal? Give us a call does discuss the process. But never overlook the value of professionals such as Attorneys, Real Estate Brokers, Accountants, and Home Inspectors. When in doubt, seek the advice of a competent professional (we do).
Deeds of Trust Terminology and Definitions Equity – it’s the difference between what is owed on the property and the value of the property. Money Down – All of our professional real estate investors will have either personal funds or a spread of equity in the transaction, serving as their guarantee and commitment that the Deeds of Trust payment is a priority
1st Deeds of Trust Only – Our investors are the only holder of the note and are in the first position
No Pooling of Funds – The Level 4 Funding does not pool funds (also called fractionalized Deeds of Trust). This gives the Deeds of Trust investor more control over the investment
Non-Owner Occupied Properties Only – The Level 4 Funding only brokers Loans for non-owner occupied, single-family homes and units (1-4) to a unique client, the professional real estate investor.
Appraisal – An estimated value placed on a property at a particular time. Also known as appraised value.
Beneficiary – The beneficiary is the lender, an individual, or a legal entity.
Deed of Trust– A document signed by the borrower that, once recorded, acts as proof that a Loan has been made on a property.
First Deeds of Trust – The first in a line of Deeds of Trust recorded on a property.
Hard Money Loans – given at a higher interest to reflect perceived risk and added convenience of speed.
Interest Only – No payments being made on a Loan are applied to the principal. The balance due stays the same.
Simple Interest is calculated using the following: (Balance Amount * Interest Rate) divided by 12. This gives you the monthly payment for interest-only payments.
Loan to Value (LTV) – This ratio determines a property's risk and equity position. If the property is currently valued as it stands now at $100,0000 a Loan of $70,000 gives a LTV of 70% ($70,000 divided by $100,000). This should not be confused with ARV – After Repair Value.
Points – A percentage fee charged for the origination of a Loan. One point is equal to one percent.
Promissory Note – The Promissory Note is signed by the borrower and shows the terms of the Loan.
Trustee – An individual or organization authorized to hold a trustee sale.
Trustor – The trustor is the borrower.
Recording – The act of writing or entering in a book of public record instruments affecting the title to real property
Recourse – The right to claim against a prior owner of a property or note
REO – Stands for Real Estate Owned or a property taken back by the bank if not sold to a third party at the trustee sale.
Usury – Usury laws limit the amount an individual can charge for lending money without using a broker. Arizona has no Usury laws, and you can charge what you want.
Why would anyone pay a high-interest rate? Because banks are not lending, and when they do lend, it only to the best credit-worthy individuals. Also, short-term Loans of less than 24 months are almost hard to find. The bank is used to the 30-year Loan, and for some reason, they cannot move their lips to say six months or 24 months. Also, when you typically fund a rehabbing project, the funds need to come fast.
In some cases, in less than 24 hours, the bank does not even open its door in time to fund a project. Investors have an extremely hard time getting a loan from a bank. When an investor finds a great deal, he wants to close quickly before someone steals the deal from them. The investor goes to a hard money lender and borrowers the money fast. The lender will lend the money to close the deal if he has a 20% to 30% down payment, decent credit, and a decent property.
Why would someone borrow hard money? There are four typical borrowers interested in using hard money:
Rental property investors These professional real estate investors buy properties intending to rent them out, letting them appreciate them over time and selling them after the prices have increased. They may also decide to hold properties permanently in their portfolio. Why don’t these borrowers simply apply with a standard lender? Unfortunately, conventional lenders view these borrowers as a greater risk. Often there are limits to how many loans a traditional lender will make to real estate investors. Once investors have four existing loans, they will find the traditional lending world much less friendly. At Level 4 Funding, we like this borrower. Conventional lenders have not recognized how safe these loans have become.
Property flippers Call them “flippers,” “rehabbers,” or “redevelopment specialists,” these real estate professionals purchase properties, repair them, and immediately sell them on the market to earn a profit. Finding these investors on popular television programs on HGTV or the Discovery Channel is not tricky. Flippers typically buy bank-owned properties (also known as REOs), short sales, or properties from private sellers in “as is” condition. These properties are typically in disrepair and in need of renovations ranging from paint and carpet to new kitchens, bathrooms, and yard rehabilitations. The state of the property is a critical factor in the investor purchasing the property at a discount. Most residential buyers are unwilling or unable to buy these properties because conventional banks will not lend on these properties because of condition, or the buyer lacks the experience to repair “handyman specials.”
Builders borrow hard money because it is quicker and easier than borrowing from traditional banks. It is not cheaper but more straightforward, and time is construction money. To borrow from Level 4 Funding, the builder in the current market must own the land free and clear. In the traditional lending world, the lender will often finance most of the cost of the ground as well as the construction. We feel this leaves the builder with little “skin in the game” and is too risky. When we lend to a builder, the loan is immediately protected by a level of equity. The land cost may be 20%-40% of the project's entire cost. We know the borrower/builder is vested in the project’s successful completion.
Owner-occupants Homeowners living in a property who need to borrow hard money are typically experiencing some sort of financial difficulty. Invariably these borrowers have been turned down by the conventional lending world and must pursue less traditional loans. These borrowers usually have poor credit, no equity, no money, and face foreclosure. They usually already have a loan against their properties, so the loans they are requesting would be in the second position behind an existing first Trust Deed.
Before there were banks, this is how we Loaned Money. When I first researched this investment, I discovered that the wealthy have privately lent out their money for centuries – before, there were banks. It was how lending was done and is still being done today because too many borrowers want to buy real estate that does not fit into the bank’s rule book. This is especially true if investors purchase a property that needs to be fixed up or if their credit score is one point too low.
The problem with brokers
Since 2004, I have loaned my money on apartment complexes, office buildings, houses, land, and motels. After a few years, I decided to get my broker’s license. I figured I could do a better job than the other brokers, as I did not like some of the things they did. The one thing I hated most was that the borrowers would be told one price, and then, when they got to the closing table, they would be charged double. So, at my shop, we charge one flat fee. The other thing I hated was how late the brokers always were. They did not stick to their timeframes, and the borrower often would scream with frustration because the brokers were not efficient, courteous, or professional, and the borrower would end up missing the deadline. When I got my license, I promised myself I would not be like that, and I’ve tried to live up to that goal in every Deed of Trust I place. If it isn’t a win/win/win deal, then I don’t do it. You probably have a lot of reasons right now why you wouldn’t want to lend money out to someone, and the two primary reasons that most investors think of first are:
People who get hard money Loans do not make their payments on time. That is false. Our borrowers have a better ‘on time’ payment record than any bank portfolio. Why? Because we are stricter. Our borrowers know we will foreclose on them in a split second if they are unreasonably late.
Our borrowers are builders and developers, construction workers, and real estate professionals – they are in the real estate game and know that their 40% down payment can be wiped out quickly if they are late.
People who get hard money loans have bad credit. You would be surprised to find out that the opposite is true the banks are not lending. Banks do not lend on properties that are missing plumbing fixtures, or stoves, or air conditioners (but these types of homes are perfect for rehabbers).
Rehabbers do not usually have all the paperwork a bank needs as they don’t hold a regular jobs.
The borrower has been self-employed for less than two years.
Borrower changed occupations (but he still makes plenty of money to buy real estate).
Even if borrowers’ credit score is 1 point below the 640 threshold, they cannot get a conventional loan.
The borrower has exceeded the Fannie Mae limit for several properties owned.
This is why people calling for money DO NOT have bad credit; they just don’t fit into the ‘conventional’ box.
Level 4 Funding Code of Ethics.
- Complete disclosure of any information to our investors. Since it is your investment and your money, you will have the complete original signed, notarized file.
- Only one investor per Loan. We do not do Fund Pools. Fund Pools serve a useful purpose, and they make Loans in the high millions, but that is not our business. We put individuals into Deeds of Trust; it is just one investor. If you have a friend or a relative that wants to go on with you, that is okay. But no STRANGERS!
- We use 3rd party Loan servicing. We are not saying that’s the right way to do it, but it’s our way. We learned it in college accounting classes to keep a separation between those who make the decisions and those who handle the money. We’ve been using the same servicing companies for a long time, and the borrower pays all of the fees – there is no charge to you unless you start the foreclosure and finish through to the end and own the property.
- No cost to the investor's anything, No fees at all. The only cost to the investor is the value of the Loan.
We respond to our phone calls and our emails. We answer them.
- We always met the borrowers. Face to face. It is our rule that we have to shake the borrower’s hand. We may have closed one or two Loans long distances, but we still met the borrower the first time he/she came into town.
- Only lend on properties we like. There are a lot of bad properties being sold. Since we know the market, we stay away from bad homes.
- We always physically inspected the property.
How to find private Deeds of Trust
To find Deeds of Trust in your area, call a licensed Loan broker, or do an online search on ‘Deeds of Trust Investments in ‘your city’ and ‘state”. In 2009, federal law changed and made it a violation of law for an individual who is not licensed as a Loan broker to lend money on residential real estate. Residential real estate is defined as any 1 to 4-unit property: single-family residences, duplexes, triplex, and fourplex are all residential properties.
Make sure you are dealing with the actual ‘Loan broker,’ not a Loan officer who wants to place private money. The owner, who is usually the broker, is the one who makes the final decisions and who is financially responsible for the Loans that are made. You want to be dealing with the person behind the ‘buck stops here’ if you want to get the real answers.
When you find a broker, ask for their license numbers (state and national). Verify that the license is valid by checking the National Loan Licensing System and the state licensing system. Check the state database for complaints or legal actions against the company.
Investigate the broker by asking for references: from their investors, their vendors, their employees, and their borrowers. If they are honorable, they will give you names and phone numbers that you can verify. And if that company tells you that they cannot give you references because they will be violating privacy laws, then do not invest with them. Every broker should have customers and investors willing to speak with you about their interaction with their Deeds of Trust broker. When you call the references, ask for the property address that was Loaned on and follow the instructions in the next section to verify the data.
Verify references, and check records Next, verify if the references told you the truth or if they were just people paid by the company to say good things. Want to know the easy way to do that? Ask for an address of a transaction in which the reference was involved, and then go to your county’s assessor records and recorder’s office records and verify that a Deeds of Trust was placed on the property. Look at what liens were filed before the Deeds of Trust were recorded and what liens came after, and ask questions if you cannot figure it out.
The biggest scams in Deeds of Trust lending came from brokers repeatedly selling the same Deeds of Trust and not recording the Deeds of Trust with the recorder’s office.
What services do Deeds of Trust broker need to provide? Thoughtful Deeds of Trust brokers always pull credit reports on borrowers and can relay that information to the investor. We provide the credit score page to the investors and explain the derogatory items on the credit report. We do not allow investors to download the entire credit report due to the FACTA Act and the Red Flag Rules. To explain further, because it could be possible for a member of the investor’s family, or a friend, to find the credit report and use it to commit identity theft, the investor could be subject to legal proceedings. Therefore, if an investor wants to see the credit report, he is invited to our office to read the credit report.
The broker should verify the borrower’s ‘ability to repay' on all residential Loans. To do this, the broker should collect from the borrower tax return(s), pay stub(s), bank statements(s), and pictures of the cash for the down payment if the funds are not in the bank. Any other proof that the borrower has enough money to purchase the property, fix up the property, make the monthly payments, and pay off the principal balance in the allotted timeframe.
Next, the broker should provide to the borrower ALL of the disclosures required by law. There are approximately 20 pages of forms that every borrower must receive, as well as a 5-page Loan application, the good faith estimate, and the truth in lending. With the first Deeds of Trust you do with a broker, you should verify that these forms have been filled out and signed by looking at the actual file.
Those are some of the highlights on how to investigate before you invest, but there is a lot more to share. If you would like more information, sign up for our newsletters to get the additional information and contact us.
A Deed of Trust (also known as Trust Deed) is a deed (a piece of paper usually recorded at the county) that gives a trustee legal title to real estate. It secures the note (Loan).
There are three parties to this type of title. They are the Trustor (Borrower), Beneficiary (Lender), and a neutral 3rd party called the Trustee.
They are written so that the lender gives money to the borrower to purchase a real property (home), and the borrower signs a Deed of Trust giving the property to the natural 3rd party trustee to be held in trust for the lender. (I like to think the trustee takes the Deed of Trust and puts it in the top drawer of their desk and waits.)
This is noted in the Deed of Trust and is called the ‘power of sale clause’ for example:
Borrower irrevocably grants and conveys to Trustee, in trust, with the power of sale, the following described property
The borrower makes the payments to the lender, not the trustee. If the borrower defaults and does not pay the loan, the lender tells the trustee (to take the deed out of the top drawer) to sell the home. It is the trustee who sells the house, not the lender. When the trustee sells the home at a trustee sale and gets the money, the trustee gives the money to the lender.
The trustee sells the home through the foreclosure process. The important part is that the trustee holds the title, and no court of law is involved. This is called a non-judicial foreclosure. No court, attorney, judge, or jury is needed. With a “power of sale” clause, the borrower has authorized the trustee to conduct a non-judicial foreclosure in the event of default. The trustee just does it, and when completed, the new owner receives a Trustee Deed. Foreclosure can start one day after the borrower is late, and the borrower has only 90 days to make the back payments, make the Loan current, and pay any fees for foreclosure or late fees. On day 91, the home can be sold at foreclosure, transferred ownership, and the original owner is out. (Please note that the Dodd-Frank Wall Street Reform and Consumer Protection Act has substantially changed the foreclosure process for owner-occupied loans. Please contact Attorney/Professional for more details.)
This is very quick and harsh on the borrower, but the borrower has one benefit. This benefit, in most cases, is that if the home is sold for less than the amount owed, a deficiency, the borrower is off the hook. Arizona is a non-deficiency state, but some states are not, and some Deed of Trust does not qualify for this exemption. In this situation, the lender usually sues the borrower for the deficiency. In Arizona, a non-deficiency state, there is typically no lawsuit for the deficiency.
Another problem for the borrower is if there is a deficiency. This is called a taxable event. This means that the deficiency is considered income to the borrower, and the borrower has to declare this as income on their income tax return. For example, if the original amount owed was $100,000 and the home sold at a foreclosure auction for $75,000, there is a deficiency (gap) of $25,000. The lender cannot sue for the amount they lost. We are a nondeficiency state. However, the US Government does not care and will want you to declare this as income on your tax return. (In most cases, the US Government does not require this at the time of this writing, but this can change).
A Deed of Trust is usually recorded with the recorder or county clerk for the county where the property is located as evidence of and security for the debt. The act of recording provides constructive notice to the world that the property has been encumbered. When the debt is fully paid, the beneficiary (lender) is required by law to promptly direct the trustee to transfer the property back to the borrower by reconveyance, a Deed of Reconveyance, thus releasing the security for the debt.
Deeds of Trust are the most common instrument used in the financing of real estate purchases in Alaska, Arizona, Arkansas, California, Colorado, the District of Columbia, Idaho, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington, and West Virginia, whereas most other states use Loans.
The periods for the “trustee’s sale” or “power of sale” foreclosure process vary dramatically between jurisdictions. Some states have noticeably short timelines. For example, it can be as short as two weeks in Virginia. In California, a non-judicial foreclosure takes approximately 112 days from start to finish. The process starts only when the lender or trustee records a “notice of default” no matter how long the Loan payments have been unpaid. (Please note that the Dodd-Frank Wall Street Reform and Consumer Protection Act has substantially changed the foreclosure process for owner-occupied loans. Please contact Attorney/Professional for more details.)
Deeds of Trust are subject to the rule “first in time, first in the right,” meaning that the beneficiary of the first recorded Deed of Trust may foreclose and wipe out all junior Deeds of Trust recorded later. If this happens, the junior debt still exists but becomes unsecured. If the debtor has enough senior secured claims upon his assets, the junior liens may be wiped out completely in bankruptcy.
How Does the Process Trust Deed Investing Flow?
Real estate investor submits loan application with all their personal information, co-borrower information if applicable, experience, credit score, available cash and credit lines, and property details. As a Hard Money Lender, we focus on the asset value as the primary decision if we process the loan.
Once the loan application is completed, our loan officer reviews the investor's goals and liquidity position. Our goal is to ensure that the real estate investor has enough cash and credit to include some of his own funds in the transaction and has the liquidity to make payments as promised. If we feel that the investor is a risk, is too inexperienced with no plan, or does not have enough cash or credit to fully protect our private money investor, we will turn down the deal until our concerns are addressed and remedied. If the real estate investor has the experience, the liquidity capability, and a solid value, only then will Level 4 Funding move forward to the next steps.
We will pull credit and see the current financial credit score.
The Title Company will prepare a preliminary title report for your review. Order Preliminary Title report. Finally, before a loan can be made, the title is checked to see what is owed on the property and if there are any judgments or tax liens against our borrower. The result of this search is called a preliminary title report. A preliminary report allows the lender to decide if he wishes to proceed with the new loan based on the status of taxes, liens, and loans. Level 4 Funding obtains the preliminary title report and searches through it, looking for defects that would damage you should you become a lender. One of the main items we pay attention to is a lien from code enforcement. That kind of item could be no big deal, or it could be a demolition order. We make sure everything is in order before we offer you the loan.
Once we have a verbal agreement from the borrower(s) and you, the Lender, to do the Loan, we will create the Loan Package to complete the transaction. We will email a copy to the Borrower, Title Company, and to you, the Lender. Please review the documentation and call if you have questions.
Level 4 Funding LLC will complete the Loan Servicing Documents for you and send you the forms to be completed and signed. You will need to add your banking information so Loan. Servicing will know which bank to send the payment to. Please send the Loan Servicing agreement back to us so we can include them in the Loan Package and deliver the information to the Loan Servicing Company. You will be paid by a bank ACH Wire Transfer “Direct Deposit”. The Loan Servicing Document is the only document you will have to fill out and sign.
The Title Company will contact you with wire instructions to wire your funds to the title. You, as the Lender, will have your bank wire the funds directly to the Title Company. The investment funding for the borrower(s) is processed through a title(escrow) company. You will need to wire the funds to the Title Company no later than 10:00 AM on the closing day.
The Title Company will have the borrower(s) sign and notarize all documents and record the Deeds and Deeds of Trust with the county recorder the same day they are signed.
Once completed at the Title Company, they will send us the Original Signed Documents within 24 hours. The Title Company issues a Title Insurance Policy and sends it to you directly, but it can take up to 30 days.
We will make copies of the documents for our files and forward the Original Signed Documents to you via UPS.
We will send a copy of the signed documents to the Loan Servicing Company.
The Loan is completed, and you will now start receiving interest payments.
How is the borrower approved for a loan?
Once the loan application is completed, our loan officer reviews the investor's goals and liquidity position. Our goal is to ensure that the real estate investor has enough cash and credit to include some of his funds in the transaction and has the liquidity to make payments as promised. If we feel that the investor is a risk, is too inexperienced with no plan, or does not have enough cash or credit to fully protect our private money investor, we will turn down the deal until our concerns are addressed and remedied. If the real estate investor has the experience, the liquidity capability, and a solid value, only then will Level 4 Funding move forward to the next steps.
The appraisal of our in-house loan officer, using current MLS data, completes a competitive market analysis. If the loan amount is more significant than $500,000 or we cannot reasonably obtain value, we order an appraisal. The borrower pays for an independent assessment of the property.
Presentation to Trust Deed Investor With a solid deal and a professional appraisal in hand, the loan officer contacts a potential Trust Deed Investor. The assessment and the property details are sent to the likely Trust Deed Investor for review. The Trust Deed Investor starts due diligence and accepts or rejects the investment.
Notice that the potential Trust Deed Investor is not notified until this point. We screen hundreds of loan applications and transactions every year. We only present those that clear all the hurdles we have set forth to ensure we offer the highest quality investments possible.
How does the Lender (you) get paid? The borrower(s) makes the monthly payment to Evergreen Loan Servicing, who will process the payment and send the payment directly to your bank via an ACH Wire Transfer “Direct Deposit”.
How fast do you get paid? If the borrower(s) pays on time, your payment should be in your bank account within three days.
Are there any deductions to the payment? No, you receive all of the payments directly to your bank.
Can you, the Lender, process the Loan yourself? Yes, you can. However, I do not recommend that you do it. The Loan Service will handle any problems collecting the funds and contact the borrower(s) when they do not pay according to the agreement. The fees for processing the Loan are paid by the borrower(s) and are at no cost to the Lender.
If the borrower(s) is late, do you, the Lender contact the Borrower? No, that is what Loan Servicing handles for you.
What about taxes and Insurance? The Loan Service will impound taxes and insurance and make timely payments for taxes and insurance.
Can the Lender use another Loan Service? No, not on the setup, but you can change the service after setup. If you want to move your loan to another servicer, you can. The cost associated with the transfer is your responsibility.
Does Level 4 Funding LLC receive compensation from the Loan Service or Title Company? No.
Can Level 4 Funding LLC process the Loan? No. As mortgage brokers, we are prohibited by State Law from Loan Servicing.
Can you make money if you foreclose? No, if there is a foreclosure and the property is sold, the proceeds from the sale go to you, the lender but only up to the amount owed for principal, past interest, and fees. Any remaining money goes to the borrower(s)
How long does it take to foreclose? On commercial loans, the minimum time is 90 days.
Who is the Trustee on the Deed of Trust? First American Title Insurance Company, a Nebraska Corporation P.O. Box 2922 Phoenix, Arizona 85062.
How many foreclosures were there to loans created by Level 4 Funding? Over the past three years, nine loans resulted in foreclosure. The lender did not suffer any financial loss on the foreclosure.
What is the Mortgage to Value or LTV of a Deed of Trust Investment? The LTV or Loan to Value ratio is the ratio between the Loan and the real estate value pledged as security, which is expressed as a percentage.
This is referred to as the Loan-to-Value Ratio:
Loan = $225,000Value= $650,000
LTV= 34.6% ($225,000 divided by $650,000)
This means that the Loan, expressed as a percentage of the property's value, is 34.6%. The higher the loan-to-value ratio, the greater the lending risk because the protective equity declines as the LTV increases.
Example: A single-family home with four bedrooms and 2.5 baths is valued at $425,000.
If we make a 70% LTV, the Loan is $297,500. ($425,000 X .70 = $297,500) The difference between the value of the property and the Loan is $127,500. This is referred to as protective equity or equity cushion.
What documents will you receive in the transaction? For you to make an informed decision, you should require the following in your package:
- Mortgage Summary of the Trust Deed Investment
- Notarized Assignment of Deed of Trust to you
- Promissory Note
- Personal Guarantee from the borrower
- Title Report for the Title Company
- Lender Title Insurance ALTA Policy
- Homeowner insurance with you added as the additional insurance
- Mortgage Application of the borrower
- Credit Report of the borrower
- An appraisal from an independent, certified appraiser, a CMA or BPO
- Mortgage Serving Agreement
- Lender Summary & Disclosure
- Types of property we look to broker funding are non-owner-occupied Single-Family Homes, 1-4 Family Homes, Commercial offices, and Land.
- Loans are commercial purpose Loans such as fix/flip, rehab, rental, buy hold, and bridge loans.
- The length of the Loan is 6-24 months, with the possibility of extensions if you desire. However, there is a possibility of paying the loan off in less than one month, but typically Loans have a prepayment penalty of 6 months of minimum interest. This means if the borrower(s) pays off the Loan within the first six months, the borrower(s) still owes the remainder of the interest. After six months, there is no prepayment penalty.
- Loans usually have a low Loan to Value (LTV) ratio of 70% or less, which means that the borrower(s) puts in 30% of their own money to complete the transaction.
- What does Level 4 Funding receive? We receive a broker fee, and points, for brokering the Loan. They are typically 3 points plus a $995 documentation fee paid in escrow by the borrower.
- Are there Loan Servicing fees? Yes, there are, but you pay for none. We deliver the fee for Loan Servicing, or the borrower(s) pays the price. The Note is serviced by our preferred vendor Evergreen Note Servicing.
- How do you, the lender, get paid? You get paid by bank ACH transfer from the servicing company, but only if the borrower(s) pays.
- We are not selling the Note; Level 4 Funding LLC is acting as Mortgage Broker, licensed in Arizona, MB 0923961, acting as a broker between you and the borrower(s). Some employees at Level 4 Funding LLC have also licensed Arizona Real Estate Agents and Insurance Agents. We do not act as dual agents on any Loan; however, some broker agents will have transactions where an employee at Level 4 Funding LLC is also employed as the broker agent.
- You will fund the Loan for the borrower(s) in escrow at an Arizona Title Company, and the funds need to be wired one day before the closing of escrow. The Title Insurance Company is First American Title Insurance Company. In Arizona, the Title Company will also act as the Escrow Company. Each Deed of Trust is insured by a Lender ALTA Title Policy from First American Title Insurance Company.
- There is no contractual relationship between Level 4 Funding LLC and First American Title Insurance Company or Evergreen Loan Servicing, nor does Level 4 Funding LLC receive any compensation from these vendors.
- The note is secured by the 1st Deed of Trust, a First Note Lien Position on the property. This means you have the 1st position on the property and are 1st in line to be paid.
The Note pays a high interest when compared to other investments.
- Notes are only for qualified Lenders making short-term Loans.
- Many of the borrowers are repeat customers with excellent track records.
- Borrowers are screened using the traditional Loan application process to determine their ability to service the Note and pay back the debt.
- The property is covered by fire and hazard insurance with you as an additional insured loss payee.
- All property taxes and property liens are paid current
Documents provided to you at closing.
- Note Summary, disclosure, and collateral information which includes:
- Name and address of the owner of the property securing the loan.
- Application of borrower(s) and credit report relative to the borrower(s) 's ability to meet the Loan's obligations.
- Any property improvements or utilities on or adjacent to the property.
- Terms and conditions of the Loan being made and sold, Loan details.
- The status of any liens on the property.
- The Promissory Note.
- The recorded Deed of Trust with you as the beneficiary.
- Title report.
- ALTA Title policy with the beneficiary to you.
- HUD 1 Settlement Statement.
- Personal Guarantee.
- Property Valuation through a Competitive Market Analysis, Broker Price Opinion, or full Appraisal.
- Evidence of Hazard Insurance with you listed as additional insured Borrower(s) Corporate Documents if applicable.
Potential Loss of Investment
Level 4 Funding LLC (we/us) is not selling the Note; Level 4 Funding LLC is acting as Mortgage Brokers, Licensed in Arizona, MB 0923961, between the Lender (you/your/beneficiary) and the borrower(s) for a Loan(Loan/Note).
Your investment is at risk. There is no guarantee that this investment vehicle will be successful, and there is a possibility of failure and the complete loss of your investment.
You are sophisticated and can absorb any loss.
The security of the proposed investment may be just the value of the real estate.
If the borrower(s) fails to pay -- you will not get paid. You only get paid if the borrower(s) pays. Nonpayment by the borrower(s) will result in loss or delay of cash to you.
Loan Servicing is handled by our recommended Loan Servicing Company - Evergreen Note Servicing.
You are the beneficiary of the Note/Loan. You control the Note and Deed of Trust through a Trustee and are listed as the Beneficiary to the Deed of Trust. The Trustee, by default, is listed as First American Title Insurance Company, a Nebraska corporation, P.O. Box 2922 Phoenix, AZ 85062.
The bankruptcy of the borrowers(s) causing long court delays could result in the total principal and interest exceeding the real estate security market value.
It would be best to view the property by at least driving by.
Level 4 Funding LLC or its employees.
Do not guarantee the Loan and is not obligated to:
- buy back the Loan,
- create a resale market for the Loan,
- to sell the property,
- assign the Loan to another Lender,
- to service the Loan.
You may need to foreclose on the borrower(s) to recover the property and sell the property to recover your initial investment, past payments and fees, and foreclosure fees.
If you foreclose you:
- are the person in charge that handles the foreclosure and associated costs,
- may need cash to complete the project or to make the property marketable if you foreclose,
- may have to pay for forced placed insurance,
- may have to pay past HOA fees, other liens added since closing, and past/future utilities.
You are funding the Note for your account, for investment purposes only, and without any intention of distributing or reselling any of the Note, either in whole or in part.
You are committing your funds for the term of the Note. The Note is fixed for a time and rate; once executed; you may have difficulty getting out of the transaction if you need the cash.
You may be able to sell/assign the Note, but this may not be possible. Usually, Deeds of trust are not liquid; resale before maturity may result in a loss to you. Level 4 Funding LLC does not sell/buy/assign Notes.
HOW I STARTED PRIVATE DEED OF TRUST INVESTMENTS
In 2004 I began purchasing homes at foreclosures and rehabbing them for sale. This was a fun and very profitable experience. However, fixing the property and getting it ready to resell for a profit was a lot of work. You can imagine that everything that could go wrong did go wrong for me. There was always something to fix, inspect, sign, and sell. I would purchase the home at the steps of the county courthouse, $10,000 down, and have to have the remainder of the funds by 5 PM the next day, or you lose your $10,000 deposit. Also, you had little time to look at the property; in some cases, I purchased the home without ever seeing the house. (Very scary). On each purchase, I used money from private hard money lenders in the area. The lender provided 70% of the funds, and I came to the table with the remainder of 20%. They knew the procedure and would fund the property within 24 hours, and by the next day after the foreclosure sale, I owned the property. Now the work began. It was a race to get the home ready and back on the market as fast as possible so I did not have to make those payments to those hard money lenders. In some cases, we were successful in getting the home sold within 60 days. In other cases, we tried for 6-7 months to sell the property, making those payments to the hard money lender. One night while I was lying in bed and hoping that someone would not steal those brand-new stainless-steel appliances we had just installed, it hit me. BAM! I have got this all wrong! I should be the lender! I realized that the hard money lender did not get their hands dirty or worry about inspections or repairs. All they worried about was that they got the payment check. I think they were hoping that I would not send the payment and they could foreclose on the deal. I thought I was in control of the deal, but when you stepped back, the hard money lender was in charge. At that point, I realized that I should be the hard money lender!
I found out that Deeds of Trust investing is just being the bank. I knew the business of purchasing, rehabbing, and selling. I have lived in Arizona since 1979. I know what real estate costs, and I know how to check on prices in specific neighborhoods.
Since I figured I could do as good of a job figuring out who was a good borrower, able to determine the value of property and repairs, and how much I was willing to lend on any specific property, then I could go look at a property, and decide if I liked the deal or not.
Level 4 Funding LLC, Brokers, Agents, and employees are not: attorneys, real estate appraisers, financial planners, securities dealers, or accountants, and we do not advise these professions. See competent advice from attorneys, real estate appraisers, financial planners, securities dealers, and accountants before you enter this agreement.