If you’ve ever tried to diversify your investment portfolio, the common advice most people give is to buy stock in a variety of companies. But buying another stock isn’t really diversifying. When the stock market goes down, it goes down. So how do you truly diversify your investment portfolio? You need to invest in another market, beyond the stock market, like the real estate market? Yes, but what’s the best way to invest in real estate? Simple, trust deed investing. Learn what trust deeds are, the benefits they offer and some ways to find a deal that’s right for you, so you can truly diversify your investment portfolio.
Trust deed investing: what they are and what makes them a good deal
Trust deeds are like short term mortgages you give to a real-estate developer. You give money to a developer who then uses your money to renovate or construct a new property. The developer repays you when their deal closes, either when they refinance or sell off their shiny new development.
Sounds risky right? Well compared to stocks this form of investment is relatively safe. Since trust deeds are like short term mortgages, you get the same protections a bank would as your investment is backed by the borrower’s collateral. Not to mention the guaranteed yield you’ll receive in the form of interest payments.
However, since trust deeds are in essence mortgages, you’re going to need to invest more money up front. So, what are some considerations to keep in mind to ensure your money is safe?
Couple things to look for in a deal, prior to committing many thousands of dollars to a trust deed.
• You need to understand the borrowers project: Any deal you invest in should be simple and the value proposition should be clear. The developer’s plans should amount to something like “I’ll build/renovate this property for so much, and resell it for so much, within this period of time.”
• Borrowers’ project should have a quick turnaround: Rarely if ever should a developer’s deal take longer than five years to close, that is unless your borrowers developing the next mega skyscraper in Dubai, in which case I wonder why r you’re reading this article. In all seriousness, the longer it takes for you to make your money back, the greater the chances are that you won’t. Over five years, the market will either change or the developer could simply lose interest.
• Trust deed should charge a reasonable interest rate: Making a higher return by charging a developer more interest might seem like a good idea, but it’s not. Charging anywhere over say 15 percent on your money greatly increases the chance that your developer will either miss payment or just simply stop paying you.
But even if they do stop paying you, you’ll have protections, which is far more than stocks can offer you. With trust deeds you’ll make steady interest payments, you’ll have protections and if you follow the above tips, you’re pretty much guaranteed to make your money back.
Unlike the nauseating carousel that is the stock market the real-estate market is generally going up, and trust deeds are one of the safest and easiest ways to invest in real estate.
If you want to truly diversify your investment portfolio, then you need to look into trust deeds. If you’re the Phoenix area or simply want to look into deeds of trust why not give Level 4 funding a call?
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.