Hard Money Information

Investing in Trust Deeds With an IRA

One of the most important lessons for anyone looking to make the most of their investment strategies is to diversify. This is what makes trust deed investing such a smart idea. With trust deed investments, you’re investing in secured real estate loans. These types of loans are the most successful when combining reliable real estate borrowers with investors who are looking to focus on collateralized real estate.

Trust deed investing allows you to diversify your funds more easily and offers several notable advantages. Let’s take a closer look:

Why Invest in Trust Deeds with an IRA?

With trust deed investing, your capital is secured by one of the strongest and most finite assets available – real estate. With your self-directed IRA, you can see annual returns averaging between 8-11% for First Trust Deeds and 9-14% returns for Second Trust Deeds. If this is your first time investing in trust deeds with an IRA, or you’d like more information, our team is more than happy to work with your account custodian to help elaborate on any questions you may have.

What to Expect When You Invest in Trust Deeds with a 401(k)

Using a 401(k) frees you from many of the requirements and responsibilities that a Self-Directed IRA imposes – most notably the requirement of an account custodian. Once you have a self-directed 401(k) plan, our professional team can help you transfer qualified funds to a new plan – one that is under your complete control and direction.

Essentially, what happens here is that funds are transferred by way of personal check to the title company which puts the name of your 401(k) in the property title.

Advantages of Investing in Trust Deeds with Your Retirement Account

Let’s take a closer look at some of the significant advantages you can look forward to when investing in trust deeds and secured real estate with your retirement account.

Less Risk Due to Independence from the Stock Market

You may think that investing separate from the stock market can lead to a volatile experience, but investing in real estate is rather stable. Because trust deed investments are secured by the real estate itself, if the borrower fails to pay off the loan, the investor retains the property.

Our California financial institution takes great care to monitor potential risks and properly assess all projects to minimize risk as much as possible.

More Diversity

The underlying element of a good investment portfolio must be diversity. Real estate is one of the most diverse investments available and can help you weather the roller coaster of economical, societal and political changes that the stock market often succumbs to.

Less Time to Maturity

It’s not always desirable or convenient to have your money walled off in a long-term investment contract. Trust deeds are short term investments that usually pay off between 8-24 months. You can then direct your money into another trust deed or real estate investment project.

Higher Earning Potential

Generally speaking, trust deed are small investments and don’t attract the attention nor money of large investors – including corporations and the government. What’s more, trust deeds don’t provide instant liquidity, since they’re bound to the completion of certain real estate processes. By and large, they are generally best placed in the hands of individual investors who have the professional guidance and foresight to assess the risks and profit from the returns.

In short, trust deeds are an investment that anyone can take advantage of, providing you have the right guidance and professional advice.

Unique Opportunities for Foreign Investors

Because of their short maturity time and the fact that they are secured with actual real estate, foreign investors in particular are highly attracted to trust deeds and real estate investing.

If you’d like to learn more about the annual returns available from this and other forms of real estate investment, we’d be delighted to speak with you in more detail and answer any questions you may have. Please do not hesitate to contact us toll-free at (818) 584-2424 to learn more.

How Can a Hard Money Loan Help Your Buyer?

Most real estate agents understandably only want to work with buyers that are pre-approved or fully approved with an A-rated Paper Lender.

But sometimes, situations occur where the lender is simply burdened by too much paperwork or too long of an underwriting process to help the buyer and their agent close the deal quickly.

In super-competitive real estate markets, buyers and their agents don’t have time to wait.  That’s when a hard money loan can help.

What is a Hard Money Loan?

A hard money loan is very similar to an institutional loan with a few key differences – notably the speed at which the loan is approved and the requirements involved. Even if property condition or credit is an issue, hard money loans present a much lower barrier to entry and can still be approved.

When Should You Recommend a Hard Money Loan to Your Buyer?

Sometimes, for small and seemingly insignificant reasons, approval from A-rated Paper Lenders goes up in smoke.  Time is not on the buyer’s side. Other times, there simply aren’t sufficient funds needed to make a down payment.  The lender is shuffling their feet and a decision needs to be made.

In cases like these, it’s a good idea to suggest a hard money loan.  But there are other instances, too, where a private equity loan can help.  Most notably:

• If the buyer has issues obtaining credit – Past credit issues like poor credit or delinquent mortgages are a huge red flag to banks and other institutional lenders
• If the buyer has limited income documentation – Limited or no income documentation can also cause a loan to be denied. There are also cases where banks won’t accept the documentation that’s provided – leaving your buyer seemingly without recourse.
• If there are issues with the condition of the property – Issues such as contemplated property additions or deferred maintenance are surefire ways to get a loan application denied with traditional bank financing.
• If it is a type of property that lenders won’t fund – There are certain types of properties that banks and institutional lenders simply won’t fund, including the purchase of:
  • Gas stations
  • Auto repair facilities
  • Churches
  • Vacant land
  • Unpermitted property additions
  • Transactions to “fix and flip”
• If the borrower needs funding FAST – Banks and institutional lenders need a lot of time to mull over paperwork and supplied documentation. If your buyer needs money quickly, a hard money loan could be the right decision – for both you and them.

How to Help Your Buyer Get the Financing They Need

First, always let the buyer know that whenever a hard money loan is obtained, that they’ll need a solid plan in place to pay off the loan. This could be through refinancing whenever the property is acceptable (assuming credit and income are in good status) or simply by selling the property after the proposed updates are made.

Sometimes, the best reason to consider a hard money loan is when there’s an incredibly lucrative business or investment opportunity that won’t be around forever.

No matter what, the buyer should always have a repayment plan in place – that plan could include getting the necessary income documentation, going through the process of credit repair and so on.

You Can Generate Additional Income Too!

As a real estate agent, you can generate additional income by participating in loan origination for your buyer.  This means you can get a commission from the Private Equity Loan as well as a commission from originating the institutional-based refinance.

All you have to do is let us know the address and important points about the deal and we’ll take it from there, providing a lending decision as well as a proposed interest rate, loan terms and closing costs. It’s that easy.  You can even submit the buyer’s information over the phone or through our secured website. All details are held strictly confidential.

Once you submit the loan, it can take approximately 1-2 weeks to get funded. Notice that we didn’t say “approved” since in many cases, approval can be done the very same day. There are some instances where the process can take longer but these are rare and usually deal with title problems or other concerns not initially disclosed by the buyer.

If you’d like to learn more about how a hard money loan lenders can help you and your buyer, give us a call at (818) 584-2424 and we’d be happy to address any questions you may have.