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Diversify with Deeds of Trust
Deed of Trust vs. Mortgage
When you buy a house, you naturally think of obtaining a mortgage through a bank, but a Deed of Trust is an alternate approach. With this method of purchasing property, the owner of the property, a grantor, signs a Deed of Trust, which is used in conjunction with a promissory note.
This deed, a security interest to secure repayment of the loan, gives an independent party, the trustee, the responsibility to fulfill the terms of the trust deed. The person making the loan is the beneficiary. The borrower is the trustor.
What does all this mean? If you do not make the required payments to the lender, then the trustee has the right to proceed with a public sale of the property. The advantage over a mortgage is the property can be sold without the legal proceedings involved in a foreclosure.
The Investment Angle
What's the investment angle of this type of transaction?
- You could agree to be an actual lender.
- You could purchase an existing deed of trust from a lender.
Either way, your return is dependent on the repayment of the outstanding loan. In the event of default, you would instruct the trust to sell the property--the proceeds would be paid to you for reimbursement of the debt without the costs and delays associated with foreclosure. Caution: Some states treat the two the same.
See What Jeff Says About:
• Selling Deeded Property
• back to intro
Resources
- Second Deeds of Trust: How to Make Money Safely, by David J. Crabtree, Loan Broker and Barney G. Glaser, Investor
This page on the Grounded Theory Institute Web site, lists an outline of the book's contents.
Note I have never read it--this is not an endorsement for the book. - Brad Evans Real Estate Loans
This Web site includes a section on Trust Deed Investment. You'll have to scroll down a bit to get to that section. The site also has a special page for beginners. - America's Note Network
This site claims to be the largest subscription-based service on the Internet for discounted trust deeds, mortgages, etc.
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