Trust Deed Investing Overview
Private money investing and hard money lending go hand-in-hand as inverse functions. Private money lending is different from a traditional bank loan. Borrowers receive funds from private individuals or groups who are looking to invest money on a relatively short-term basis.
The terms hard money lending and private money lending are often used interchangeably. Hard money loans are often used to finance real estate projects. Private investors often lend money based on the value of the property in question, which is called asset-based lending. Lenders can be individuals, small mortgage brokers familiar with real estate investments, or organizations who lend money as a short-term investment.
When funding a private money loan, you purchase trust deeds and mortgages as a form of investment. From a practical perspective, you may want to consider working with a broker that can provide a number of opportunities for investors who are looking for solid returns while minimizing risk.
Advantages of Working With a Licensed Broker
Private money investments through a licensed broker can be a great alternative or supplement to stock and bond investments. Working with a recognized broker is critical since the rates, terms, and qualifications of a private money loan can vary widely. Brokers can discuss various investment opportunities with you based on your preferred loan type, property location, and property type, loan-to-value percentage and more.
While it may seem easier to lend money to private borrowers or people you already know, this may lead to excessive exposure to one or two real estate investors rather than greater diversification spread out among many borrowers. Working with a licensed broker provides you with more options, may be safer, and possibly more reliable.
Brokers have the experience and expertise needed to vet potential borrowers and the knowledge required to navigate current market conditions. Whether you want to purchase trust deeds, mortgages or other assets as your investment, it’s important to work with a professional broker in order to reduce your risks and maximize your returns.
How to Get Involved
If you want to get involved with trust deed investments, it’s important to understand the different types of loans and conditions available. While all private money lenders will offer loans secured by real estate and other assets, who you work with has a big impact on how the loan functions. Make sure you choose a broker that is right for you.