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Trust Deed Lending Investments Are Not Exactly Risk-Free

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Investors must be sure to complete proper due diligence on potential trust deed investments before jumping in based on the promise of high returns.

The borrower’s property secures the investment, so it is vital to thoroughly research the property’s market value and title status. Investors should request a Preliminary Title Report from within the past 90 days and review it for any factors that could adversely affect the market value.real estate investments loss

Issues that should raise red flags include a lack of direct access to a public road, a significant difference between assessed value and appraised value, unexplained encumbrances and unresolved legal concerns, according to the California Department of Real Estate (CDRE).

Editor’s Note: So much good is said about trust deed lending return and it's for good reason. But don't fall into the trap of thinking it's a bulletproof investment no matter how safe it is.

There is no 100% percent safe investment, when your money leaves your account there is always a chance that something goes wrong and never makes its way back.

Learning the ins and outs of hard money lending will lead you success because you'll have you eyes open for the pitfalls that can occur to the unaware. For example, do you know if you're investing in a first trust deed or a second trust deed? If you don't, you should.. Here are our article highlights:

  • Mortgage brokers are touting double-digit returns on trust deed investments.
  • Trust deed investments are not insured by the FDIC or any other government agency.
  • If a borrower files for bankruptcy, it could affect the foreclosure process and cost investors large amounts of money on resultant legal fees.
  • Since a single investor doesn't need to put up the entire loan sum in fractionalized trust deed investments, this may be the preferred method for those with less money to invest.
  • Lenders in fractionalized trust deeds may not have possession of original documents, which could turn into a problem down the line.

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