Trust Deed Lending
It is generally the case that those who are into real estate investing are the ones who are borrowing money in order to purchase investment real estate. However, being the lender of such funds can also be a good investment. Invest America provides a private lending option for investors. This allows you to loan money to the purchaser, a loan that is secured by a real estate deed trust or a mortgage. This is known as trust deed investing.
Invest America will never handle any funds involved in the transaction. As per state and real estate licensing laws, these funds are transferred through a title and escrow company or through a closing attorney. All money transfers are wired from your bank account directly into the escrow or trust account. This is known as trust deed investing.
Trust deed investing is comprised of two parts. The first is the promissory note, which is a written promise by the issuer to pay a certain sum of money to the payee at a specified time in the future. The second part is the deed of trust, which is the collateral against which the promissory note is issued. This deed of trust is filed with the county recorder’s office and it is proof that there is a loan against a certain property. This ensures there is a secure lien on the property.
50% Down Trust Deed Lending
The process of trust deed lending provides a low-risk investment for the lender. The more equity there is in a property, the lower the risk, which makes 50% down trust deed lending the lowest risk of all. The process of 50% down means that the property owner will put a down payment of 50% on a property, paid in cash, and that means there is 50% of the property value in equity right from the beginning.
Invest America can set up these private mortgages with their investment clients who are looking to purchase one of our turnkey properties. At Invest America, we purchase distressed properties at a reduced cost, rehabilitate that property, find a tenant for the property, and handle all the property management. If the investor who purchases the property needs a private mortgage to finance the purchase, Invest America can set up a 5-year note for the investment.
For the lender, this is the ideal investment situation. With 50% down on the loan, there is a high-yielding promissory note at 9% interest that is secured by a 1st lien on the property. Plus, the property is managed by Invest America, which ensures it will be well looked after.
No lender will ever go into an investment blind. Invest America will provide the lender with all closing documents and photographs of the property and the loan documents and filing are all handled by a closing attorney who is located in the county in which the property is located. In addition, the lender is carried as an additional insured on the insurance policy for the property.
Transaction Overview for 50% Down Trust Deed Lending
• Note Purchase Price: $30,000 to $50,000
• Security: Note is secured by Deed of Trust (1st lien position)
• Note Term: 5-year balloon note
• Interest Rate: 9%
• Payment Terms: monthly payments, interest only
• Loan to Value: 50% (based on appraisal value)
• Option to Extend: Yes
• Risk: Very low
Example of a Transaction
Invest America purchased the distressed property in Memphis, TN, rehabilitated the property, and sold it to an investor in Canada. The investor put 50% down on the property and Invest America originated a seller note at an interest rate of 9%. Invest America is also the property manager.
A client of Invest America has bought the note for the property. This client is receiving monthly payments over a term of 60 months or 5 years. At the end of this term, the client may renew the note, but holds no obligation to do so.
Property: 3 BR/2 BA Single Family Home in Memphis, TN
Borrower: Canadian investor
Sale Price: $88,000
Down Payment: $44,000
Loan Amount: $44,000
Loan to Value: 50% to 60% (based on appraisal value)
5-year note at an interest rate of 9% (Can be bought down to a lower rate)
Monthly payments, 15 year amortization, principal and interest, of $420.00
Principal balance: $44,000 (due to note holder at end of 5-year term)