Does anyone here know about trust deed investing?

Question

Is it safe? Any experiences? Why isn't there a question about it on yahoo answers yet? Strange to me...

Answer 1

Yes, I do. I have money invested with Vestin Mortgage in Las Vegas. They started out with three plans, and because of pressure from investors, converted the first two plans to REITs.
The plans are set up as partnerships. Vestin lends money on construction, short term bridge loans and other mortgages which are one to two years in length. The interest rate was as high as 13% until the Fed started raising interest rates and the economy got healthy. The current earnings rates are about 6%. But, the two REITs are trading on the open market at a discount right now. VRTB is the ticker symbol for Vestin Fund II. A $10 original share is trading at $7.15.
The federal government thru the SEC regulates trust deed partnerships. The main drawback: The trust deed manager can only return 10% of investments to investors in a given year. People who wanted to cash out were put on a waiting list that was years long.
Trust deeds are too complicated, especially nightmarish at tax time. Investing in real estate is always risky. It is worth the risk at 13% but not at 6%.
If you are interested in real estate, try established REITs or Fidelity's real estate mutual fund.

Answer 2

I know a little about it. It's somewhat risky as the people who loan money from you don't usually have perfect credit if you know what I mean. But you technically own the house if they default the same as a bank would. I don't know a lot of the specifics but basically people come to you with fairly large down payments to put some equity in the house and then loan money from you at higher interest rates because for one reason or another they couldn't get the loan from a bank. They sign an agreement to pay you for the remainig loan on the house with interest and if all goes well you receive a check in the mail every month. There are real estate organizations that specialize in this as well as finding the people who are in need of this kind of an arrangement.

Answer 3

What Is A "Deed of Trust Pledge"

It is a security instrument that obligates parties to fulfill the contractual promises made in an agreement.

For example, a Trust Deed is used to secure the repayment of a promissory note, a Trust Deed Pledge can be used to secure a loan as well as any performance promises made in a contractual agreement.

Our new and innovative Equity Rescue Program uses a Deed of Trust Pledge. We use it to enhance the investor's security. It secures contractual promises and financial commitments that are far superior to normal trust deed lending.

There are numerous differences between a "Deed of Trust" and the way the Equity Rescue Program uses a "Trust Deed Pledge". Below we've summarized and compared some of the important use differences. This comparison illustrates how a "Trust Deed Pledge" can be used to produce a more attractive, secure and rewarding investment.

Earning Difference

Deed of Trust
Results vary as loans can earn single digit returns and double digit returns. Loans can also suffer very large loses when a borrower defaults.

vs Trust Deed Pledge

Offers a pre-agreed, fixed bonus reward of 42.5% of the amount invested. The investor's bonus reward payment is secured at the start of the investment.


Collateral Difference
Deed of Trust
Only one property equity protects the funds. If the owner does not pay the monthly payments the property equity can diminish in value.

vs Trust Deed Pledge

Property title and a substantial cash reserve are used as collateral to protect the invested funds. The collateral cannot dimish. Acquisition of additional properties increases the amount of collateral. Together they exceed, by far, the amount of security that a typical trust deed loan offers.

Investment Time Difference
Deed of Trust
The average length of an equity loan, trust deed investment is three (3) to five (5) years.

vs Trust Deed Pledge

For each investment the time frame is approximately one (1) year or less. The timing can shortened even further with the use of the accelerated investment program.

Monthly Loan Payment Difference
Deed of Trust
The borrower is responsible for the loan payment and can become unreliable or even default when additional debt is incurred.

vs Trust Deed Pledge
The Equity Rescue Program has a large, preplanned cash reserve fund available which, if needed, can be used to makeup any loan payment deficiency.

Reserve Difference
Deed of Trust
To guard against the loan security from being "wiped-out", a prudent lender is required to keep a large cash reserve fund.

vs Trust Deed Pledge
There is no requirement to maintain a cash reserve. Beyond the original investment no additional cash is needed. The investor holds a legal position that prevents an additional cash request.

Finding The Opportunity Difference

Deed of Trust
It takes the investors personal time to locate, research and contract with each borrower, thus the funds are often idle and earn less.

vs Trust Deed Pledge
The funds can be contracted for reinvestment into additional Equity Rescue opportunities. No personal time is required to participate in the acceleration of bonus earnings and capital growth.

Foreclosure/Bankruptcy Difference

Deed of Trust
Nonpayment can create legal problems such as foreclosure or bankruptcy which are very costly, time consuming and can severely diminish the lender's bottom line.

vs Trust Deed Pledge
The legal position held by the investor prevents a foreclosure or bankruptcy from affecting the investor.

Capital Requirement Difference

Deed of Trust
Time is money and it requires the investor's personal time to locate, research and contract with each borrower. The investor must then supply all the funds.

vs Trust Deed Pledge
No time requirements. Participation requires $60,000 however the investor can join an investment club and participate with smaller amounts.


Check out this web site:
http://www.trustdeedpledge.com/dot_performance_deed_difs.html

Answer 4

It has its own set of unique risks

http://www.searchlightcrusade.net/posts/1144709107.shtml

Basically, if you're not extremely experienced in what is and is not a good investment in trust deeds, stay away. Especially with the market the way it is. It would take one heck of a discount for me to think about rescuing lenders from the corner they've painted themselves into.

Answer 5

It is the same as mortgage investing. Many small investors make decent returns on their money. It is important to deal with a reliable mortgage company/broker with a good history & references, because investors in mortgages/trust deeds have little legal protection against fraud or poor lending practices.

Answer 6

Never even heard of it, and I work in Real estate.