All Inclusive Trust Deed
Recently I stumbled upon a blog. This blog author is Scott Mazza from Simi Valley (California). Scott is a real estate agent for more than 10 years. You can see Scott’s profile here.
The reason I’m writing about this blog is because he clearly explain what is an “All Inclusive Trust Deed“. To make a long story short, this kind of deed of trust secures a wrap-around loan, which loan incorporates an existing loan, with a new loan made by the Seller of a property.
Here is his example:
“For example , the sales price is $200,000, there is an existing first trust deed securing a loan with a balance of $150,000, with an interest rate of 7%, the Buyer has $20,000 cash to put down; therefore, an AITD is created in the amount of $180,000 at 8%. The AITD wraps around the existing $150,000 at, and the Seller makes 1% on the $150,000 at 8%, on the $30,000, thereby effectively increasing the yield.
The Buyer makes payments based upon the $180,000 balance, and the Seller makes the payments on the existing loan secured by the first trust deed.
The terms of the AITD, such as rates, maturity date, payment amount, late charges and prepayment penalty are completely negotiable.
In the event the first trust deed and note contains a “Due On Sale Clause,” the parties will want to seek legal and tax counsel as to the ramifications of doing an AITD.”
Invest In High Yield Trust Deeds
How To Invest In High Yield Trust Deeds?
This is one of the most recurrent questions I receive in my e-mail account.
Investing in trust deeds is one of the best ways to earn a very high return on your investment, while at the same time making sure your investment is safe, secured by the value of the property, all while receiving a monthly check based upon the amount of your investment.
Smart investors pad their retirement accounts with Trust deed investments because they normally earn 10%-15% annually on their investment!
So, what is trust deed investing? Good question.
Trust Deed investing is the loaning of money with real estate as collateral. In California, most loans against Real Estate are called “Trust Deeds,” after the name of the legal instrument used to pledge their security. With expert guidance from NXT Equities, anyone can successfully invest in trust deeds. This contrasts with most other investments where extensive study and years of experience may be necessary before you can invest with confidence. Trust Deeds are safer than most other investments of comparable yield because the risks are identifiable, as well as the procedures necessary to counter them. Many investors, especially retired people, also enjoy the relatively minor effort needed to manage the investment once their money is in place.
The typical trust deed investor is a person looking for a competitive return on their investment. The interest rate the borrower pays is generally higher than the borrower would pay at a bank. The investor in turn, receives a higher return on his investment. Additionally, the money you loan is secured by the borrowers’ equity in their real estate. The security, the good return, plus the monthly cash flow, make trust deeds and excellent investment vehicle.
At NXT Equities, we receive many calls everyday from borrowers, realtors and mortgage professionals who are looking for private money for a real estate transaction. It is our job to fund loans with our investors investments, then after the loan is funded, we collect the payment each month, and send our investors a check every month.
What is so special about our trust deed investments is that we normally only provide loans in the Los Angeles area. That way, before we ever lend our investors money, we physically see the property, interview the borrowers, and have a professional appraisal completed by a licensed real estate appraiser.
Our job is two-fold, to make sure we give our borrowers a good loan at a rate that they can reliably re-pay, and also make sure our investors receive a high return on their investment is the safest way possible.
What makes trust deed investing with NXT Equities safe?
The basic premise of safe trust investing is to make sure that the property(collateral) is sufficient in case the borrower does not make their payment, and we have to repossess the property. Although this is rare, it does happen. However, we do have a healthy safety net, in that we only lend on low loan to value properties. Loan to value is simply the loan amount divided into the value of the property. Here is an example: a client calls and needs a loan for $100,000 on a property values at $300,000. In this scenario, the loan to value is 30%. This means that if the borrower were to default on their payment, there would be approximately $200,000 left over. Is this safe? You bet it’s safe. That is what makes trust deed investing so attractive to both experienced investors and new investors as well.
What is a deed of Trust ?
A deed of trust, also known as a trust deed, is a unique form of loan
recorded within public records as a deed that has a lien on the property. Trust
deeds are used by borrowers instead of conventional mortgages. This is usually
done in order to obtain greater flexibility on the loan that would be available
under the rules and regulations in standard lending institutions such as banks.
With a deed of trust, there are three main parties involved. These parties
include the trustor - which is the person who is borrowing the money - the
beneficiary - also known as the lender - as well as a neutral third party. This
third party is the trustee, who temporarily holds part of the property title
until the loan is paid in full.