WHAT IS A TRUST DEED?
A “Trust Deed” is the common
term for a loan secured by Real Estate.
Normally, a Trust Deed involves a loan made by a private party (Investor)directly to a
property owner. Banks have been making
loans for centuries. They use money from
depositors (people like you), pay a nominal interest to the depositor, and then
lend it out at a higher rate. In Private
Lending, the “middle man”, the Bank, is removed and the depositor (Investor)
makes the loan directly to the borrower, earning a high return.
WHY SHOULD I
CONSIDER TRUST DEED INVESTMENTS? Trust Deeds provide:
·
High Return
·
Consistent Yield
·
Predictable Income (Monthly, Quarterly,
Semi-Annually, or Annually)
·
Secured by Tangible assets (Real Estate)
·
Short Term (2 to 5 years)
HOW DOES IT
WORK? It is a similar to a Bank
loan, except that the Investor (you) take on the roll of the bank. The Investor (Lender) and Property Owner (Borrower) agree
on the loan amount, interest rate, repayment terms and collateral. A Promissory Note is signed by the Borrower,
which gives written evidence of the loan, and obligates the Borrower to repay
the loan to the Lender (you). When a
private loan is backed by Real Estate, the Lender receives a Mortgage or Deed
of Trust which gives the Lender a security interest in the Real Estate. Generally, this is done with the help of an
attorney who is experienced with these types of transactions.
TRUST DEEDS
HAVE OUTPERFORMED
TRADITIONAL INVESTMENTS
IN THE PAST 10 YEARS:
| <><><><><><> | <><><><><><> | <><><><><><> |
CERTIFICATE OF DEPOSIT
| <><><><><><>
<><><><><><> |
10 YEAR TREASURY
| <><><><><><>
<><><><><><> |
STOCKS (DJIA)
| <><><><><><>
<><><><><><> |
TRUST DEEDS
| <><><><><><>
|
Suppose you invested on
1/1/01
| <><><><><><>
<><><><><><> |
$50,000.00
| <><><><><><>
<><><><><><> |
$50,000.00
| <><><><><><>
<><><><><><> |
$50,000.00
| <><><><><><>
<><><><><><> |
$50,000.00
| <><><><><><>
|
|
Average annual yield
| <><><><><><>
<><><><><><> |
5.04%
| <><><><><><>
<><><><><><> |
4.16%
| <><><><><><>
<><><><><><> | <><><><><><> | <><><><><><> |
10%
| <><><><><><>
|
|
Income or Gains
| <><><><><><>
<><><><><><> |
$25,200.00
| <><><><><><>
<><><><><><> |
$20,800.00
| <><><><><><>
<><><><><><> |
$3,169.50
| <><><><><><>
<><><><><><> |
$50,000.00
| <><><><><><>
|
| <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> |
|
NET VALUE ON 12/31/10
| <><><><><><>
$75,200.00
| <><><><><><>
<><><><><><> |
$70,800.00
| <><><><><><>
<><><><><><> |
$53,169.50
| <><><><><><>
<><><><><><> |
$100,000.00
| <><><><><><>
||
| <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> |
|
NET RETURN/PROFIT
| <><><><><><>
<><><><><><> |
$25,200.00
| <><><><><><>
<><><><><><> |
$20,800.00
| <><><><><><>
<><><><><><> |
$3,169.50
| <><><><><><>
<><><><><><> |
$50,000.00
| <><><><><><>
|
| <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> | <><><><><><> |
|
% OF ORIGINAL INVESTMENT
| <><><><><><>
<><><><><><> |
50.40%
| <><><><><><>
<><><><><><> |
41.60%
| <><><><><><>
<><><><><><> |
6.34%
| <><><><><><>
<><><><><><> |
100.00%
| <><><><><><>
|
WHY WOULD A BORROWER PAY INTEREST OF 6%, 8%, OR MORE? It is true that banks are
lending at historically low rates. If a
borrower can go to a bank, they will.
But banks have made it almost impossible for many business people to
obtain loans. They are constrained by
regulators and no longer use “Common Sense” lending. Worse yet, Banks are taking months to approve
loans, causing Borrowers to lose out on opportunities where time is
critical. Therefore, Borrowers with
solid business plans are seeking alternative financing sources, and are willing
to pay higher rates.
CAN I INVEST WITH
FUNDS IN MY RETIREMENT PLAN?
ABSOLUTELY! You can use your IRA,
401 (k), or SEP IRA to invest in Private Lending. You also have the option of using the Health
Savings Account (HSA) and Coverdale Educational IRA (CESA). It is a simple process to set up or move your
account to a Self Directed Custodian (there are many… contact us if you need
recommendations). By investing at
consistently high yields, and paying NO TAX on the earnings (until withdrawal),
you can build a fabulous retirement, HSA, and/or Educational account for your
future.
IS MY INVESTMENT
“GUARANTEED”? No. It is illegal to guarantee such
investments. As with any investment,
there are risks. You can reduce the risk
and protect your investment by:
-
Secure your Investment with Collateral (Real Estate).
-
Making sure the value of the collateral is much
more than the amount of your loan (this gives you protection in that the
property or collateral can be sold to pay off your loan).
-
Documenting the loan with the proper paperwork
(promissory note, mortgage or deed of trust, title insurance, etc.).
-
Working with reputable companies.
WHY HAVE I NOT
HEARD OF THIS BEFORE? Private
Lending transactions are generally not available through the traditional
investment channels. Investment Brokers
and Financial Planners usually want you to invest in their products because
they are paid commissions. CPAs often
are not aware of the opportunities in Trust Deeds and Self Directed IRA
accounts. Normally, Private Lending
occurs through networking.
By following simple processes, you can enjoy consistently high returns on your investment.
Here's to your success!!!
