The Pros and Cons of Trust Deed Investing

No matter what angle you put on it or how savvy you are, investments are always a gamble and can be tricky. So, is it a smart move to invest in trust deeds?

First things first. What exactly is trust deed investing? Trust deed investing is when someone loans money to someone else; also known as the lender and the borrower. The borrower puts up property as collateral which is a trust deed investment. The property can virtually any property they own. Investing in a trust deed is literally granting a private mortgage.

The Cons

The biggest con when considering trust deed investments will be a foreclosure. This can be a legally complicated and lengthy ordeal. Foreclosing on a property means there is a chance you will not get your entire investment returned. It is critical that anyone investing in trust deeds has a broker. A broker is an essential resource for investors. Brokers can help navigate the loan process, give valuable information, and help the investor whether to pass or invest in deals. 

Trust deed investments can be worrisome because the FDIC does not ensure trust deeds meaning you have absolutely no guarantee your investment funds will be returned. This is another reason to work closely with a broker. They can advise you on the best course of action for your investments. Working directly with a borrower is risky because of your conflicting interests.  However, a third-party broker can more easily produce an outcome where everyone is content.

The Pros

Most investors own their own property and have a decent amount of knowledge when it comes to real estate. Real estate investors conduct research prior to purchasing a property. Trust deeds are secured by real, tangible collateral. Because the collateral is tangible if the loan goes into default and you are forced to foreclose on the property. As long as the property has value it is generally a safe investment. There is a good rate of return on trust deed investments. Of course, it depends greatly on the type of property and the condition it is in. Generally, the returns seen most often with trust deed investments are between 10% and 13%.

How to Get Started in Trust Deed Investing

There are four main ways to invest in trust deeds. You can personally source individual loans and directly lend money to real estate investors, invest in a fund that then invests in trust deeds, purchase loans backed by real estate brokers, or identify people or groups that are directly investing in trust deeds.

Just as with any investment, experience and knowledge play a big part. Trust deed investing works best when you have knowledgeable people around you.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions

Differences Between Mortgages and a Deed of Trust

A mortgage and a deed of trust are very similar. They are both loan agreements where a borrower uses the title to a piece of property as collateral for a loan.

In a loan transaction, the lender requires the borrower to sign either the mortgage or the deed of trust. Both of these documents set up the terms of the loan and a very similar. Both give the lender the right to sell the property through foreclosure in case the borrower defaults on the loan. However, there are two significant differences between the two: the involved parties and the foreclosure process.

Typically, mortgages and deeds of trusts have the same clauses. Both require the borrower has homeowner’s insurance, that the property is kept in good condition, and no hazardous substances are allowed on the property.  Both mortgages and deeds of trust require the lender to give the borrower a breach letter and a specific amount of time to become current on the loan before beginning the foreclosure process.

Lenders in certain states such as California use deeds of trust to create security interests, while other states like Florida prefer mortgages. Depending upon the state the deed of trust may be called by another name. For example, Georgia calls the contract that gives the lender a security interest a “Security Deed.” However, it is the same thing as a deed of trust.

Mortgages and deeds of trust both use the borrower’s property as the source of repayment if the loan goes into default. However, they differ in two crucial ways. A mortgage has two parties: the lender and the borrower. A deed of trust, on the other hand, has three parties: the lender, the borrower, and the trustee.  The trustee obtains the legal title to the property being used as collateral. This happens when the loan is originated and holds until the borrower pays the loan in full. Who the trustee is depends upon state laws. It may be an individual like an attorney or a business such as a bank. The lender typically chooses the trustee. The trustee becomes very important when the borrower goes into default and foreclosure proceedings begin. Trustees receive payment when they handle foreclosures and generally lookout for the lender’s interest during a foreclosure.

What Does Foreclosure Look Like?

If borrowers don’t make their payment, the lender will foreclose. The procedures of foreclosing a deed of trust or a mortgage depend entirely on the state laws and terms of the initial agreement. In states where lenders use mortgages, the lender files a lawsuit to begin the foreclosure process. This is called a judicial foreclosure. In states that use deeds of trust, the lender forecloses out of court using a process called nonjudicial foreclosure. Nonjudicial foreclosure can involve sending the borrowers a notice of default, recording the notice of default in the land records office, publishing information concerning the sale in newspapers, and giving the borrowers a notice of sale.

Deed of Trust or Mortgage? Which One is Best For You?

Deciding whether to use a mortgage or a deed of trust when buying your home depends on which state the property is located. For both a deed of trust and a mortgage the property serves as collateral in the case the borrower defaults.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions

Differences Between Mortgages and a Deed of Trust

A mortgage and a deed of trust are very similar. They are both loan agreements where a borrower uses the title to a piece of property as collateral for a loan.

In a loan transaction, the lender requires the borrower to sign either the mortgage or the deed of trust. Both of these documents set up the terms of the loan and a very similar. Both give the lender the right to sell the property through foreclosure in case the borrower defaults on the loan. However, there are two significant differences between the two: the involved parties and the foreclosure process.

Typically, mortgages and deeds of trusts have the same clauses. Both require the borrower has homeowner’s insurance, that the property is kept in good condition, and no hazardous substances are allowed on the property.  Both mortgages and deeds of trust require the lender to give the borrower a breach letter and a specific amount of time to become current on the loan before beginning the foreclosure process.

Lenders in certain states such as California use deeds of trust to create security interests, while other states like Florida prefer mortgages. Depending upon the state the deed of trust may be called by another name. For example, Georgia calls the contract that gives the lender a security interest a “Security Deed.” However, it is the same thing as a deed of trust.

Mortgages and deeds of trust both use the borrower’s property as the source of repayment if the loan goes into default. However, they differ in two crucial ways. A mortgage has two parties: the lender and the borrower. A deed of trust, on the other hand, has three parties: the lender, the borrower, and the trustee.  The trustee obtains the legal title to the property being used as collateral. This happens when the loan is originated and holds until the borrower pays the loan in full. Who the trustee is depends upon state laws. It may be an individual like an attorney or a business such as a bank. The lender typically chooses the trustee. The trustee becomes very important when the borrower goes into default and foreclosure proceedings begin. Trustees receive payment when they handle foreclosures and generally lookout for the lender’s interest during a foreclosure.

What Does Foreclosure Look Like?

If borrowers don’t make their payment, the lender will foreclose. The procedures of foreclosing a deed of trust or a mortgage depend entirely on the state laws and terms of the initial agreement. In states where lenders use mortgages, the lender files a lawsuit to begin the foreclosure process. This is called a judicial foreclosure. In states that use deeds of trust, the lender forecloses out of court using a process called nonjudicial foreclosure. Nonjudicial foreclosure can involve sending the borrowers a notice of default, recording the notice of default in the land records office, publishing information concerning the sale in newspapers, and giving the borrowers a notice of sale.

Deed of Trust or Mortgage? Which One is Best For You?

Deciding whether to use a mortgage or a deed of trust when buying your home depends on which state the property is located. For both a deed of trust and a mortgage the property serves as collateral in the case the borrower defaults.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions

What is a Deed of Trust in ArizonaTrust

So, you have decided to buy a home in the great state of Arizona. Expect to sign your John Hancock to several documents. The is one you may not be too familiar with. In this article, you will learn all about what a deed of trust is used for.

Buying a home is one of the biggest decisions you will ever make. Information will be thrown at you right and left, and there are numerous documents you will need to sign. In many states, homeowners will use a mortgage for their property loan, but in other states, deeds of trust are more common. In Arizona, you will most likely use a deed of trust. Although mortgages and deeds of trust serve the same purpose, there are significant differences that all prospective buyers should be aware of before buying their home.

The deed of trust and mortgage are both executed and recorded in the county the property is located. They are both the same as in the property is used as collateral for the loan. Also, any future buyer will need to pay off the loan whether it is a deed of trust or a mortgage, and on a deed of trust, they will receive the deed of trust.

A mortgage operates in the same way in Arizona. One difference between the two documents is the parties involved. In a mortgage, there are only two parties: the borrower and the lender. The lender is typically a bank or private money lender. When a deed of trust is used there are three parties involved: the trustor, the trustee, and the lender. The trustee holds the title to the deed until the loan is paid off. Generally, the trustee is a business such as a title company or escrow company or individual such as an attorney. The trustee and the lender typically work together. In the case of a foreclosure, the trustee will be the party to begin foreclosure proceedings at the request of the lender.

The biggest difference between a mortgage and a deed of trust is foreclosure

What happens after a borrower defaults on a loan is called foreclosure and serves as the biggest difference between the two loans. Under Arizona law, a mortgage can only be foreclosed judicially which means in a court of law. That means a lawsuit would have to be filed and won to allow the lender to sell the property. This can be a lengthy and expensive process.

Deeds of trust, however, can be foreclosed with judicially or nonjudicially according to Arizona state law. Nonjudicial foreclosures only require recording a Notice of Trustee’s Sale which includes waiting at least 90 days and then legally selling the property.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions

What is a Deed of Trust?

Most of us are familiar with a mortgage. However, in many states, deeds of trust are used in place of mortgages and the role they play in the home buying process. But what is a deed of trust?

A deed of trust secures real estate transactions and includes three necessary parties: lender, borrower, and a trustee. The borrower receives money from the lender in exchange for a promissory note, and the trustee holds the legal property title until the loan is paid in full.

A deed of trust has many components that are similar to a mortgage and other components that work as a traditional property deed. Just like a traditional deed, a deed of trust has a detailed description of the property. This is called a property description. A property description describes what the trustor has rights to as long as they follow all terms and guidelines in the trust deed.

The agreed-upon purchase price of the home sans the down payment is the initial loan amount. The initial loan amount is what the lender is giving to the purchaser and is the exact amount that must be paid off at the end of the loan to dissolve the trust.

The trustee holds the legal title during the time the loan is being paid on. The role of the trustee is to be completely impartial when it comes to the deed of trust. As long as the loan proceeds the way it should the trustee has two possible options. If the trustor chooses to sell the property before the loan is paid off, the trustee pays the lender the proceeds of the sale that cover the remaining amount of money due on the loan. If the loan is paid off before the end of the loan, the trustee is responsible to dissolve the trust and give the trustor the legal title.

Do I have a Deed of Trust or a Mortgage?

The only major difference between a mortgage and a deed of trust that truly affect homeowners is when foreclosure is an issue. If you aren’t sure which was used to secure your loan be sure to review the documents you received at the time you closed escrow on your property. You can always contact your lender or call your local land records office. Although certain states use a deed of trust versus a mortgage, none use both. Deeds of trust are recorded in the same way mortgages are with the county clerk.

Mortgage Versus Deed of Trust

There are many similarities between these two loan assurances. In this article, we will break down some general information.

Why would you use a deed of trust? A deed of trust is used when traditional lending institutions are not being used. Certain states require homeowners to use a deed of trust instead of a mortgage. Regardless if you have a mortgage or a deed of trust their main purpose is to ensure the loan is paid in full. A mortgage involves only two parties, the lender and the borrower. A deed of trust includes a trustee who is responsible for holding the property’s title until the loan is repaid. In the case of default, the trustee will start the foreclosure process. In a mortgage, the lender is responsible for beginning foreclosure proceedings.

Be sure to take careful note of the terms outlined in the Closing Disclosure. These terms are where you will find particular differences between trusts and deeds and mortgages when it comes to foreclosure. In the event of the death of the trustor, a surviving spouse or family member can continue to keep making payments on the loan and take over as the trustor as long as they qualify.

With a traditional loan, lenders can impose certain restrictions and conditions in order for borrowers to qualify. Lenders may require the borrower to occupy the property as their primary residence for a specified period of time or pay mortgage insurance on the property. Be sure to discuss prepayment penalties with your lender.

There are little things borrowers need to be aware of when working with a deed of trust instead of a traditional mortgage. When it comes to foreclosures the process works differently. A deed of trust speeds up the foreclosure process because it is a nonjudicial foreclosure which means the courts don’t get involved. Acceleration and alienation are similar. An acceleration clause goes into effect once the borrower is behind on their payments. Depending on the terms of the acceleration clause it could happen after three months or even after just one missed payment. Depending upon the lender the borrower may have ample time to bring their payment current. An alienation clause is referred to as a due-on-sale clause. If the lender doesn’t want to have anyone who buys the property to assume the loan under current terms, they get an alienation clause in the deed of trust. These are a contractual language that ensures the borrower repays the loan when a sale or transfer occurs. Alienation clauses protect the lenders.

Deed of Trust or Mortgage? Which One is Best For You?

Deciding whether to use a mortgage or a deed of trust when buying your home depends on which state the property is located. For both a deed of trust and a mortgage the property serves as collateral in the case the borrower defaults.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions