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What You Need To Know About Deeds of Trust

From an investor’s point of view, a real estate deed of trust is a financial instrument that is similar to that of a mortgage. Both deed of trust and mortgages require a property owner (in search of private money investors for real estate) to pledge real property as collateral when borrowing capital against it. However, a real estate deed of trust offers a somewhat unique bonus for hard money investors. Essentially, a deed of trust eliminates the legal requirement that a property is foreclosed judicially, and offers a quicker solution upon default. This offers an investor a huge advantage.

Deed of Trust Players

There are 3 parties involved when a property transfer uses a real estate deed of trust:

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A Trustor

The one who has borrowed money with the intent to repay the balance in accordance with the deed of trust’s terms and conditions

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A Beneficiary

The entity that has provided the investment funds to the trustor/borrower (e.g. the lender, or even you, if you decide to invest)

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A Trustee

The impartial 3rd party that agrees to hold, on a temporary basis, the legal title to the property in question. The trustee’s primary function is to do what is necessary to resolve outstanding financial and title matters should the borrower default on the loan.

The Basics

When considering the many first deed of trust for sale, make sure to carefully review the collateral being offered. The more data and time an investor reviews available data, the better their investment decision will be.

Deed of trust investing is not like opening a savings account at the local the bank. This financial product is a bit more complex and therefore, not insured by a federal agency like the Federal Deposit Insurance Corp (FDIC). This type of investment involves calculated risks, similar to any other investment that would not be considered a bank product. The more an investor understands about first deed of trust investments, the easier it will be to make prudent investment decisions.

What are Fractionalized Deed of Trust Investments?

A real estate deed of trust offers the option to be purchased on a fractionalized basis. Fractionalized investments allow for multiple investors to jointly participate in one financing situation. A fractionalized deed of trust minimizes each investor’s risk because the investors agree to share the total investment risk.

When investing in fractionalized deed of trust investments, an independent party, (a trustee), safe keeps the property paperwork and financing documents. Copies of these documents are forwarded to the lender as verification of ownership.

Conversely, a whole deed of trust investment is where an investor has a 100% ownership of the investment and complete control over the loan’s documentation. The single ‘deed of trust’ investor owns the title insurance policy, the note, the fire-theft policy as well as the all-important deed of trust.
A real estate deed of trust offers great benefits. They offer a practical way to spread your portfolio’s level of risk. The generated revenues are from a variety of investments, which can lead to higher profit yields.

Theoretically, it is also argued that the addition of many different investors provides a diverse, comprehensive set of opinions when making critical decisions regarding the deed of trust.

Remember the Paperwork

First deed of trust investments are an interesting combination of a real estate transaction and a financial transaction. Together, real estate underwriters and financial analysts request more than enough paperwork, although this should not be a surprise to anyone who has chosen to invest in any kind of real estate.

When the investment is complete, the investor (or their chosen custodian or fiduciary representative) will receive the original note and original deed of trust. However, a real estate deed of trust investor should also receive all relevant deed of trust assignments or title endorsements.

When investing in fractionalized deed of trust investments, an independent party, (a trustee), safe keeps the property paperwork and financing documents. Copies of these documents are forwarded to the lender as verification of ownership.

Conversely, a whole deed of trust investment is where an investor has a 100% ownership of the investment and complete control over the loan’s documentation. The single ‘deed of trust’ investor owns the title insurance policy, the note, the fire-theft policy as well as the all-important deed of trust.
A real estate deed of trust offers great benefits. They offer a practical way to spread your portfolio’s level of risk. The generated revenues are from a variety of investments, which can lead to higher profit yields.

Theoretically, it is also argued that the addition of many different investors provides a diverse, comprehensive set of opinions when making critical decisions regarding the deed of trust.

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Private Loan Financial is a full service private money direct lender focused on funding equity-based deals fast through custom designed financing structures for residential, multi-family, land, commercial and construction loans. PLF specializes in residential and commercial loans for both borrows and brokers filling a void left by institutional lenders.

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(888) 219-6840

Need A Real Estate Loan Fast? Call Us Now! (888) 219-6840
Since we are privately funded, we can offer loan terms that no other bank or organization provides.

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Why Choose a Hard Money Lender Instead of a Traditional Bank?

Why should borrowers choose private lenders over traditional banks? The short answer is that these lenders fill in the gaps where other lenders fail. Many individuals today have the ability and desire to invest in a new home, but they have an unproven track record....

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