Investing in Real Estate
Mortgage Notes & Deeds of Trust
Short Term Flip Projects <> Long Term Hold Properties
Land Banking <> Development
Mortgage Notes & Deeds of Trust:
Mirroring the actions of the old neighborhood Savings and Loans & Banks from days gone by at a time when banks made loans to their patrons from the money actually on deposit held by the bank. Those loans would be lent to qualified borrowers at a rate slightly higher than the amount they paid to savings account holders. The loan would therefore create profit for the bank and pay for overhead, operations and salaries. The Broker identifies a borrower and analyses their real estates value coupled with the borrowers ability to repay the requested loan payments. Then the loan is packaged for an investor who has the desire to put their money to work, without them having to personally work at it. (Passive Investing) The investor is provided a loan package for their review and the broker explains to the investor the circumstances of the loan and borrower. If the investor feels comfortable and decides to participate, the broker will produce loan documents like the bank and the investor is named as the Beneficiary. Each month loan payments are made either directly to the lender but in most cases to a 3rd party servicing company who then in turn keeps records of the payments and takes a small servicing fee and then forwards the balance of the borrowers monthly payment on to the investors bank account automatically. (Payments can also be sent directly to investor) Typically private loans are made at rates anywhere from 6% to 12% annual interest and the length of time (term of the loan) will run on average anywhere from 6 months to 5 years or more. There is one other main factor in private lending and that is the amount of the loan in relation to the value of the property. Known as loan to value (LTV). There are many variations, and specific types of loans such as fixed interest rate, simple interest (interest only), loans on land only (land banking) loans on single family multifamily and commercial real estate. Additionally there are single investor loans where only one investor is the lender of the complete loan amount and there are multi-investor type loans also called fractional ownership investing in mortgages. Some investors prefer to be the only investor so they have full decision making ability and others prefer a smaller piece of a larger loan so their risk is spread out over a variety of properties and not all on one for any particular loan. Private Mortgage Lending is also commonly referred to as investing in Notes & Deeds, Deeds of Trust, Real Estate Notes or just plain old Notes.
Feel free to visit: http://www.dre.ca.gov/files/pdf/re35.pdf and download or read on line a booklet called Trust Deed Investments ~ What you should know
Short Term Flip Projects <> Long Term Hold Properties:
Although a slowing market, there are still occasional good deals as flips where you can invest your money as a partner or silent investor similar to the paragraph above but have higher return on your investment. Call or email us today for more info about this program.
Longer Term Holds represents probably the largest group of real estate investors in the U.S. today. Having ownership or investing in real estate as both a cash flow and a long term capital gains move is traditionally safer and more consistent than any other type of investment. Certainly there are other types of investments which can make great returns quickly but normally they come with greater risks such as investing in stock markets and business financing. The other side of that is, the likeliness of loss can also be quick and painful. If you’re thinking about or already know you want to have some real estate in your investment portfolio, call us today for a more comprehensive look into the types of properties and investments available to you. From sole ownership to shared and single family to multifamily, land to commercial.