Chapter 13 - Pitfalls for Investors to Watch For

Although a trust deed investment is one of the safer investments you can make, it is imperative that you understand there are still risks involved. The best way to ensure that you avoid pitfalls is to learn as much as you can about trust deed investing and everything it involves. However, to give you an idea of some of the pitfalls you should watch out for, the following are a few tips:

It is always in your best interest to physically inspect any real estate you are intending to invest in, even if the property has already been checked out by the appraiser, broker or title company.

Take the time to establish your personal opinion regarding the value of the real estate collateral. You can do this by using a number of approaches such as:
? Ask your realtor for information on closed sales of comparable properties
? If you were to purchase the property today, what would it be worth to you?
? Read the appraisal

Take the time to learn the difference between personal and real property. You dont want to confuse personal property for real property when you are establishing your opinion in regards to value. Real property is that which is considered to be affixed to the earth. However, dont mistake all property that is fastened to the ground to be real property; some of these items are personal.

You should make it a point to know how the borrower is planning to pay the private money loan. Just because short term loans are primarily funded based on real estate equity, you should discover what the borrower has already pre-approved for their take out loan.

When it comes to Loan to Value Ratio that concerns homes occupied by owners, you should never lend out a LTV that exceeds 60%, even if the home appears to be the most ideal of owner occupied homes. Likewise, as far as non-owner occupied homes are concerned, the LTV should not exceed 50%

You should never rely on future promises regarding improvements unless the proper draws for the upcoming work that is to be completed is officially set up.

Make sure you do not want or require any final, additional documentation before you close. Such documentation can include, but is not limited to following:
? Certificate of occupancy
? Well report
? Proof of purchase cost
? Notice of completion
? Closing statements
? Roof reports
? Toxic reports
? Sign off of final permit card
? Etc.


Take the time to research everything you can about trust deed investments. Speak to qualified professionals, and dont be afraid to ask questions, or rethink your decisions before making an investment. By following these guidelines, you will lower the risk you take when making a trust deed investment, and will be less likely to experience a pitfall.

Trust Deed Notes

The standard yield is 11 V 14% per annum.

Each month, the loan servicing officer bills the borrower and collects payment, depositing the funds that are received into the account of the investor. Obtain certified copy of escrow papers V The investor needs to obtain a certified copy of escrow papers, which is an escrow file that has been verified and signed by an agent of the escrow company and is considered to be a valid and accurate copy of the original document. Once the investor has the certified copy, the escrow company recognizes that the investor expects all conditions and terms of the escrow to be completed precisely. Why do I want to get involved with trust deed investing? _ Stocks can be purchased and sold through brokers.

That being said, a person may choose to recourse a note so that the payment goes to one individual in particular and no one else.
Are their Precautions I should take? For instance, the lender needs to consider inspections and lines. Therefore, borrowers will do everything they possibly can to avoid foreclosure, as it is extremely costly to them, and has the potential to damage their credit. That being said, the following is a list of the criteria that is required to be stated within the escrow instructions:1. A lien is a legally recognized claim or hold against one persons item by another which utilizes this item as security for a duty, debt or obligation. Some of these laws include, but are not limited to the following: _ The investor must have their loan serviced by a mortgage loan broker (MLB) and have a written agreement.

When it comes to bankruptcy, the investor will require the assistance of an attorney to appear in court, in order to request that relief be granted from the automatic stay.
If it happens that an error is made, or a lien has been overlooked and such aspects affect the trust deed holder, then the holder can take legal action against the company that issued the title insurance policy. At this point you may be asking yourself: What is private money lending? The reason why such foreclosure actions are started is due to the fact that payments on the promissory note have not been made, or it could be that taxes and insurance are overdue. Why do I want to get involved with trust deed investing? An attorney will also be required to respond to the Temporary Restraining Order.