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 Investment In California

In addition, the agent will request a written statement regarding the default amount, the date up to which the interest is paid, the due date of the payment, and the unpaid principal balance.

Although it may appear that each title insurance policy listed above appear similar, that ALTA policy is recognized as being far superior to the CLTA policy. With a construction loan, there are certain aspects that must be followed to ensure that everything goes according to plan. ) _ Other Liens (property taxes, judgment liens, etc. Therefore, a ,000 loan to a property worth 0,000 has a 70% LTV.

In addition, it is highly recommended that you always insist the Borrower takes personal responsibility on the promissory note.
_ A trust deed broker often charges investors no fees. Find out the experience, knowledge and integrity of the broker with whom the transaction will be arranged or made. Almost any problem can be rectified; its only a matter of money. A deed of trust is then documented at the county recorders office to legally notify the world that the property in question has now been pledged to secure a loan. _ Declaration of Default (DOD) Notice of Breach (NOB) and the election to sell under the deed of trust.

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.
_ Divorce _ Unemployment _ Medical emergencies _ Etc. When it comes to researching the property, the title company will begin from the time the government conveyed the property, and then move on to the original private owner, and continue on until the title company reaches the most recent record within its database. With a lender approved draw schedule, the proceeds of the loan may be funded over a certain amount of time. The reason is because ALTA provides a broader range of coverage compared to CLTA.