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.

Ira Real Estate Investing

Some of the topics you will find include the different methods for investing, loan underwriting, title insurance, lien priority, escrow and much more.

Although it is evident that there are many differences between trust deeds and other types of investments, one thing is for certain V a trust deed is an investment opportunity that offers you a high return with less risk. Loan servicing provides a great service to investors, because it allows a third party servicing officer to collect on a trust deed and a note on behalf of the investor. Dont forget, the more you learn about trust deed investments, the safer the risk and the higher the potential for excellent return.

Aside from the Real Estate Law, you may find that your loan documents will feature another legal document known as the federal Truth-in-Lending Act (TILA).
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. In addition, there are a number of other bonuses related to trust deed investing that you may want to keep in mind before choosing just any type of investment. Certain liens are removed 3. There are three parties involved in a trust deed: 1. Chapter 6 - Loan Underwriting The underwriting discipline of the lenders is one of the single most important elements when investing in a trust deed. The reason is because ALTA provides a broader range of coverage compared to CLTA.

_ Trust deeds, on the other hand, are purchased and sold through brokers, but can also be purchased and sold privately at no extra charge.
And remember, make sure the loan servicing company you choose has experience, integrity and a good reputation. For instance, while some companies will consider themselves control companies, the actually disburse the funds directly to the owners or general contractor, without first making certain that the subcontractors and material suppliers have been paid. Furthermore, it is in the investors best interest to safely secure the escrow agents card, and inset the escrow number on it. However, despite their differences, each policy works to insure some the following (Note: The list below is only a small sample of the insurance provided by these two policies): The deed of trust that is insured is recognized as a valid an enforceable lien. Yes!