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.

Smart Trust Deed Investing In

The instructions for escrow that you will be requested to sign could be unilateral (separate set of instructions for the buyer and separate ones for the seller) or bilateral (one set of instructions for the seller and one for the buyer).

When the instructions have been completed, it is then important for the investor to read the preliminary title report more than once to ensure that everything is understood and nothing has been overlooked or missing. The purpose of this procedure is so that those who supply the services and products, as well as those who are the subcontractors working on the project, can be tracked. In order to keep your original note and deed of trust safe, you should place them in a safety deposit box at your bank. 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. A title company will open a standard insured loan transaction, and will research the property.

Thus, make the effort to keep these seven trust deed investing tips in mind when you are making an investment:1.
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. However, if both parties involved in the loan agree, the or more clause can be deleted by simply having an escrow agent omit the objection. 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. That being said, the following is a list of the criteria that is required to be stated within the escrow instructions:1. Ground-up Construction Loan V This loan is one that assumes the borrower has approvals and a completed set of plans which are sufficient so that construction can begin once the loan has been funded. _ The owner of a trust deed is generally first or second in regards to the lien position.

When everything is in the clear, and the documents have been appropriately signed, the escrow officer will inform the title company to record the trust deed, who will then deliver the loan package (all the executed loan documents) to the lender.
00 in a 1 year trust deed investment that pays 10% compounded annually. Acceleration Clause V An acceleration clause should be apart of the escrow documents. However, although a deed of trust acts like a mortgage, it is important that you understand there are differences between a mortgage and a deed of trust. A legal description of the property that is to be transferred 4. Once this notice has been sent, the subcontractor has been given the right to lien a project. Each month, the loan servicing officer bills the borrower and collects payment, depositing the funds that are received into the account of the investor.