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.

What Is Deed Of Trust

While some properties may look similar, you need to understand that no two pieces of land are the same.

This or more clause enables the borrower to rightfully increase their monthly payments when they choose, as well as the right to fully pay off the loan without being subject to penalty. _ With a mortgage document foreclosure the state law will determine the foreclosure method that will take place, which can sometime involve a lengthily process. _ Divorce _ Unemployment _ Medical emergencies _ Etc. Speak to qualified professionals, and dont be afraid to ask questions, or rethink your decisions before making an investment.

If in the event the investor held a second deed of trust, and the initial trust deed holder began a foreclosure action, the investor would receive notification.
This type of lending that is provided by Coppercrest Funding is commonly referred to as hard money or private money lending. California Land Title Association (CLTA) - This policy is generally issued to a lender in second position, or to the purchaser of a property. 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. Conclusion By now you should have a good understanding of what is involved when it comes to trust deed investing, and should feel confident that with the knowledge you have in your possession, you can properly assess the risks involved. Even though each policy works in the best interest of the investor, ALTA is still considered to be the best choice among the two, and is something you should keep in mind when selecting a policy. Some of these reasons could be, but are not limited to the following: Borrower has the opportunity to gain investment by utilizing the equity in their real estate.

Throughout a loan transaction there tend to be far fewer problems when a loan has been properly underwritten.
_ A deed of trust usually involves a quicker foreclosure, because the most common type of foreclosure is a non-judicial one. Regardless if you secure your trust deed investment through a single lender (whole) or by more than one lender (fractionalized), you will still need to follow certain rules and regulations as stated by real estate law. The documents can be sent to the unavailable party ahead of time and pre-signed. Foreclosure is the process that is taken by the investor in order to sell the property to a bidder from a third party, or to obtain title to the property. Thus, from a lenders perspective, while providing a loan may seem like a sensible transaction, due to the fact that its classified as subprime, it requires private money lending. 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.