Of all the income-producing investment alternatives, few are more transparent than trust deed-secured notes. Investing in a secured note that is originated through a reputable and experienced broker can provide high monthly income with easily understood and quantifiable risk factors.
Consider the fact that you have the individual borrower(s), whose credibility you can assess through credit reports, income verification, bank statements and even tax returns. Second, you have the real estate that acts as security for the loan, and which provides protective equity that acts as insurance against loss of principal. A reputable independent appraiser verifies the likely resale value of the property.
The combination of these two factors creates a transparency that allows the individual investor the ability to assess risk and opportunity. Can you do that with stocks or mutual funds?
As for those who fear that we may not yet be through the worst of the real estate market “correction”, let me say this: There are segments of the real estate market that have bottomed out and are already trending upward. Entry-level housing in California was among the hardest hit by the price collapse, and investors have been snapping up foreclosed entry-level homes like crazy since the Spring of 2008. There is a stable market of sales to first time home buyers of remodeled, formerly bank-owned homes, and this has firmed prices in this segment. We make loans to investors who are holding these remodeled homes for rental income and future appreciation, and the ratios of rents versus loan payments on these properties make for very attractive note investments.
Trust deed investing has been called one of the best kept investment secrets. In my opinion, when done correctly, no other investment vehicle can offer the safety, security, and returns of trust deed investments.