Trust Deed Investing
Why Trust Deeds?
Trust deed investing with Bridge Loan Financial provides you the confidence to lend money just like the banks. Like the banks, all loan transactions utilize an Escrow and Title company to ensure legal process. Often referred to as a mortgage, each loan placed is secured by real estate acting as collateral for repayment.
There are 3 Primary Documents for each Trust Deed Investment:
1) Promissory Note – The borrower’s promise for repayment. It is a legally binding contract outlining the borrower’s responsibilities and obligations. This document describes in detail the repayment terms, the interest rate the borrower will pay, and conditions of repayment.
2) Deed of Trust – This document pledges the borrower’s real property to secure a loan. It is the agreement to transfer an interest in the property to a neutral third party, a trustee, to secure the payment of a debt by the borrower. If the borrower defaults in the payment of the debt, the trustee is empowered by the deed to sell the property and pay the lender the proceeds to satisfy the debt.
3) Title Insurance – A policy issued by a Title Insurance company, which guarantees that an owner has title to a property and insures against errors in the title search. The policy insures a lender’s priority position in the chain of title.
Depending on the complexity of the specific loan transaction, Bridge Loan Financial may require additional documentation to secure the lender’s position.
The investment opportunities we underwrite typically yield 8% and above annually and produce a steady income stream of interest payments monthly. The risk is lower than most traditional investments because these investments are backed by the protective equity of marketable, high-quality real estate.
Who Can Invest In Trust Deeds?
The following entities qualify as trust deed investors:
• Family trusts
• Self-directed IRA’s
• 401(k) plans
• Pension plans
• Corporations and Limited Liability Companies
• Institutional lenders
*All trust deed investments are offered and sold by Bridge Loan Financial, Inc. pursuant to a California Real Estate Broker’s license, license number 01947983. Fractional trust deeds for purchase will only be sold to qualified California investors. All trust deeds will only secure California properties.
Investments with Bridge Loan Financial typically start at $100,000. Approved investors can purchase whole or fractional interest in each loan. We generally include the following items in each loan package for an investor to review:
• Loan Overview Summary
• Subject Property Appraisal
• Preliminary Title Report
• Completed 1003 Loan Application
• Borrower’s Credit Report
• Income Documentation
• Asset Documentation
• Loan Servicing Agreement
Once investors are ready to participate in a loan opportunity, they then wire funds directly to a Title company assigned to the loan file. Upon closing of the loan, investors receive copies of the following (including above) in a concise Bridge Loan Financial Investor Package:
• Deed of Trust
• Other Loan Documents signed by Borrower
• Loan Disclosures
• Any applicable Insurance Policy
• Loan Servicing Setup Forms
After the close of escrow – typically a couple weeks – investors will additionally receive the Final Title Policy showing the beneficiary/investor lien and a copy of the recorded Deed of Trust. Bridge Loan Financial will service the loan utilizing a third party trust company to collect all payments from the borrower and make all interest and principal distributions directly to each investor. Upon loan payoff, each investor will receive their: balance of principal, interest owed, and portions of any penalties, fees and default interest directly deposited into their designated bank account.
*There are certain risks involved in investing in trust deeds that you should familiarize yourself with. Investors are strongly encouraged to read a publication published by the California Department of Real Estate entitled “Trust Deed Investments: What You Should Know,” made available online at: www.dre.ca.gov
The strong protective equity provided by real estate collateral offers a measure of safety to trust deed investors not available in all high-yielding investments.
Collateral is a borrower’s pledge of specific assets, in this case commercial or residential real estate, to secure repayment of a loan. The collateral protects a lender in the case of a borrower’s default. Borrowers failing to pay the principal and interest under the terms of a loan, agreement are said to default on the loan at which point they forfeit the property pledged as collateral and the lender becomes the property owner. Banks and private equity lenders like Bridge Loan Financial use a legal process called foreclosure to obtain real estate from the borrower who defaults on a loan obligation.
In the event of foreclosure, investors in first-position trust deeds underwritten by Bridge Loan Financial will receive priority over other creditors on:
• The interest owed as defined in the loan and servicing agreements
• Their portions of the penalties, fees and default interest as outlined in theservicing agreement
• 60% of all gross profits from the successful sale of the property