No, you’re not reading Consumer Reports or Motor Trend. But believe it or not, your choice of car can have an impact on your level of real estate investment success. This is because your choice of car makes an impression on people, and you always want to make the right impression. And of course, since cars are wasting assets - they very rarely rise in value - the less money you spend on them, the more you’ll have to invest in more practical things - like your next deal.

I was thinking about this recently because my wife and I are buying a car. We’re replacing the old Subaru Outback with… drum-roll, please… another Subaru.

What kind of impression do we want to leave with your tenants and anyone else with whom we have financial dealings? They should think of us as practical. As smart. As careful with a dollar. We want to present these impressions because we are battling a stereotype. That stereotype, of course, is that we are all rich - that we don’t actually have to work that hard - that because we own real estate investments, money comes easily to us. That a few bucks here and there aren’t that important to us. That when we haggle over money, we’re just being jerks.

Making the Right Impression

Don’t let your tenants see it! –>

Even if you are rich and don’t have to work that hard - good for you! - you almost certainly don’t want your contractors and especially your tenants to think so. Again, if they think so, your contractors are much more likely to overcharge you. Your tenants are much more likely to try to make late payments or take advantage of you in other ways. Of course you’re not going to allow this, but why deal with the hassle?

What does that mean to your car-buying decision? Well, first of all, it doesn’t mean you can’t have that Lexus or Porsche. It just means you shouldn’t ever take that car anywhere for business. And it also doesn’t mean you can’t be comfortable. Even my little future Subaru has heated seats, power windows, and so on.

Peoples’ impression of your car will be completely driven by the exterior, and in particular, the brand. That means an old luxury car or sports car will seem “richer” to your business contacts than a new non-luxury model. I would avoid all luxury brands. You especially want to avoid all sports cars. In addition to perpetuating the “rich playboy” stereotype, they just aren’t that practical for landlording.

If you must have a luxury brand, go American, and more than a few years old. An eight-year-old Lincoln or Cadillac will usually be beat up enough to not look overly impressive.

The most practical landlording vehicles are often pickup trucks, vans and SUVs. They never look ostentatious unless they’ve been tricked out with deer antlers and so on (think J.R. on “Dallas). They can carry a lot of stuff. Vehicles with four-wheel-drive can get almost anywhere.

Not only that, but if you really want to spend a lot of money for a comfortable and luxurious ride, a pickup truck can now be as comfortable as any car. But from the outside, it just looks like a pickup truck - not a bling-mobile that will send the wrong message.

So why aren’t I buying a pickup truck? I’d actually love to have one, but the little Subaru will hold everything I need for 99% of my landlording efforts. Of course this includes maintenance projects. It’ll also haul my two kids. If I need to tote a washing machine or something else equally bulky, there’s my wife’s Honda Pilot. However, the Subaru will get much better mileage than any of those other choices. And it sure doesn’t look ostentatious.

A Good Car is a Good Value

I define a good value as everything I need for the lowest possible price. Something that doesn’t suit my needs isn’t a good value - that’s why I won’t buy an old clunker that’ll leave me stranded 30 miles from home at midnight.

Once you’ve determined the best kind of vehicle, the next thing to consider is ownership costs. This is a combination of two factors. The first factor is cost of operation - gas, maintenance, and insurance. The second is depreciation. If you are like most small landlords and use your vehicle for both business and personal purposes, you probably figure your vehicle tax deduction based on mileage. The government includes cost of depreciation in the per-mile deduction - it’s currently 21 cents per mile for depreciation out of a total deduction of 50.5 cents per mile for the first half of 2008, 58.5 cents per mile for the second half. But in reality, cars obviously lose value at different rates. The most luxurious tend to lose value the fastest.

For example, let’s take a look at a couple of flashy rides from high-quality brands. A new BMW 528 will set you back about $55,000, but the five-year-old equivalent will be only about $21,000. A new Lexus LS 460 runs about $88,000. But the five-year-old is only $22,000. The BMW has lost more than half of its value (assuming a 2004 BMW cost less when it was new - it wasn’t that much less). The Lexus has lost almost 3/4 of its value.

By comparison, the Toyota Corolla is one of the most reliable and durable cars you can buy. (I’m not considering one, only because I really want the Subaru’s all-wheel-drive.) A new one will run about $15,000. The 2004 equivalent? About $9,000. That 2004 Toyota Corolla retained most of its resale value over five years and proved itself to be a much better value than most other cars.

Maintenance and insurance will cost a lot more as well.  Just ask anybody who ever bought an old luxury ride.  Replacement parts for a 1999 BMW aren’t any cheaper than for a new one.

Obviously these aren’t the only things you should consider when buying a car. But I find that most landlords don’t think nearly enough about the impression their choices make, and this is one way to do so. And considering the amount of time you spend thinking about your major investment decisions, shouldn’t you devote a little more to this important choice?

Talk to Your Tax Advisor

As you know, the domestic automakers are in serious trouble right now, and I expect the government to create some innovative incentives to try to encourage people to buy cars as part of their ongoing bailout efforts. That means we are likely to see tax changes which will affect your purchasing decisions. I used the Auto and Vehicle tables at Small Business Tax & Management and Edmunds.com for research, but you should ask your tax advisor for advice. Your advisor should be up on the latest changes.

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Tags: attitudes, landlord, money, perception, real estate investing, rich

Well, pretty much everybody raised their hands at my club meeting last week when I asked this question.   Boy you can’t swing a dead cat around without hitting an investor who is looking for private money these days huh?  To be frank - I’m getting kind of bored hearing so many investors tell me this same problem over and over again.  The scariest part is that some of these investors are brand newbies or they don’t have any deals what-so-ever to offer a private lender.   Come again?

Now I don’t mean to sound so grouchy about this subject, but raising private money is no different than finding deals and finding buyers.  It’s work work work!  When I ask investors what they are doing to “raise private money” I am getting pretty much the same answers… which is not much.   Now call me crazy, but if we aren’t marketing to folks who may have money to lend us - then how do we expect to Raise Private Money?  Or if our only form of “advertising” is going to be real estate meetings where other investors are looking for money too - good luck.  No my friends, this simply won’t do.

The only way that I know of to raise money successfully is to advertise for it.  And by advertising I mean YOU are the advertisement!  Marketing non-stop, all the time, telling everyone you know (outside of your investor world) in some form or another.  Just like you would be doing to buy houses and to find buyers. 

In a nut shell:

1.   Tell everyone you know that you are a real estate investor and tell them about your real estate investing business.  Tell your neighbors, your friends, your family, your Doctors, dentists, lawyers, plumber, every new person you meet… everyone!   When you start with this -people inevitably are going to want to know more about what you do.

When you get to the point when you have a deal or two or five under your belt - then move on to a whole marketing campaign on Raising Private Money.  This is what I do now.  I send out direct marketing to folks ( I bought a list from a list broker) letting them know that I can teach them how to earn 8 - 12% on their money by being a Private Lender.  Just like I do to find sellers of homes.  I send out direct mail saying that I can buy their home.  Just like I am about to do to find buyers - market to them!

2.  Have deals to tell people about!  Duh… this is a no-brainer right?  Well I am surprised when I ask investors if they have deals already in place to offer a private investor and they say No. (Or worse, they are not even currently marketing for deals.)  Wowee Kazowee.   

It is a two fold operation that must be happening at all times.   Talking to everyone you know who might have money - either in the bank, in a 401K, in a pension, stuffed in their mattresses - and getting deals all the time. 

3.  How do you have deals all the time?  Market, market, market.  How can an investor be worried about raising private money if you don’t have deals to talk about?  I hear it all the time… “well I don’t want to find deals if I don’t have the money to buy them”.  This is the wrong attitude all together.  When you have really good deals - you will find the money or the money will find you -period.  Notice that I said - “good deals”.   I have had my own experience of having a hard time finding money for deal or two.  I recognize it was because they weren’t good deals after all!  Just because we know of a property that is for sale - doesn’t mean it’s a deal.  Oy - I get shivers down my spine at the hard lessons learned there…  Rule #1 - know your business!

Now - Raising Private Money is a whole workshop in itself.   But the bottom line is that we must work our real estate investing business all the time.  Finding private money is a lot of work.  But this whole business is a lot of work.  If you want deals - you must work hard to get them.  If you need private money, you must work hard to find the people who might be interested.  If you need buyers - you must work hard to find them.  It’s not brain surgery - but it is hard work.  (Did I mention it is work?)

If we don’t do all of this, all the time, then forgetta ’bout it.   Find another hobby. This business is not for you.

(Again - sorry for being Ms. Grouchy pants right now.  I think that after hearing about 30-40 investors tell me in the last week that they were not really doing any of the above to accomplish their goals for raising private money - I had a moment of OH -SNAP!)

Photo Credit: Refracted Moments™

Tags: money, private money, real estate, real estate investing, real-estate-finance

Last week I made the case against real estate as an investment class. My recent change of heart is due to the ridiculous amount of market tinkering the Fed, the Treasury, and the central bankers around the world are doing to “support the real estate market”. All the bad loans, the foreclosures, and the schizophrenic Hank Paulson with his “on again - off again” bailout schemes, is putting the banks on hold…not knowing quite what to do with the growing REO on their books.

They are holding on to a ton of it because Hank said he was building an auction platform to buy all their troubled loans. Hank called this program TARP….or the troubled asset repurchase program…and he put a really sharp Wall Street guy (…haven’t we had enough of these guys?) in charge by the name of Neel Kashkari. Hank went to Congress and got almost a trillion dollars so he could buy up the bad loans and save the real estate market. Help the guy on the street, you know…you and me.

But a funny thing happen on the way to “helping” the American public….

The banks stopped lending to each other…like some errant children, they decided to stop playing nice and started killing each other right in the middle of the mall!

What is Hank to do? It’s embarrassing….trying to separate these children…get them to stop fighting…stop them from being petty, greedy, and only out for themselves. Hank remembered he had a pocket full of money…your money. So he offered nine of the “bigger” kids a truck load of “ice cream” if they could shape up and fly right. This took $250 billion of the $750 Congress gave him to fund TARP.

And it seems to have “worked” since the LIBOR and the TED spread are down some, but bribing kids or bankers to behave wears off quickly. So on Monday of last week, Hank said in a press conference, he was not moving forward on TARP. He was going to stick with direct investments(bribes) in banks to get the markets working again.

What?

Hank realized he’ll need the remainder of the $750 billion just to keep the banks from destroying each other …and us in the process.

There are rumors running all over Washington since Monday, that Hank’s job is hanging by a thread. Every Congressman who voted for the bailout bill looks like an idiot now that Hank’s approach to fixing the “worst financial crisis in a century” shows less insight than your 14 year old babysitter shows when the kids act up on her watch. Bribes, picking favorites, and appeasement at the highest levels is exactly what I’d expect of a part-time baby-watcher, but we deserve more from the Secretary of the Treasury.

With the government and the Fed knee deep in “fixing” things, where can one find an investment that is less susceptible to this meddling? Better yet…what investment could actually benefit from it?

Well let’s look at the alternatives left after eliminating real estate. It can’t be stocks with a recession headed our way. It can’t be the bond market; those yields are so low they don’t cover inflation. The same goes for sticking money in a CD or money market account; yields are horrible. Commodities like sugar and pork bellies with a global recession aren’t the way to go either…but we all have to eat, so their might be something there a little later.

But right now…the only investment class that makes any sense to me is …. drum roll please….

Gold!

I know what you are thinking…I’m not about to trade the gold futures market….and you right to say it. I’m not thinking that either.

I’m saying buy actual physical gold bullion…and coins if you like…but mainly the bullion.

(If this is the first time you’ve read my stuff, you’re probably scratching your head right now. If you go back and read some of my earlier stuff here on BiggerPockets Blog, I recount the story of my call to short Fannie and Freddie 26 months ago when they were trading at $60 a share…and the home builders…and the subprime lenders.

I even gave a five live seminars here in Denver on it back in the fall of 2006! Telling folks to short those stocks when everybody else including Jim Cramer was advising the opposite sounded crazy too…but those who took my advise don’t work for a living anymore. Which begs the age old question - “Is blogging work?”)

Here are my reasons….

First, as we saw, there are no other reasonable investment options. Soon the big money will come to that conclusion too.

Second, if you like real estate for it’s hedge against inflation, you’ll love gold because it’s a storage of wealth just like real estate. The only differences is in a down market I can still sell my gold in a matter of minutes, not months.

Third, if you believe like I do, that all this lowering of rates and printing money at a pace the US has never seen before will end in 1970’s type stagflation, owning gold could prove to be the wisest decision of your life. Once you own some gold, you actually want Bernanke to keep printing money( he’s not likely to stop regardless).

Well I could go on for an hour about fiat currencies, a seriously out-of-whack M3, and the under reported unemployment numbers that lead to a very ugly economic picture moving forward, but suffice it to say, if even a tenth of it happens, gold will be the only safe haven.

If we could only buy physical gold the way we buy rental real estate….25% down, finance the remainder…gold would be the best investment - at least for now.

Oh, wait…you can! Check out my BiggerPockets blog this week for more on gold…I’m planning on posting a few ideas for you!

Next week I’ll be writing on why Paulson resigned…and explain in more detail who his successor, the mystery man, Neel Kashkari really is…at least I hope so!

Bye for now!

Tags: Economy, gold, investment, paulson, real estate investing

I admit the title is a bit hokey and a play on words. However, it also is one great investment alternative. The reading audience is very well aware of the opportunity in real estate investing but may not be aware of the alternatives that actually produce as promised.

Most people know about CDs, annuities, life insurance, stocks, bonds and other investment alternatives. However, not eveybody is familiar with Treasury Inflation Protected Securities or TIPS. The complete dirty lowdown can be found here.

For this post I’ll concentrate on only the cursory details. Simply put, TIPS are simple, inflation-indexed, fixed-income investments that deliver a real rate of return that the U.S. government guarantees will keep pace with inflation. Their measuring stick is the Consumer Price Index (CPI).

TIPS generated interest is taxable only by the federal government. State and local taxing agencies are not allowed to dip their grubby meat hooks into this interest bearing animal. This feature alone alone gives you an advantage over CDs and savings account.

Since they are indexed to inflation -no matter what you think about the validity of the CPI- you get another benefit. Here are some numbers to put TIPS into perspective.

Money Example

Assuming a person buys a $1,000 TIPS security with a 4% coupon and inflation is at 10% during the first year we own it, the face value of the TIPS would rise to $1,100. Additionally, the coupon rate of 4% would generate $44 in income.

NOTE: In reality, the payments change to reflect shifts in the CPI, and the payments are semi-annual. However, even though the numbers in the above example are static, I think you can get the idea. Heck, if you can figure a CAP rate in your head just from the figures tossed out by the seller, you definitely can grasp the shifting CPI rate.

A point of interest is that since their inception in 1997, TIPS have actually outperformed the U.S. Standard & Poor’s 500 stock market index. Given our current economic debacle, they’re likely to do even better I say editorially speaking.

You can invest in TIPS through your local bank or broker or if not inclined to use either facility, visit the above website and invest directly through the U.S. Treasury.

Diversification Is Still The Name Of The Game

I posted this information because I am a strong believer in diversification. I would bet those of us in the real estate investment arena who lost everything we had (I personally know several as they contacted me to do a short sale on their properties) during this bubble burst would now agree with me.

What we learned is something the investment community has preached for years - don’t put all of your nest egg into one investment vehicle. Spread it around to protect yourself.

I’m not preaching to the choir nor am I recommending TIPS as an investment. Like everything else, give them a look over and make up your own mind. If they fit your portfolio, go for it. If not, you at least learned about an another type of investment vehicle.

Photo Credit: zzzack

Tags: inflation, investment, real estate investing, real estate tips, savings, Treasury Inflation Protected Securities

Remember the Oscar Wilde play, “The Importance of Being Earnest”? Well, I’d like to blog today about “The Importance of Being NIMBLE.”

The turmoil in the markets and the contraction in the global economy reminds each of us of the old cliche: “the only thing that’s constant is change.” So it is in business and, especially, investing.

My business partner and I founded our investing company with one very simple idea in mind: we wanted our business to outlive us. We want it to be around long after we’re gone. So all of the major decisions we make are colored by a long term perspective. What’s best long term for Live Oak? What’s best for our investors? How do we ensure that the projects we’re developing are benefiting the long term success of Live Oak (not just the next five plus years, but over the next decade and beyond) and have our investors benefit in much of the same way.

For example, our private equity company has only invested in commercial real estate to date. However, we are now expanding that. We are now investing in businesses and the passive cash flows they produce. Our criteria: the businesses must have a very high rate of return (20%+ per annum), are likely to be wildly successful even in down economies, and the management teams behind those businesses must also have a long term vision for their companies.

So our latest project, for example, is investing in a business that develops multi group dental centers and manages the practices within those centers, across the US. Dentistry is a high cash collection business, 99% of all new dental centers succeed (i.e. remain open and thrive beyond the five year start up phase), and for every 6,000 dentists retiring this year only 4,200 are coming out of dental school. So, we think this is a great play (it doesn’t hurt that the returns are phenomenal). And 65% of all Americans visited a dentist last year - up 10% from just 10 years ago (and as the population ages, particularly the baby boomers, that percentage is more likely to go up than down). Yes, there is a real estate component to it (the centers are stand alone office buildings after all) but the investment is really in the business of the dental practices (the returns are higher there than in the real estate actually). It’s an opportunity to get in on the inside of a deal which should produce a high amount of stable cash flows for many years — our investors will be able to invest in these very lucrative medical practices which are not usually open to private investors very often because of the hard work we’ve done and the nimbleness we’ve shown.

We’ve spent over 6 months of due diligence on the project (and, more importantly, all the players involved) so we took our time. But, if we were not nimble and remained closed to investing in only commercial real estate, we would not have this opportunity open up for us. The opportunity opened up for us because of some key relationships we’ve cultivated over many years — again, another thing we take a ‘long term, take your time’ view on (relationship building, that is).

Now, instead of waiting on the economy to come back around before we start seeing some great commercial real estate deals again, etc, we can monetize our nimbleness and continue to provide great opportunities for our investors who have to put their money somewhere while the options of where to place that capital are getting more and more limited by the day (stock market? CDs?). They say: “why NOT throw some capital at a private placement deal with a reputable firm and a strong offering?” Even in the worst case, it can’t be worse than losing 40% of my assets in the stock market! If you’re sitting on $1M+, why not throw 10-20% of that into this deal (as an overall percentage of your portfolio that’s not much risk exposure … and the upside could be enormous).

So, for us, this opportunity will open up other opportunities (for us and our investors). And it’s not the only opportunity. There are still commercial real estate deals and other private placement opportunities to look at. The point here is that all we, at Live Oak, care about is developing great opportunities for our investors and ourselves so that we both can benefit from them for many many years to come (although the dental centers, for example, will stop being developed in 2-3 years, the centers will still be kicking out returns for decades to come most likely or there might be even more lucrative exit strategies sooner to be looked at).

So, I encourage you to keep your eyes open and remain nimble not just during these rough times, but through all times.

I know that we will continue to make that a mantra for ourselves.

In closing, one of my favorite market commentators, John Mauldin, has a newsletter entitled: “The Frontline”. I highly suggest you subscribe to it at http ://www.frontlinethoughts.com/gateway.asp. In last week’s newsletter entitled “The Problem With Deleveraging” he gave a great history lesson on recessions and it was all pretty discouraging, negative stuff. But he concluded by saying:

“All is not gloom and doom. The last major recession and problem period, in the ’70s, saw a number of new businesses start and prosper (Microsoft, Apple, Intel, etc.). Businesses that have access to capital are going to be able to take market share and come out of this recession in much better shape. It is just a recession, after all, and will end. But I would suggest keeping your powder dry and being nimble. There are opportunities which will arise, as they do in every downturn. Just don’t expect this recession to be like any past recession. Make your plans accordingly.”

Who knows. You may be sitting on a business right now that could be the next Microsoft, Apple, Intel, etc. If you have a long term, deeply compelling vision with a business model that can stay nimble while you keep your eyes wide open to the opportunities that are all around you right now, you may be able to generate a wealth of abundance for not just yourself and your loved ones but for generations to come. Maybe even become one of those businesses John Mauldin will write about.

Photo Credit: Mayr

Tags: business, investor, opportunity, real estate, real estate investing

Last week I was at a four day marketing boot camp. Besides the information I learned, the best part of these types of events is hanging around other “players” in this business….positive people who are closing deals and making money. If you haven’t already figured it out, the way to faster success is to associate with other like minded and successful people. If you hang out with poor people, you’re most likely going to be poor. Just like if you hang out with meth addicts, you’ll turn into a druggie.

As we get closer to the end of the year, I would recommend putting the following at the top of your “to do” list for 2009: Join a mastermind group. It can be local where you meet in person or national where you do teleconferencing. But whatever you do, find a group of people and get together on a regular basis. Also, find people who are more successful than you, to be in your group (the dumbest thing I see people do is to take advice from people who make less money than them). Since the game of business is measured by dollars and cents, the only people I ever get advice from are those with a larger bank account than me.

Another thing I want people to do is to take responsibility for your life (the rest of this post is in response to a ton of emails I’ve been getting lately). Most people know that I started out investing in real estate while I was in college. I was broke. Because I was broke I was forced to be creative, which was a blessing in disguise. I’m getting a ton of emails lately where people are whining about how they’re broke and can’t get started in the business now. If you’re broke, that is the number one reason to get started now. If you do nothing, you’ll continue to stay broke (The definition of insanity is doing the same thing over and over again expecting a different result. So are you going to your cubicle job everyday, expecting a different result?).

It all comes down to how bad you want it and how big your balls are. 95% of people’s are small, but 5% of people have the guts to get out of their comfort zones, learn creative real estate and spend their time how they wish.

To those 5%, start looking for a mastermind group and it will greatly increase your chances of getting out of the rat race in 2009 (I feel much better now). Oh yeahh, here’s a winning headline for your next postcard “6 Reasons You Can Sell Your House In The Next 11 Days…No Matter What Your Realtor or Mortgage Broker Told You!”……you’re welcome.

Photo Credit: Shahram Sharif

Tags: marketing, mastermind group, networking, real estate investing

Well, that question is what I have spent the last week and half - UNLEARNING.  You see, I am a real estate investor and I, like many other investors, am always working on raising private money to use to close my deals fast (or, in this hellacious market - to close them at all!)  That is the Buzz word - or rather Buzz Phrase these days…. Raising Private Money! 

Now I thought I knew a good amount about raising private money… But what I learned this past week has given my pretty little head a brain hemmorage.  (And for all the old timers and way smarter investors than me out there - you will probably be like “ah duh - we know that”, but for me - it’s a whole new world and it is very exciting to learn, so please bare with me.)  This week, I have been learning all about  Real Estate Trust Deed Investing…  Hhhhmm isn’t that the same as private lending the way I have been doing it?  Nope it isn’t. There is so much more opportunity in Investing in Real Estate Trust Deeds

In my case, Real Estate Trust Deed Investing means that instead of  “raising private money” from someone to use on a specific property that I am buying, I can raise money that will have ANY viable Trust Deed attached to it - whether it is the subject property or not!  Wowee.  I did not know that!

For Example:  Borrower (me) wants to buy Property-A and it will be at about 75% of value.   Now this is an OK deal for an private money lender - but it’s just not quite good enough to close the deal - especiallly in today’s market right?  But wait there’s more!  I also have another Property-B that has a lot of equity in it, let’s say 65% equity.  Now what I can do is attach a Trust Deed to Property B in order to secure the loan. 

The coolest thing about this is that I don’t have to pull my equity out of Propery B to use to buy Property A.  I simply use funds from a Private Lender - all the while attaching the TD to that Property.  Equity stays in the propery!  This is way cool. There are so many ways that you can use this strategy.  You can do anything you want with the money really. Hey - I can use it instead of a business line of credit! It doesn’t matter because you are using the property as the asset/collateral for the TD.  It’s real estate financing without ever using conventional banks and my equity stays in tact!

As we investors all know, This is a great oportunity for many regular folks to earn substantial interest on their money.  Private Money lenders (who for me, are all individual people), are earning 8-9-12% on their money, rather than the 1-3% they might be getting.  What I know is that there are still so many people out there who don’t understand how being a Private Money Lender works and how it can benefit them.   Here are a few points that I am including in my Private Lending Report that I will give to potential Private Lenders:

1.  What is Private Real Estate Lending?

Private Lending or rather what we are talking about now  is Investing in Real Estate Trust Deeds is when regular people like you and me can invest our money in Real Estate Trust Deeds secured by real property and insured by a Title Insurance Company. 

Basically, Private Lending is your opportunity to become the bank and earn a much higher interest rate than a conventional bank is paying you on your money when you own a CD or have funds in a Money Market account. It’s your opportunity to eliminate the “middle man” (the bank) and make more money than the conventional bank is making for you.

2. What is a Trust Deed?
A Trust Deed (sometimes referred to as a Deed of Trust) is a document recorded with a County recorder’s office creating a secured lien on real property to provide collateral for lenders and Trust Deed Holders.

3. How does it work?
A borrower who owns or who is in the process of buying real estate property usually needs a loan. The borrower signs a Promissory Note wherein the borrower promises to repay the Lender a certain amount of money. The recorded Trust Deed creates the security interest attached to the borrower’s real property.  

4. What are the benefits of Trust Deed Investing?
Investors enjoy monthly interest payments on their invested capital. Returns are considerably higher compared to other fixed income investments. Real estate collateral is often viewed as more secure than stocks and equity investments, because its value can never diminish to zero.

5. What Kind of Interest Do People Earn as Private Lenders?

At this time Private Lender/Investors are generally paid anywhere between 8% and 12% interest per annum for the money that they lend and they can receive their payments monthly, quarterly or at the end of the deal. 

6.  What is the average time frame that an investor would use the private lenders funds?

Typically the time frame is anywhere from 6 months to 1 year.  However it is strictly between the lender and the investor.  Some deals can go past a year depending on your agreement.  I’ve even seen funds needed just for “bridge financing” and those last not more than 3 months.  The interest rate can vary depending on the time frame as well.  You might pay a lender a higher interest rate if you need the funds very quickly and for just a few months.

6. What are the Advantages of owning Trust  Deeds?

     a. Trust deeds establish a monthly income through interest payments.
     b. The interest rate paid is generally higher than rates paid by banks or other institutions.
     c. They are liquid and may sell relatively easy to another investor.
     d.  An investor may borrow against them by using them as security. 
     e. The lender is not responsible for the payment of property taxes, maintenance, gardening, repairs or any other expenses connected to the property.

Real Estate Trust Deeds are one of the safest investments available because the investment is not only secured by real property: land, homes and buildings but is insured by a Title Insurance Company.   Private Lending is a win/win for all.  The Private Lender is earning substantial interest on their money and the real estate investor has a source where they can get their money fast to close the deal without the hassels of conventional financing!  Hallelujah!

Tags: borrowing, lending, private lenders, promissory note, real estate investing, trust deed