Investing in trust deeds???

Question

I have an opportunity to invest in trust deeds in Orlando, Fl, which is close to home.  I put 50% and the buyer puts 50 %.  I take a 1st lean holder position for 60 months at 9% with montly payments.  Can anyone give their opinions? Thanks Hugo.

Account Closed · Answer

If someone like David had posted the information right off the bat it would have saved alot of mumbo jumbo. Thanks David, That is exactly what im interested in doing.

Bill Gulley · Answer

Absolutely,  brokers and licensed lenders can make such loans, not individuals or other entities who are not in the business of lending or regulated as such.

Know too that points are pre paid interest which for an individual may not be authorized or may push the APR to be an issue of usury.

Maybe not years of study, best just to get with a broker or lender as David suggested, learn from them. :)

David Beard · Answer

@Hugo Gort  - no, lenders are not getting in trouble lending at 10-15% and 3-5 points.  These are perfectly acceptable hard money lending terms to non-owner occupant borrowers, virtually everywhere in the U.S.  Certainly fine in FL.  Have you heard otherwise?

You should look at just investing with Principal Lending Group in Miami.  They recently were paying 10% with no specified term, well secured by real property at low LTV's -- http://www.prinlend.com/.  They are well established, affiliated with a premier law firm, and have done millions in successful loans.  (I have no affiliation with them, but their manager is a member on the site and has posted quite a bit.)

Account Closed · Answer

I did some reading on notes on the BP forums and  I'm now more confused than when I started.  It seems like I'm going to need years to get educated. As far as charging too much interest on the money, I guess alot of poeple are in trouble because they are lending with 2-5 points and 10-15 %. I might just have to leave my money in the stock market instead of investing in real estate.

Bill Gulley · Answer

Who is the "buyer" is this  a purchase or is the owner paying off half the note and you're buying half?

Are you simply making a loan?

Again, investing with your money is fine, buying a note, if you're in a partnership that can change the flavor and become a brokerage situation.

Thing about buying illegally is that you could put yourself in a situation where you could not enforce the terms of the loan if the debt was acquired in violation of law.

I suggest you talk to an attorney, you'll want to know that the debt was initially made in compliance. Is there any recourse with the note seller? It's easy to get skinned.

Do some reading here on notes as well. :).

Tom Goans · Answer

EDUCATION

It is the opinion of this investor who has been directly involved in originating, servicing, buying, and selling loans secured by real estate since the 1960s that investing in or participating in the complex real estate finance business REQUIRES a lot of education. Primarily law - federal and local.

• Just the way you communicate with a borrower is regulated.

• You may also be required by law to have a license.

To enhance the success of investing in or participating in real estate finance also requires a more thorough ability to determine realistic real estate value and understand the future value. Assumptions and appraisals will send you down the same road many institutional lenders traveled in recent years.

Another word of caution, do not set your borrower up for failure. This opens up many other cans of worms, including the cost and delays of foreclosure. Moreover, what if the borrower reports you as a predator lender? Right or wrong, should a government employee take an interest, there may be huge costs involved in defending your actions.

I do not recommend anyone play in the real estate finance world without extensive knowledge. Experience is another great partner.

Dealing with finance is dealing with peoples’ lives. There are many laws protecting borrowers and many government employees in charge of protecting borrower's rights. The government employees have endless funds backing them.