[quote=murf2222]Qwerty…….”very little skin in the game”? I would hardly call 45% “very little skin”.
I for one, wouldn’t mind a bit if the borrower defaulted and I was handed the keys along with 40-50 percent instant equity.
As we all know, selling a property if priced at what it’s worth is pretty easy right now (at least in SD county). As long as you have an accurate/current appraisal going in, I still don’t see the downside here. . . [/quote]
murf, I do see a downside to even having 50-55% equity if it is a “niche” business property that is difficult to put the right tenant into. You, as a trust-deed investor that was forced to foreclose have to now service the debt on the property plus the taxes and insurance. Likewise, if the property is in a rental-area that is transient or difficult to obtain a qualified tenant. I don’t think these types of properties sell easily or quickly.
As an individual trust-deed investor, you can’t “throw caution to the wind” just because your trustor has some “skin in the game.” When choosing which trust deeds to buy, you still have to adhere to the principles of “location, location, location” and stick with property types and areas you personally are intimately familiar with. If you find yourself an “overnight” business-property owner, it helps to have a contact list of friends and acquaintances that would be able to give you legitimate tenant referrals.
If a trust-deed investor was not able to manage his newly-acquired property by himself, this would significantly add to the carrying costs of this investment, esp. if that property was commercial.
