Investing in Trust Deeds (Mortgage Notes) and LLPs

[briansd1]

Investing in trust deeds is a risky game. People who turn to hard-money lenders don’t have access to other sources.

If you’re going to invest through an intermediary, best to do so in a booming market and hope to get out before the crash.

I’m personally leery of investing through a broker because the broker and developer will pay themselves and live the good life while the small investor take the risks.

Large multi-million dollar deals are above my pay-grade. I prefer to invest on a small scale I can control.

As a small investor I would buy a rental property and try to get a good tenant in there. I would rent out the property for a while and offer the tenant a purchase option where I carry the note. Perhaps the tenant is a great tenant who doesn’t have a credit history or documented income, but he is a good, credit-worthy person.

You know the history of the property and the buyer. That’s a good risk for you. Your downside protection is if the buyer doesn’t pay, you foreclose and take back the property.

You could also buy a small building or shophouse and put a business tenant in there to cover your costs — perhaps a dry-cleaner, a food-to-go restaurant or another small business (This is harder to do in San Diego because of the dearth of properties). If the business grows and takes off, the owner might buy the property from you because the location is valuable to him. Ofter to carry the note.

If you have friends and relatives to work with you, you can even start a small business and then sell it after it’s established (and carry the note).

My small investor method takes a hands-on work and knowledge of the local market. You may get ordinary returns for a while, but with time and happenstance, you may get great returns.

[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.

Where else are you gonna make a 12% return AND have your investment so well secured/levered right now?

[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.

Where else are you gonna make a 12% return AND have your investment so well secured/levered right now?

[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.

Where else are you gonna make a 12% return AND have your investment so well secured/levered right now?

[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.

Where else are you gonna make a 12% return AND have your investment so well secured/levered right now?

[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.

Where else are you gonna make a 12% return AND have your investment so well secured/levered right now?

[bearishgurl]

[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.

[bearishgurl]

[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.

[bearishgurl]

[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.

[bearishgurl]

[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.

[bearishgurl]

[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.

[murf2222]

Actually, If I end up doing this it will most likely be lending on a SFR that an investor/flipper needs funding on. The Norris Group specializes in this type of Trust deed lending and the 12% yield is based almost entirely on these types of properties.

They also have longer term investment programs that are geared towards rentals, but the yield is only 9%

[murf2222]

Actually, If I end up doing this it will most likely be lending on a SFR that an investor/flipper needs funding on. The Norris Group specializes in this type of Trust deed lending and the 12% yield is based almost entirely on these types of properties.

They also have longer term investment programs that are geared towards rentals, but the yield is only 9%

[murf2222]

Actually, If I end up doing this it will most likely be lending on a SFR that an investor/flipper needs funding on. The Norris Group specializes in this type of Trust deed lending and the 12% yield is based almost entirely on these types of properties.

They also have longer term investment programs that are geared towards rentals, but the yield is only 9%

[murf2222]

Actually, If I end up doing this it will most likely be lending on a SFR that an investor/flipper needs funding on. The Norris Group specializes in this type of Trust deed lending and the 12% yield is based almost entirely on these types of properties.

They also have longer term investment programs that are geared towards rentals, but the yield is only 9%

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