Benefits of investing in trust deeds with Funding Warehouse:
- We are fellow real estate investors with over 30 years of combined experience in all areas of investments such as Single Family Residences, Multi-Family, and Commercial Properties etc.
- We only invest if the numbers make sense. We also keep to a strict Loan-to- Value(LTV) standard on all of our loans to ensure our investments are safe.
- Our priorities lie in the security of the investment and the return on investment.
- Trust Deeds are loans “secured” only by real estate investments, which are personally vetted by us. These are similar to mortgages. Some states use mortgages and some use Trust Deeds.
- We do not take any percentage of the interest rates earned by our trust deedinvestors. We give the full rate of return stated in the loan and only take a fee in the amount of points on the loan.
- Our services are free to our lenders because we service all of our investor’s trust deeds personally.
- Our investors are payed an annual rate of return (interest only per month) of 8-18%.
High Rate of Return by Real Estate
The stock market is risky due to its unpredictable and volatile nature. On the other hand, bonds and CDs are safe, but offer a minimal return on principal. Trust Deeds are a fixed high-interest investment secured by real estate and is utilized by savvy investors. Trust deeds are secured liens on real property. The property (which remains insured) will stay where it is. You, the investor, will get a fixed high rate of return of interest only payments until the principal is repaid. From there, you can pocket your investment or reinvest your principal into the next trust deed and continue to grow your portfolio.
High Rate of Return without Investor Headaches
In order to purchase a commercial property in California, even a duplex, an investor requires a substantial down-payment if they can’t find a seller willing to carry the note or aren’t willing to live in the property. If an investor wants a multifamily property, then they have to deal with tenant issues, repairs, possible evictions, for a return on principal that is comparable to what they can earn investing in a trust deed for a hard money loan.
As a private lender, all you need to do is lend any the amount of money you’d like. We will service your loan, collect your payments, and mail them to you. No tenants, no repairs, no headaches. This is the easiest way to make your money work for you. With trust deed investments, time is money in every sense of the word!
Invest from your savings OR from your IRA!
Did you know that at a tax deferred interest rate of 12% you will double your investment every six years? But the major question is where in the world can you earn a consistent rate of 12%? And what about rate reduction due to taxes? In a self-directed IRA account, you can invest in real estate, including trust deeds, tax deferred. And in a self-direct Roth IRA, you can invest in trust deeds TAX FREE! This allows you exponential rates of return.
Did you know that your child can have a Roth IRA? Did you know that if you contribute $5000 per year at an annual interest rate of 10%, then the account will have over 2.5 million dollars in it after 40 years? Consult your accountant for procedures, get them started while they’re young, and turn them into passive millionaires by the time they’re 35!
Earnest Money Deposit (EMD) Investments
EMD investments are put down on a property in good faith. When a buyer wants to make an offer to buy an investment property, the buyer wants the seller to take the offer seriously. So the buyer offers a “good faith” deposit toward the purchase price. This is also referred to as an earnest money deposit. Wholesalers take EMD loans as they work on several deals at the same time.
We are one of the few hard money lenders that lend on EMD. EMDs offer good rate of return for our investors, 30% return per annum; however, the majority of the time EMD lending is for 30 days or less, which only gives 2.5% return for a month. Even more appealingly, the money never goes hard, it always stays in escrow until the property closes. Your EMD funds stay safe and secured until the property is purchased or the offer is cancelled. You will get back your EMD principal back as soon as the contract period ends.
Though EMD offers the highest rate and potentially smallest investment size, opportunities for EMD occur less frequently than trust deeds. We expect more opportunities for EMD lending in the future. Ask us for more information on this program. In the meantime, there is never a shortage of trust deed investments.
Investment terms range from small to big and if needed, we match you up with another investor to successfully fund the project. No investment is too small or too big.
What are the advantages of investing in trust deeds?
The primary advantages of investing in trust deeds are as follows:
1. A substantially higher interest rate than any rate you a money-market, savings, CD, or bond, with a substantially higher than average annual rate (and less volatile) that the annual average for over the past decade in the stock market.
2. Trust deeds are “secured” assets, attached to real-estate holdings. This means that your investment is locked to a property in the same way that a bank mortgage is.
3. Trust deeds lent by Funding Warehouse are short term; usually under a year. This keeps your money liquid and allows you reinvest with us, or in another venture once your trust deed pays off.
Does this mean that trust deeds safer than stocks, bonds, or CDs?
No investment is completely without risk. However we do everything we can to protect against it.
When we analyze a deal, we usually look for two things: Comps and LTV based on the comps. We will typically loan a 75% maximum LTV (the way we calculate LTV is: Purchase + repair divided by ARV), but we can sometimes lend for higher LTV, if the property is located in a strong area.
One point that differentiates us from other hard money lenders is that our primary focus in any loan is the property value and spread. This means there is skin in the game in the form of equity. We also look for experienced investors, however if we are approached with a new investor with a phenomenal property, we will partner them with an experienced investor for their first flip. We always want our clients to be successful, because it means they will come back to us for their next deal!
I’ve heard 2nd trust deeds are unsafe. Am I wrong?
Funding Warehouse makes our 2nd lender’s investment almost as safe as the 1st, and even safer than owning the property itself. How? We put in the following “claws” in our borrower agreement that can give us immediate title to the property in case of default.
Claw 1: We hold onto the deed of trust, so we can foreclose in case of default.
Claw 2: We place a ucc (lien) on the borrower LLC membership interest. This means we can take over the LLC membership (and thus the interest in the property) in the same way that a car lender can repossess a car.
Claw 3: On the lender’s behalf, one of our companies becomes a member of the borrower’s LLC which owns the property to be lent on. The LLC Operating Agreement is amended to state that if the borrower defaults on any loan on the property, our company may take over the entire LLC. This allows us, as the lender, to get ownership of property without a foreclosure process.
Claw 4: Our deals are recourse, which means that as the lender we can go after all of the borrowers other assets, including garnishing their income, should they default on the loan.
As you can imagine, this can be extremely hard on the borrower. As an alternative to this measure, we offer the borrower the option to cancel the guarantee against their assets in exchange for giving us the deed in lieu of foreclosure. This means, of the borrower should default, we can get the property deed in hours instead of 100+ days of a foreclosure process.
Since the borrower does not live in the investment property, this a win-win for them and they ALWAYS take this offer. This is our first and nearly fail-proof method. The other three claws are simply alternatives and additional insurances for us to get the property immediately in the event of default.
If this sounds complex, it is. People have used bits and pieces of each of these strategies to secure their loan interest, but we are the only ones who do all of them systematically. If you’d like a better understanding, we recommend you visit our office and our broker Pritam Sinha will explain everything in greater detail.
Can I invest from within my retirement account?
Yes. You’ll need to have your retirement account with a “self-directed” firm. There are many such firms to choose from.
What kind of return can I make on my money?
With Funding Warehouse, you can make between 8-18% annual return on your investment.
What if I want to liquidate my note and invest in pork bellies?
If want to liquidate your note, we can always try to sell to somebody else or buy it back ourselves. However, the note market is not a public market, so we would try to sell your note on a “best effort” basis.
-Great. I’m sold. Now what?
Call us and tell us what your investment goals are. We’ll match you with a wonderful deal.