If you are seeing a solid investment that is hassle-free as well as free of broker commissions on product loads, and provides a secure return on your investment, then you need a trust deed investment plan(TDI). TDI’s are good for:

  • Investors seeking a secured income
  • Investors seeking a passive real estate investment
  • Investors seeking to diversify their portfolios beyond traditional investments
  • Investors seeking compound returns in qualified retirement plans

For those of you that are unfamiliar with the term “Trust-Deed Investment” (TDI), it means that an individual can invest in a loan that is secured by the property. This means that a TDI circumvents a bank, and allows an individual to invest in property through lending money. TDI’s are usually done through a licensed trust deed investment company.

“A licensed trust deed investment company (TDIC) offers investments in collateral-backed property loans in the United States. Unlike private individuals who are generally subject to usury laws limiting interest rates on loans, TDICs can legally lend to property owners at rates determined by market demand. Because TDIC’s usually lend to borrowers with needs banks cannot accommodate (e.g., fast turnaround, multiple-use real estate projects), market rates for trust deed investments are usually significantly higher than bank mortgage rates.” Direct quote from Wikipedia

Our Scottish readers can learn more about trust deeds in Scotland by visiting Trust Deed Scotland

To put the above in one sentence: Trust-deeds invest in asset secured loans and enable private individuals to act as peers in the loan, securing them a “title deed” on the property, which can be sued to secure the loan if the property owner defaults on payments.

Most states have mortgages, while a few offer TDI’s through TDIC’s. The states that provide TDIC’s include Alaska, Arizona, California, Colorado, Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Tennessee, Texas, Virginia and West Virginia.

TDIC’s are not large capital management companies; they are usually sorting houses that collect private investors and use their money to secure loans to asset-based loans. Most of the borrowers are property developers seeking a loan secured by the property and plans they have. The reason that TDI’s appeared was due to the strict regulatory requirements set by banks that can sometimes hinder homeowner loans or property development projects due to various “bad property loans.” TDIC’s are not restricted by bank regulations, and you can secure an investment that gives you temporary ownership (or part ownership) of a property or construction project.

Some States set limits to TDI, for instance, the State of California limits TDI to 10% of your net worth, this means that if you have a net worth of $1 million, you cannot invest in TDI’s more than $100K in the State of California. Most TDIC’s also limit their minimum note investment amount, and this is usually around $10,000. The lending methods include:

• Individual or joint cash accounts
• Self-directed IRA accounts (Traditional, Roth, Simple and SEP IRAs)
• Corporations, partnerships, and LLCs
• Trusts
• Pension plans

Tips for securing a TDI

    1. Never invest in a property you wouldn’t want to own yourself. This means, check the property listings that are being offered for investment and only pick the ones you would invest in if you had the full amount to buy it in the first place. You can check the viability of the project you are investing into by asking for the property or development project details. You must factor into the decision-making process the property location, the identity or end product, is it commercial or residential and the population and tradability of the project.
        The Loan checklist

      • a. Property description
      • Loan amount
      • Loan-to-value ratio
      • Annual interest rate
      • Duration of loan
      • Exit strategy
      • Guarantees
      • Broker price opinion value and date executed
      • Borrower history
    2. Invest in quick return “partials.” This means you can make a mix of investments by buying the next fixed term for payments, let’s say 12 months of payments from a note owner that needs the money back fast. What you will need to do is consider your interest rates and contact note brokers for this option. It allows you to secure short-term investments with a higher rate of return.
    3. Invest in small notes that are offered by land developers; this gives you an opportunity to invest in property under construction that provides higher interest returns. It also provides you with added security that you are investing in a company and not an individual.
    4. Build a group of investors and take over a large note, this sometimes provides a more lucrative return, such as investing in a large development project. Creating investment groups is common on many large projects.
    5. Buy out defaulted notes, but be very careful, remember tip number one. If you buy into a defaulted note, you could end up losing all your investment. The price of property development or property can change in certain circumstances, such as the Flint water issue that killed property prices in Flint 2015-2016.