What is the minimum for a Trust Deed Investment maximum trust deed investment
What is the Minimum for a Trust Deed Investment?

Minimum to Maximum, Your Money, Your Choice!

We rarely purchase properties for under $100,000. What does this mean for the investor?

  • Occasionally, we have small funding requirements
  • GAP Funding Options
  • High Risk if loan is too small (explained below)
1
What is the minimum investment for Trust Deed Investments?

Whoever is offering the trust deed investment determines the minimum required. There are some firms who will take investments as low as $10,000, while other firms may require upwards of $100,000. We do not have a minimum investment amount and we do not pool funds. If you want to invest smaller dollar amounts and would consider being the gap between the first and what it takes to completely fund the project, we can offer lower investment amounts that still provide a great yield on your investment.


2
How can very small Trust Deeds be more at risk? How small is too small?

In more distressed parts of the country, take Detroit for instance, properties and homes are selling for as little as $20,000 or even less. Making a $10,000 loan that is secured by property selling for $20,000 means that the loan-to-value is 50%. This is typically a safe deal.

Even though the 50% LTV is considered to be a low risk investment, the margin of safety is limited to $10,000. In the event the borrower defaults, the foreclosure process may cost as much as $7,500 and in some cases more. Once the foreclosure process ends, the investment is no longer $10,000, but $17,500. This will not cause a profitable end.

Furthermore, let us say that the property you have invested in needs $5,000 in renovations. Add this to the foreclosure and loan amount and now your total investment is $22,500. This is more than the actual value of the property.

Additionally, upon selling the property to recoup your initial investment, usual costs is about 5% of the selling price. This is then split between the buyer’s broker and the seller’s broker; in the case of a $20,000 sale, this means that $1,000 is split 50/50 between them. Fortunately, a few helpful brokers will be willing to do the work of selling a house for a mere $500 commission.

For the reasons previously mentioned, you can see that very small loans hold more unique risks. However, with much higher loan amounts these issues are nearly non-existent.


3
How can I invest in Trust Deeds?

There are typically four options for someone to invest in trust deeds.

  1. Source individual loans personally, lending to real estate investors directly
  2. Loans backed by real estate from other brokers can be purchased
  3. Trust deed investment funds have options for you to invest into the fund itself
  4. Trust deed group that invests directly as a group can be joined for investing with them

Despite the fact that investing has the potential to create high adjusted returns, there also remains a significant risk for those investors who are not well versed and experienced. Working with an ethical company that will take the time out needed to ensure you understand your position and the structure of the loan will help eliminate a lot of the risk. Even some of the most experienced investors should be careful. Critical documents and items such as loan documents, title insurance and underwriting all have important legal aspects that have to be clearly understood and maintained.

Trust Deeds provide great returns with leveraged risk.

Time to start Investing in Trust Deeds! We are here ready to help you get started.

Minimum Investment for Trust Deeds

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