Bank Lending Still Tight: Investors Earn 9% Lending on Real Estate

by 06 Nov 2012

Looking for a low risk place to park your cash and earn a nice return? Rates aren’t moving up anytime soon, and the Fed said it will keep short-term rates near zero until 2014. Savings accounts are paying from 0.2 percent to 1.05 percent.  Money market deposit accounts are paying 1.25 percent while high yield, internet checking accounts are paying 2-3 percent CDs are offering 1.85 percent while World Currency CDs can earn you returns as high as 3 to 4 percent.

With the rate of inflation, how can any of these options be counted as a return? This is why so many investors put their money into stocks. It seems better to gamble for a higher return than to put your cash into such low yield options.

But many people aren’t aware of the returns available in trust deed investing. Trust deed investing is essentially making a loan on real estate, or acting as the bank. The safest trust deeds are paying between 7-9 percent, while riskier trust deeds pay higher rates of return.

May sound risky if you don’t know real estate, but investing in stocks and investing in trust deeds have some strong similarities. For both stock and trust deed investing, a good broker is essential. For example with stocks, unless you know fundamentals and study companies yourself, you won’t make money. This is why having a good stock broker is essential if you don’t live and breath stocks.

With trust deed investing, you are making loans on real estate and earning a return like a bank would. If you haven’t studied real estate, similar to investing in stocks, you need a good broker to make money at trust deed investing.

Many hedge funds are taking advantage of the wave of foreclosures by doing trust deed investing, in other words, by making loans to real estate investors. Because bank lending remains tight, particularly on distressed properties, there has been a tremendous need for real estate loans. Hedge fund managers have identified this opportunity and are making real estate loans, charging higher interest rates than a bank would.

Because bank lending will continue to be tight for the next several years, trust deed investors will continue to be a vital source of funds for both real estate investors and businesses. By leveraging the know-how and the experience of both real estate investors and savvy loan brokers, trust deed investors will be able to earn low risk returns as high as 9 percent, collateralized by deeply discounted real estate assets.


  • by mercadeo | 11/9/2012 2:08:45 AM

    There is also the possibility of unanticipated legal disputes involving the property, the navigation of which could easily destroy investment returns. It is necessary to have advisors with relevant experience should a situation such as this arise. Furthermore, while there are safeguards in place to protect against fraud, real estate transactions are susceptible to unscrupulous individuals looking to take advantage of unsophisticated lenders. Realizing the superior risk adjusted returns offered by trust deed investing is not for the faint of heart and requires a certain level of sophistication.


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