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What about Real Estate Trust Deeds?

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One way to break into the wonderful world of rental property investing without the need to spend boatloads of time looking for the best deals – assuming you have access to cash or capital – is to invest in real estate trust deeds.  A trust deed, or deed of trust, as it relates to real estate investing basically means that you are the bank.  In other words, whenever you invest in trust deed notes, you basically become a private lender to real estate flippers.  And as a private lender, you will typically enjoy a 9-10% return on your money.

The main downside of real estate trust deeds is that you need to have money in the bank to be the bank.  As such, it tends to be more of an advanced strategy, not particularly cut out for newbies.  But if you do have some free cash available, this type of investing offers some tremendous benefits.

The first major benefit is that real estate trust deeds offer excellent returns and consistent cash flow.  You will generally receive monthly fixed interest payments, much like you would with a MMA, but the yields are always substantially greater.

The second major benefit of trust deeds, especially as compared to “traditional” investments like stocks, is that they are secured.  The property is the collateral, and property in general is more tangible than other forms of paper investments.  Because trust deeds are secured by physical assets, the overall risk is lower, especially if you take the steps necessary to thoroughly screen the investors to which the money is loaned.  This screening should include a credit check and a referral check at a minimum.

Trust deeds also tend to be less risky because they provide a passive income stream that is stable and predictable.  Similarly, they tend to be very straightforward and relatively simple to comprehend; everything is in black and white so you have full transparency, and there is no complex math involved.
Finally, there is very little work involved in managing real estate trust deeds compared to traditional investment p
roperty ownership.  Simply put, with deeds of trust there is no need for you to be a landlord.  They also tend to be easier to liquidate compared to physical properties so you don’t need to go through the traditional real estate selling process.  And this relative ease of management makes it easier to diversify your portfolio across multiple real estate projects.

The bottom line is that real estate trust deeds, or deeds of trust, can make an excellent investment vehicle if you have access to a lot of free cash and you know what you are doing.  You can use them to diversify your overall investment portfolio with comparatively low risk.  Just remember to fully check out any real estate investor you are considering lending money to.

If this piques your interest, check out this article for detailed info on how to get started investing in real estate trust deeds:

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