Trust Deed Investing is the the act of lending out money on real estate for a shorter period of time at a slightly higher interest rate, and a lower loan-to-value than what a bank does, so that a borrower can acquire, rehab, rent and/or sell real estate. It is also referred to as "bridge lending", "hard money lending", or "private money lending". As it is so difficult to get bank financing now, "private" money lending is about the only way for an investor to get funding to buy real estate. Our Rehabbers clean up neighborhoods and revitalize the properties, and then they sell the properties, usually for a small profit, and then they go do another one. When we talk about an "investor" we are talking about a person who funds a loan. That means they are the one taking the money out of their account and lending it to a borrower.

"To me, trust deed investing has always been an investment that has made sense, since if the borrower stops paying, I have recourse to foreclose on the property and own it for less than what the borrower paid for it. It's better than the stock market because there is actual real collateral backing the note and deed of trust."
Corinne Cordon, President Capella Mortgage Corp

This type of lending is done with private investors, who in return receive 12% interest, and their "investment" is secured by a "deed of trust". Foreclosure does not usually happen, in fact with us it is very rare, but if it does happen, it's better to end up owning a property, than it is to be left with a worthless piece of the stock. Once you own the property, you can hire a property management company and rent out the property for many years, and then sell it, or you can immediately put it on the market and sell it. Foreclosure takes 120 days in Nevada, and if you sell the property for less than what is owed to you, you can get a 'deficiency judgment' which gives you the right to collect the remaining amount of debt. Like we said earlier, it is very rare for us to do a foreclosure, but you should be prepared for the event in case you do need to do it. It does cost some money to foreclose and more money if you want a deficiency judgment.

DEED OF TRUST

The loan is secured by a Deed of Trust recorded with the county recorder's office which gives the world notice that the owner of the real estate owes money to "someone". That someone is called the "beneficiary" and that beneficiary is a private individual (or an IRA or a family trust), who has loaned money to the owner of the real estate. The term of the loan is typically 12 or 24 months, and the interest rate is 12%. When the owner sells the property (or when the 12 months is up) you get paid off because there is a "lien" on the property and the title company will contact you to get the payoff amount.

The borrower also signs a promissory note which outlines the terms of the loan, the interest rate, the date the loan must be paid back by, and what happens if they stop making payments. During the term of the loan, you will receive monthly interest payments from the borrower, and the borrower pays all of the fees .

PROMISSORY NOTE

Because someone has borrowed money from you, and you have placed a lien on their real estate, they will make monthly payments to you, just like you do when you have a mortgage on your property. At our company, the borrower pays an interest rate of 12 - 12.5 %. Here in Las Vegas that has been the standard rate for a very long time, and people are accustomed to paying that. You will only see us presenting loans that have those approximate interest rates because if borrowers are willing to pay more than standard rates, something is usually wrong with the deal. Construction loans are usually 13%, but the extra point goes to us, because we have to do a lot more work, inspecting the property regularly, doing construction draws, verifying or 13% for construction. We want our customers to succeed in their real estate venture, so that you get your interest and principal payments, on time, without any stress. Because of that we have a policy of not overcharging even though the borrower may be willing to pay more.

Two reasons: #1) speed, and #2) ease of application. The process of applying for a mortgage loan, especially now, is very paper intensive. Just when you think it's all done, they ask for another piece of paper. People who borrow hard money have to make a down payment of at least 40%. If they can come up with that much cash, plus have more money in liquid reserves, and they have decent credit (or at least a good explanation of why it isn't good credit), and the property is worth what they are paying for it, then we will lend them the other 60% of the purchase price for 12 months (or maybe 24 months).

Terms and Conditions of the loan

Because we are a licensed mortgage broker, we have the authority to pull a tri-merge credit report, which is much more extensive than the credit report you can get online. We check the credit report for judgments, liens, unpaid taxes, unpaid child support, and we analyze the late payments. We also review the borrower's tax returns, bank statements, W-2's, pay stubs, personal financials, and property information reports. This is called due diligence. If the borrower and the property pass our criteria, then we will put the word out to our investors, and then an investor can select a trust deed that he or she is interested in. Loan amounts range from $15,000 to $1,000,000. You tell us if you want to lend on houses, apartments, office buildings, raw land or construction projects and when a deal matches your criteria AND passes our due diligence, then we call you or email you and tell you about it. Most of our investors are knowledgeable of real estate in Las Vegas - either they have been investors themselves, or they were a real estate agent, or a mortgage broker, or a loan officer, or title company employee. It's okay if you don't have that experience, because we are happy to answer all of your questions and teach you the basics before you fund a loan.

If you are interested in the loan, then we will send you additional documentation to review. Once you say yes, we expect you to honor your commitment, unless we find something out that causes us to cancel the loan. If you have said you will take the loan, then we have taken the opportunity away from other investors, and made a promise to a borrower who is counting on buying his property on a certain date, and you cannot "change" your mind because Aunt Millie needs to borrow some money from you or your dog needs braces. However, we do continue to do due diligence up to the point that the loan closes and we will notify you if we decide to cancel the loan. If that happens, you will have first priority for the next loan that fits your criteria.

Also, all new investors, and investors who call and say they have money to place right now because of a payoff, will get priority over the other investors who already have loans in place.

THE INVESTMENT IS NO COST TO YOU UNLESS YOU NEED TO FORECLOSE. YOU DO NOT PAY US FOR ANYTHING, UNLESS YOU WANT TO ASSIGN YOUR INTEREST TO SOMEONE ELSE AND THAT COSTS $250.

THE LOANS LAST FOR 12-24 MONTHS AND THE MONEY YOU USE TO FUND THE LOAN SHOULD NOT BE MONEY THAT YOU WILL NEED DURING THAT TIME. AT THE END OF THE LOAN, THE BORROWER MAY ASK FOR AN EXTENSION, AND IF YOU LIKE THE LOAN YOU MAY AGREE TO THE EXTENSION, OR YOU MAY REQUIRE THE PAYOFF. WE HAVE THE OPTION AT THAT POINT TO PUT ANOTHER INVESTOR INTO THE LOAN BY DOING AN ASSIGNMENT.

YOU CHOOSE WHICH LOANS YOU WANT TO FUND. READ THE TERMS OF THE DIFFERENT LOANS AND PICK THE ONES THAT YOU LIKE. REMEMBER, WE ONLY TRY TO PUT ONE INVESTOR PER LOAN, SO THAT YOU DO NOT HAVE TO WAIT ON SOMEONE ELSE TO MAKE A DECISION.

PLEASE READ OUR CODE OF ETHICS TO FIND OUT ABOUT THE REST OF THE THINGS WE DO AND DON'T DO, AND THEN CALL US AT 702-214-4700 AND ASK FOR CORINNE.