A trust deed is a legal document between the borrower and the owner of property. It is most commonly used in states such as Alaska, California, Idaho, Illinois, Missouri, Montana, North Carolina, Tennessee, and Texas. However, trust deeds can also be used in other states. These states have different laws and procedures governing these types of loan documents. A real estate lawyer can provide valuable advice regarding the terms and conditions of these types of loan documents.
As a passive investment, trust deeds can generate attractive returns, but they’re also not liquid. You need to be committed to the entire duration of the loan before you can start reaping the benefits. The interest rate on trust deeds is also unusually high, which is a direct result of the frustration of developers who need to raise funds. In addition, you will not be paid off until the loan matures.
Unless the property is fully insured, the capital won’t appreciate. Your profits will come from the interests you receive from your investment. Moreover, finding a suitable project or developer can be a hassle. In addition, you may lose the investment because of loopholes in the developer. For this reason, you should seek advice from a licensed broker before investing in trust deeds. However, it’s best to seek advice from a broker or legal advisor to ensure that your investment is right for you.