OfflineA loan made to an individual or a business can be secured by real estate or real property. This is also called real estate lending, or trust deed investing. A trust deed is recorded, putting a lien on the Title to the real estate. This serves as the security for the loan. But what are the risks of trust deed investing?
Trust Deed Investing is not easy, as it requires knowledge of real estate, and in some cases, property management experience. Should the borrower not repay the loan, there is a risk of foreclosure. Depending on which State the real estate is located, the foreclosure process can be fast or slow. Once you are able to successfully take the property back, then you must market it and sell it. Cory Z.
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This is especially true if your lien is junior to a first mortgage. Any recorded liens that are ahead of your loan take first priority. In the even that the borrower defaults on the first mortgage and that lender forecloses on the house, there is a slim chance that you will ever see any of your money.
If the home goes for a short sale, then the farther down the line, the smaller and smaller your payoff amount becomes - if you get any at all.