Give The People What They Want

The real estate market has the potential to produce such lucrative investments, that there is stiff competition for the best places, and many people who spend a great deal of time scouring their sources for potential big earners. In real estate investing, every day counts – you can’t necessarily sit on your idea, mulling it over for a week. Someone less cautious and risk averse as you will come along and snap up the offer while you are looking the other way!

Real estate developers often move fast to acquire property, or they risk losing out on a choice opportunity. The clock is tick, tick, ticking away for them. Consequently, developers may opt to avoid banks, which can take 90 to 120 days to fund a loan. Trust deed investment companies, on the other hand, can fund a loan in less than 30 days. Therefore, trust deed investment companies-despite their higher interest rates-are a developer’s best friend.

Usually, developers don’t mind paying higher interest rates because they know trust deed investment companies set up a short lending term. Unlike home mortgages, which last from 15 to 30 years, trust deed loans typically last about one year-36 months at the most. Consequently, commercial real estate developers can obtain the money as soon as they need it, knowing the high interest rate is temporary. When the term expires, they can find a lower interest rate elsewhere.

The other reason that people turn to trust deed investment companies rather than banks is that the bank won’t give them a loan. This is usually for one of three reasons – either there is something wrong with the borrower, there is something wrong with the property, or there is insufficient equity. Some things that might happen to make the institution think there is something wrong with the borrower are: their credit score being too low, or no source of income to pay back the loan. As many of you may know, there is a variety of reasons you may have a low credit score, the most incongruous of which is the fact that you have managed your money well enough to never need credit! However, most single problems can be overcome easily, with a little flexibility and lateral thinking. The only reason that banks can afford to turn away these loans is that they have economies of scale on their side – they don’t necessarily need every single loan, and they prefer very high security over much higher return on their own investments.

So basically, borrowers who need a lot of money fast are very well served by trust deed investment companies. They are able to temporarily trade off having a low interest rate for being the ones to get the deal, which they hope will make them much more money than the pittance they paid as extra interest! Neither are these loans unethical, in that they lock in people desperate for cash to overblown interest rates – they are simply fulfilling a need in the market, and serving both parties.