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Frequently Asked Questions About Trust Deed Investing




Question

Why haven’t I heard of trust deed investing before?





Question
What are the benefits of trust deed investing?

Answer

Most private money trust deeds are created by small mortgage companies, and are not typically sold or scrutinized on the secondary mortgage market – a prerequisite for trading in mainstream markets. This, combined with their smaller volume, makes them unattractive to large financial services firms to market to the masses – even though investors might benefit from awareness of these opportunities.

Answer
There are four main sources of risk with trust deed investing: property devaluation, interruption of cash flow (i.e., borrower fails to make payments), legal action, and, in the case of second position deeds, subordination in the event of a foreclosure and sale. Pencap only lends on 1st mortgages and manages all of these risks on behalf of investors. For example, requiring a 50% loan-to-value (LTV) ratio keeps property devaluation risk to a minimum.
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