How do Trust Deeds Work?

This is a guest post by Deets LaMoss at freedom595.com.  His blog documents the methods and strategies he is using to generate passive income to replace his salary and become financially free by November 15, 2017.

One of the core investments that I use in my passive income machine are trust deeds (aka notes or mortgages).  If this is a new topic to you, then please read on as I will share the mechanics of how this works and why I like them.

A trust deed is like mailbox money

Trust deeds or mortgages are one of the best passive income investments I have found.  These short term loans, secured by real property, are made to contractor/investors who purchase undervalued homes in desirable areas, rehab them, and then quickly resell them.  By acting as the private lender or “banker” you get to participate in the real estate market and earn high returns without worrying about tenants who don’t pay their rent or fixing their leaky toilets. Also, it is really cool to get checks in the mail every month for doing nothing!

How they work

These contractor/investors do not have time to wait on a bank to approve and fund a loan. When they find a property they have to move quickly before someone else gets it.  That is why they use private lenders who can fund the project in less than two weeks.  They pay a higher interest rate for the convenience of this service because they are borrowing the money for a short period of time (6-18 months) and their anticipated resale price will offset the rehab costs and interest payments yet still produce a handsome profit.

One of the things I really like about this business is the transparency. I work with a team of licensed brokers, attorneys, and title and escrow companies to make sure the paper work is complete and everyone is protected.  It’s clean, easy, and secured by real estate.

The other thing I really like is the fact that everybody wins. The borrower is able to close more deals and make more profit.  The private lender makes a spread on the interest and sometimes a share of the borrower’s profit.  The trust deed investor earns excellent interest (8-10%) and sometimes a back end profit. The service providers (broker, loan servicing, escrow, title, etc.) all benefit from the transaction too. It’s a great business model!

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Investing in Gold – Alternatives to Buying Bullion

Gold

The current market downturn has me thinking more about safe havens. Earlier this week I shared an overview on safe haven investing across asset classes. For each asset class, there are safe havens but the ultimate safe haven that has stood the test of time is none other than – gold. Holding part of your portfolio/net worth in gold allows your portfolio to weather the storm of a recession/depression/currency collapse etc. But in order to hold gold, one does not have to necessarily buy gold bullion as there are alternatives available to investors. This article discusses some of the options.

Why Gold?

The reason to invest and hold gold is strong. In case of a major crisis, investors always rush to gold and hold the metal to preserve wealth. Previous civilizations and generations have been obsessed over it and current gold market is still huge with central banks buying up as much physical gold as they can. Some investors suggest that its a barbaric metal that does not serve any purpose, but history has proven otherwise.

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Alternative Investments – Supplemental Pension Plan

Alternative Investments can provide lucrative returns that are unavailable by investing in the stock or bond market. In earlier posts, I profiled alternative investments in the following categories: farmland, rooftop solar system, private equity, collectibles, real estate, gold and P2P lending. In this article I profile a different form of alternative investment – Supplemental Pension Plans.

Note that a popular alternative to buying supplemental pension plan is to buy annuities from private companies – most likely insurance companies. Most private insurance companies have annuity products that may suit your needs. Of course, the setup is slightly different (otherwise it would simply be called a ‘pension plan’). With annuities, you deposit a lump sum of money and the insurance company agrees to pay you a guaranteed income for a set period of time or life. But in this article, we look at supplemental pension plans instead – as an alternative investment.

This blog is dedicated to achieving financial freedom that is achieved by saving regularly and investing in appreciating assets to generate passive income. This is done by investing in companies (equities), government bonds (fixed income) and other forms available. In essence, my plan is to build my own pension to fund my retirement. However, there may be other options available depending on your country of residence.

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Alternative Investments – Peer-to-Peer Lending

Alternative Investments can provide lucrative returns that are unavailable by investing in the stock or bond market. In earlier posts, we discussed alternative investments in farmland, rooftop solar system, private equity, collectiblesreal estate, and gold. In this article we discuss investing in another form of alternative investment – Peer-to-Peer Lending, or P2P Lending or Crowd Lending as it is more commonly known. P2P Lending has gained plenty of momentum in the recent years as the hunt for alternative sources of investment and higher returns are pursued by investors, especially in this low interest rate environment.

Alternative Investments – Peer-to-Peer Lending

Peer-to-Peer Lending is the practice of lending money to unrelated individuals, or “peers”, without going through a traditional financial intermediary such as a bank or other traditional financial institution. The lending takes place online on peer-to-peer lending companies’ websites using various different lending platforms and credit checking tools. It is important to realize that these are unsecured personal loans – either to an individual or a small business.

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Alternative Investments – Gold

Gold

Alternative Investments can provide lucrative returns that are unavailable by investing in the stock or bond market. In earlier posts, we discussed alternative investments in farmland, rooftop solar systemprivate equity, collectibles, and real estate. In this article we discuss investing in another popular form of alternative investment – Gold.

Alternative Investments – Gold

Gold is one of the oldest and most popular forms of investment. Its a precious metal that has proven time and again to be the best hedge against inflation.  However, with the reputation also comes a lot of speculation and volatility. Over the course of last couple of decades, the price of gold has risen and has corrected a bit as seen the following 20-yr chart.

gold-20yr

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