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Trust
Deed investing is not the exclusive
niche market it used to be.
As
the consumer public is fast
becoming aware of the existence
of privately funded real estate
loans in conjunction with super-appreciated
California property values,
competition in this area of
niche lending is increasing
rapidly. We are beginning to
see "shoppers" looking
for the lowest interest rates,
points, and prepayment penalties
for hard money loans, regardless
of how poor some of these individual's
credit and other qualifying
factors or circumstances may
be. Conventional
sub-prime lending has also
become more liberal and thus
more competitive in areas where
private money used to dominate.
Anti-predatory
lending laws also severely limit
the interest rate and overall
fees allowed on privately funded
property loans in which the original
principle balance of the loan
does not exceed the current conforming
loan amount ($417,000) for an
owner-occupied, single-family
dwelling as established by Fannie
Mae in the case of a mortgage
or deed of trust. As such, you
can secure more real estate investment
opportunities with a lower required
interest rate return and points
charged. Likewise, the higher
loan-to-value percentage you
are willing to loan against the
properties you wish to lend on
may also earn you more transaction
opportunities, though there is
an increased risk to you in the
event of the borrower's default
or declining market conditions.
Finally, your willingness to
consider less desirable property
types, such as manufactured or
modular homes (permanently attached
to a foundation), raw and remote
land parcels, unfinished construction,
etc., will also open more investment
opportunities, though; again,
there is a higher risk in lending
on these properties versus more
conventional types.
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