No worrying, like other investments that disappear overnight, trust deeds are “secured”, “managed”, “fixed rate” investments.
The term ‘SECURED’ used in conjunction with “REAL ESTATE INVESTMENTS” has advantages over other investments that are not “Secured”:
A) You might have “less worrying” as the investment secures a tangible asset that exists, and that you can look at and touch. It isn’t like a company that can fold overnight or be crippled with an employee strike, or lose market share, or be investigated by the SEC;
B) the security is covered by hazard insurance – in the event of fire or other hazard, the investor gets paid back his principal first.
C) the lien doesn’t disappear – and there is title insurance that proves that the lien is in first position, and the investor’s name is listed as the insured on the policy. In the event, that your lien is not in first position (exceedingly rare that that could happen), you put in a claim to the title company, and get your money back.
Here is what makes a Secured Promissory Note so special:
A Promissory Note is a negotiable instrument with special properties that make it the same as cash in the eyes of the law (Uniform Commercial Code). The definition provided in Negotiable Instruments Act, 1881 clearly expresses the characteristics of a promissory note. Section 4 of the Act defines it as:
“an instrument, in writing, containing an unconditional undertaking, signed by the maker, to pay a certain sum of money, only to, or to the order of,a certain person, or to the bearer of the instrument.”
The definite characteristics are noted below:
1. Written Instrument
The promissory note is a written instrument. The terms of the instrument and the extent of liability, the amount to be paid, the maker’s name, the payee’s name etc are to be written down. The whole undertaking should be in writing.
2. Signed instrument
The promissory note to be complete should be signed. The signature is the primary evidence which gives presumption that the maker has executed the document. A promissory note without signature loses validity.
3. Unconditional undertaking
As per the definition of promissory note, it is clear that there should be an undertaking to pay money. That undertaking should be free from any type of conditions. If the undertaking is subjected to some qualifying conditions, the instrument loses its validity as a promissory note.
4. Express declaration
There must be an express declaration or promise to pay the money to the payee. A mere implied undertaking will not qualify the instrument to be a promissory note. The declaration must be on the face of the instrument. It should be clear to whom the amount is to be paid and how much amount is to be paid etc.
5. Payee is certain
The payee should be a certain person. The instrument can be rightly called a promissory note only if a payee ascertained by name or designation is provided.
6. Amount is certain
In a promissory note the amount is certain. It should be a figure which can be calculated. Uncertain sum entered will not make an instrument a promissory note.
7. Mode of payment
The payment has to be in terms of money. Any other thing than money is not the medium of payment with respect to a promissory note.”
One thing that might not be clear is that we “manage” the investment for you – without any cost to you. We watch to see if the payment is late, and we make the phone call. Need a letter sent out? We do it. Need your bank account changed? We’ll get the form and turn it in for you. Need to foreclose? We do it for you. Want to extend the term of the note? We do the paperwork, you just sign it. Want to get out of the trust deed because you have a family emergency? For a small fee from you (because this is not for the benefit of the borrower), we will “assign” the documents to another investor. You really don’t have to do anything but sit back and watch the money grow in your account.
The investment does not fluctuate during the term of the loan. Once the term is over, anything can be negotiated but neither party is bound to it until the agreement is signed in writing. There isn’t much more to say about this. You just receive 12% paid per year (some investments pay 13, 14, 15, 16, or 17% interest. See me if you are interested).