Whether you are positive you want to be a trust deed investor, or whether you just want to investigate, here is the process:
1. “REGISTER” AS A USER OF THE SITE – this will give you access to all of the trust deed screens. Once you register, I will receive an email with your registration information, and I will give you a call (or you can call me at 702-214-4700) and indicate that you just registered on the site, and my staff will put you through to me. Why do we need to speak on the phone? Read #2 below.
2. “ACCREDITED” OR “NOT ACCREDITED”? – When you and I speak on the phone, I will ask you some questions so that I can determine that you meet the minimum requirements listed by statute in the State of Nevada. Trust Deeds in Nevada are exempt from licensing as a “security”, but your state may have requirements that are different from our state, and you must comply with those as appropriate. My state requires that you meet a minimum of either 1) a net worth of $250,000 – not including the equity in the house you live in, or 2) an income of at least $70,000 or more for each of the past two years. The State of Nevada does NOT require that you prove this, but you do have to sign a piece of paper on every trust deed you buy, that states that you do meet at least one of these conditions.
Why does my state care about this? Don’t you have the right to invest where and when you choose? Yes, BUT……..we do not want you to place every last cent into trust deeds – that is not a good diversification strategy. It’s smart to have safe limits to investing. That is where Phase II comes into play. Our state law says that you cannot invest more than 50% of your net worth into trust deeds, and you cannot place more than 25% of your net worth into any one trust deed. That is why I am going to ask you many times “what is your net worth?” You don’t have to tell me the whole amount, but it has to be at least high enough that you can satisfy your budget for trust deeds. Make sense? If not, we will talk more about it on the phone.
3. CHECK OUT THE TRUST DEEDS. As soon as you sign back in (after I approve your registration), you can see the trust deeds. Do you like one? Want to reserve it so you can be the investor that funds it? Then you will have to do three things:
2) Do the paperwork. You will find links to the paperwork listed below in the very bottom of the screen. Fill it out and then email it to us at firstname.lastname@example.org
4) CHOOSE A TRUST DEED THAT YOU LIKE BY CLICKING ON THE “DOCUMENTS” AND REVIEWING THE INFORMATION AND THEN CHOOSE ONE THAT SUITS YOUR BUDGET AND YOUR FANCY.
Please remember – it is as much about the borrower as it is about the house, and with our record, you will have a very, very, very slim chance (.0057) to end up foreclosing on the property.
5) CLICK ON “RESERVE THIS LOAN” for the one that you want to reserve. Anyone can reserve a trust deed and once the loan comes out of processing, and before it goes into underwriting, we will call the investors that reserved the deal, and will discuss the deal with them. If it is decided that you will fund the deal, then I will put your name on that trust deed as a “Beneficiary”, and you will be able to watch the progress of the transaction by clicking on “View My Reserved Loans” which is on the “View Trust Deeds” page.
6) Once the loan is done in underwriting, I will merge the loan documents, and we will then send them to you through “docusign.com”. Make sure that docusign.com is on your safe sender’s list, so you see the email when it comes through. Make sure that your name is spelled correctly, and the loan amount is correct, and then you will sign many, many pages of disclosures. At the end of the document you will be able to save a copy of the documents.
7) Next you will receive wiring instructions. Please coordinate with your financial institution so that you understand their requirements for wire transfers. Most of our investors have accounts with banks that allow for wire transfers to be processed online from the comfort of their home. When we give the “go-ahead”, WIRE ASAP. Your funds go to the title company, and this is a time sensitive operation. We do not want to be the cause of the borrower having to pay a penalty for not closing on time.
8) Within two weeks of closing you will receive a deposit into your account for the prepaid interest, and you will receive an email with the “Investor Closing Package”. Please keep this paperwork in a folder with the other items that you have downloaded.
9) You will then receive a payment into your account sometime between the first and the fifth of the 2nd month after the closing. For example: if escrow closes September 15, the borrower’s first payment is the 1st of November, because interest is paid in arrears. Item #7 above is the interest payment for September 15-September 30th, and the November payment is for the interest from October 1 through October 30th. This formula will work no matter when the escrow closes, and this is the most frequently asked question from new investors.
10) Each month you will receive payments, and sometimes, or every time, or not at all, you will receive principal reduction payments. The monthly payment amount does NOT change, but part of the payment may be applied to principal, if the borrower has made at least one principal reduction.
11) Eventually, it will be time for the borrower to pay off the principal balance. Usually, the borrowers pay off early, but sometimes they will request an extension. If they want to extend, we will check their credit, the recorder’s office to make sure no other liens exist, and their payment record, before we contact you. At that time, if you like their payment record, and you still like the property, you may extend the loan, and the payments will continue as usual. If you want to be paid off, and the borrower wants to extend, I will try to put them with another investor, without charging them for a whole new loan.
POINTS OF LAW
With the 2009 Mortgage Investment Disclosure Act, it became illegal for investors to lend on residential real estate, without using the services of a broker. This is because of the legailities of lending on residential real estate. However, the State of Nevada has a law that says that it is illegal to “hold yourself out as being able to make a loan on ANY real estate (residential, commercial or land”, so it is necessary to use a broker no matter what. Make sure you work with someone who is licensed with both the State and Federal regulatory bodies. You could receive a cease and desist from the Mortgage Lending Division if you don’t.