In this environment of low interest rates and uncertain returns, you can still find opportunities to earn high yields and obtain large gains. The respond lies in insight and investing in alternative investments. These are investments that are not offered by the wire houses or broker-dealers or mutual funds. In fact, these investments will seldom appear on the radar screen of your financial planner or investment advisor. The alternative investments that I specialize in are hidden mortgage notes. Carefully chosen, they can return 14-18% annually to the passive investor with relatively itsybitsy risk, manufacture them ideal for any investor needing more earnings or a safe haven from a possibly overvalued stock market.
If you're retired or recovery for retirement, it's likely that your stock-laden folder looks a itsybitsy less invulnerable than it did a combine of years ago. It's possible, too, with interest rates on bonds, money shop funds and bank Cds at all time lows, that you're counting on a fixed earnings that doesn't fully meet your needs.
"If only I could growth my monthly earnings without depleting my nest egg," you think, "and without losing sleep over the stock market." Well, there is a way to make this happen: by investing in trust deeds, or hidden mortgages notes, or investment partnerships that specialize in investing in these debt instruments.
Private Mortgage Notes
Simply put, hidden mortgage notes, commonly referred to as trust deeds in the western states, are short-term loans made to real estate investors secured by the value of the real property as collateral for the loan. Investors who invest in hidden mortgage notes or trust deeds typically earn a 12 to 18 per cent return, paid out monthly, with a minimum investment of just ,000 and relatively low risk. As a result, they are able to heighten their lifestyle significantly without threat to their principal, or build a large nest egg, safely, in a relatively short duration of time.
When you invest in a mortgage loan or note, you are in essence buying a mortgage secured by real estate. You receive fixed monthly payments from the borrower based on the terms of a promissory note.
You can invest in trust deeds on your own, lending your money directly to a borrower. But it wouldn't be advisable unless you have the time and expertise to evaluate property and to screen out borrowers, and know your way colse to the legal maze of real estate transactions. Or, you can invest in trust deeds through fellowships that specialize in this type of investment.
By far the biggest attraction of investing in hidden mortgage notes is their high yield. Borrowers, often real estate investors, are willing to pay interest rates of 12 percent and higher because they need a quick short-term loan to buy or refinance a property without the hassles and red tape they may run into at a bank.
Or sometimes borrowers may not qualify for traditional financing at lower rates because of minor credit problems or liens against the property. Or the property may be too small or settled in an area that makes accepted financing difficult.
Your safety against default is the property that secures the promissory note. That's why it is so prominent to invest in trust deeds (notes) with a low "loan-to-value ratio."
In other words, the loan should be only for a determined division of the appraised value of the property (and you must use a reliable and experienced appraiser). As a guideline, investors should seek loan-to-value ratios no higher than 70 percent for single-family homes, 65 percent for apartments and 65 percent for market and market developments.
One risk of hidden mortgage notes is lack of liquidity - you typically can't get your hands on your considerable until the loan is paid off. Trust deed loans often are for a year or two.
Another risk is the possibility of default and foreclosure. True, you are likely to recover your money finally and even make a profit from the sale of the foreclosed property. But in the meantime you may go months without receiving any interest payments.
That said, trust deeds ready through reputable and experienced firms offer an attractive composition of risk and reward.
But what happens in a recession, particularly one in real estate? If you believe property values are going down 10 percent, you are still protected by having claim to property assessed at a higher value than the loan amount. Of course, if you believe property values are going to go down 50 percent, then you are not protected.