Trust Deed FAQs

Frequently Asked Questions about Trust Deed Investing


1. What is a Trust Deed Investment?
2. What is a Private Money Loan?
3. How much do I need to start investing?
4. Who can invest in Trust Deeds?
5. How is the investment structured?
6. What is the typical yield?
7. Why would an Investor get involved?
8. What are the benefits of Trust Deed Investing?
9. Should I invest all my money into one trust deed or invest in a few different Trust Deeds?
10. Why would a borrower pay higher rates for their loans when bank loans are much less?
11. What is the loan-to-value ratio that you lend?
12. I have heard of 1st and 2nd Trust Deed investments. What is the difference?
13. What considerations should I be concerned about when making my decision to invest?
14. Why is my return lower than the Note interest rate?
15. What is Loan Servicing, and what does Mortgage Loan Servicing include?
16. What should I expect in my Trust Deed investment package?
17. How do I get started investing in Trust Deeds?



1. What is a Trust Deed Investment?
A Trust Deed investor, is an individual seeking a competitive rate of return by loaning their personal funds on real estate. The investor earns a higher interest rate yield than typically offered by a bank or credit union. The loans are secured by the borrower’s equity in the real estate transaction. The Trust Deed is recorded with a county recorder’s office creating a secured lien on real property which provides collateral for lenders.


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2. What is a Private Money Loan?
Private Money (also known as hard Money) is the term used for loans funded by qualified private individuals seeking a high yield investment return. Frequently, borrowers looking for Private Money loans are real estate investors who do not meet, nor qualify for the banks current underwriting guidelines. The F.E. Forbes Company has been investing in Private Money Trust Deed loans for over 90-years


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3. How much do I need to start investing?
For qualified (according to SB978) investors the minimum investment with F.E. Forbes Company is $25,000.00.


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4. Who can invest in Trust Deeds?
Private individuals, family trusts, corporations, LLC’s, pension plans, IRA’s, ROTH IRA’s, Self-Directed IRA’s.
Starting in 2013, the California Bureau of Real Estate released new “Qualified Investor” guidelines that makes qualifying for trust deed investments much clearer. All investors are now required annually to fill out an Investor Questionnaire (BRE form #870) prior to investing in Trust Deeds. This form must be retained on file with the licensed mortgage broker, F.E. Forbes Company, Inc.


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5. How is the investment structured?
A borrower who owns or is purchasing real estate needs a loan. The borrower executes a Promissory Note wherein the borrower promises to repay the lender/s. The recorded Deed of Trust creates the secured interest attached to the borrower’s real property. Private Investors provide the money to fund the loan to the borrower. If the borrower does not pay as promised, the Lender/Trust Deed Investor can look to the real property for repayment and/or recovery of their invested capital.


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6. What is the typical yield?
Yields are often times higher than banks and Credit Unions. The Trust Deed annualized yield will depend on the length and term of the individual investment. Trust Deed mortgage investments currently yield from 8.00% to 12.00% annually.


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7. Why would an Investor get involved?
Many investors look to diversify their investment portfolio from stocks, bonds and CD’s. Trust deed investments allow investments in real estate without ownership or property management concerns.


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8. What are the benefits of Trust Deed Investing?
Investors enjoy monthly interest payments on their invested capital. Yields are higher compared to other fixed income securities. Real estate collateral is often viewed as more tangible than stocks and equity investments. Mortgage Brokers who specialize in trust deed investments arrange the transaction, collect and distribute monthly payments, and handle most problems that may arise, through the payoff of the loan.


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9. Should I invest all my money into one trust deed or invest in a few different Trust Deeds?
At F.E. Forbes we believe in investment “Diversification.” It is advisable to invest a divided portion of your money into a number of different Trust Deeds with varying property types, property locations, loan-to-value ratios, and maturity dates. In order to reduce your overall risk.


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10. Why would a borrower pay higher rates for their loans when bank loans are less?
There are a number of reasons why borrowers request private money loans. A few include:
• Loan request may have unconventional loan issues that make it more difficult to obtain bank financing.
• Borrower may require very fast closing date, in less than 10-days.
• Short loan term may be desirable to fulfill borrower’s goal.
• Property may include a special purpose building.
• Borrower credit score may be less than acceptable at a bank.
• The property may be new or newly renovated in a good demand area however rents have not stabilized or seasoned.
• Loan request may include cash out for various reasons, including rehabilitating property condition.
• Existing loan may have matured and borrower needs time to locate long term permanent financing.


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11. What is your loan-to-value ratio guide lines?
The F.E. Forbes Company loans up to 60-70% of the After Repaired Value (ARV) of the residential 1-4 unit property. On commercial properties we lend up to 65% Loan-To-Value. When determining on a final loan amount, we also consider property location, condition, repairs if any to be made, investor/borrower experience, and property type.


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12. I have heard of First and Second Trust Deed Investments. What is the difference?
The difference between a First and Second Trust Deed is the priority of the lien based on the date the Trust Deed is recorded. The earlier recording date would have priority (i.e. first position). If you have a Second Trust Deed and the Borrower fails to pay the First, you would be responsible to make the First Trust Deed payments or suffer the risk of being foreclosed out and losing your invested capital.


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13. What considerations should I be concerned about when making my decision to invest?
F.E. Forbes is primarily a collateral based lender and to a lesser degree a credit based lender. In other words, we look first to the real estate collateral, secondly to the ability to repay from either the property cash flow, borrower’s personal resources or other means, and third to the borrower’s credit to determine the likelihood of the borrower’s ability to repay the debt. During the underwriting process, we obtain an appraisal report, a credit application including financial statements, interview the borrower personally and then present the loan package to the investor.


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14. Why is my return lower than the Note interest rate?
The F.E. Forbes Company is the Master Loan Servicing agent, and charges a loan servicing collection fee annually, on all our loan serving programs.


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15. What is Loan Servicing, and what does Mortgage Loan Servicing include?
Loan servicing includes payment receipt from borrowers, payment disbursements to investors, oversight of subject property including maintaining adequate insurance coverage, overseeing property tax payments, issuing late charge notices and balloon payment notices, mailing quarterly statements to investors, issuing year-end tax documents, and coordinating foreclosure proceedings if necessary. Our management team has in excess of 30 years of experience in servicing loans.


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16. What should I expect in my Trust Deed Investment Package?
In order to make an informed decision, your Trust Deed package should include:
• Loan Summary of the Trust Deed Investment
• Borrower financial application information
• Credit Report of the borrower
• Financial Statements of the borrower
• Appraisal from independent, certified appraiser
• Borrower Escrow Instructions, copy of Promissory Note and Deed of Trust
• Current Preliminary Title Report issued by the title company insurer
• Indication of title insurance coverage amount


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17. How do we get started investing in Trust Deeds?
When you are ready to invest simply complete the following two forms and return to F.E. Forbes via email at info@feforbes.com or fax to 510 526-7976.

1. F.E. Forbes Investor Profile

2. Investor Questionnaire BRE form #870


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If you have more questions, call Mark Forbes, at (510) 526-7933. Or if you prefer, email your questions to info@feforbes.com