Trust Deed Frequently Asked Questions
1. What is a trust deed investor?
A trust deed investor is a person seeking a competitive rate of return on their investment. At the simplest level, trust deed investing is when an individual lends money to a borrower through the services of a broker.
The source of this money can be from savings, credit lines, or retirement accounts. The broker finds the borrower who wants the loan, and the private party with the money provides the funding. The broker then arranges for the borrower to sign paperwork to show the world the agreement to borrow money and the terms.
2. How much money do I need to start?
The Norris Group is actively seeking private money sources with at least $50,000 to start.
3. Can I use IRA funds?
Yes. The Norris Group actively places funds from IRAs, Self Directed IRAs, and Roth IRAs. However, please contact your plan representative as all IRAs have different rules and regulations. Read more.
4. What’s your typical property you loan on?
The Norris Group only lends on vacant, non-owner occupied homes in California. We mainly focus on single family homes and units (1-4 only). Read more.
5. What is the yield?
Annualized yield is 9% with a prepayment penalty of 6 months if the loan should pay off before two years of origination.
6. Do you pool my money with other investors?
Not typically unless immediate family members get together to invest. The Norris Group tries to have only one trustee per investment. We do not pool private money to fund these residential properties (also called fractionalized loans). This offers more security and control for the trust deed investor.
7. Once I’ve committed to be a private lender, what should I expect?
Please see our process HERE.
8. Is it safe?
Every investment has risk. However, unlike many other investments, trust deed investing is unique in that a private lender owns a first trust deed on a piece of real estate.
9. How much do you loan?
The Norris Group has brokered loans from $30,000 to over $1,000,000. However, our main focus in this market is first time buyer inventory as it makes up the majority of the market. That being said, most of our loans range from the $30,000-$350,000 range. Our goal is to find long term properties where the rent will cover more than the monthly costs.
10. What is your loan to value that you loan on?
The Norris Group loans up to 60% of the after repaired value of the home for our long-term loan program.
11. Do you offer 2nd and 3rd trust deeds?
No. The Norris Group only offers first trust deeds on all of our investments.
12. What are points?
Points are the fees The Norris Group collects for acting as broker in a hard money loan transaction.
13. Why is my return 9% when it says 9.9% on the website?
The Norris Group charges a 0.9% servicing fee annually.
14. Why don’t I skip you completely and work with an investor directly?
This is a great question! It’s easy to think that avoiding a broker can save money. In the case of lending money, it’s a little more complicated and very important to understand the rules and regulations.
Let’s say you are deciding to list your house. Should you sell it yourself or list the property with a broker? If you could sell the property for exactly the same price yourself, you could make a case for taking on the job because it could save you money.
In the lending world, it is just the opposite! Only through a broker can you charge high interest rates. If you charge these high interest rates while making the loan directly to a borrower, you are committing usury, and usury has severe penalties. You can read more about usury on the California Office of the Attorney General website at ag.ca.gov.
15. What does loan servicing include?
Loan servicing includes the back-office tasks of collecting payments from borrowers, disbursing payments to the investor, mailing required notices and statements, year end tax documents for the IRS and franchise tax board, maintaining adequate borrower insurance coverage, and coordinating foreclosure proceedings if necessary.
16. Who in my network might be able to advise me on these types of investments outside of the Norris Group?
Having an excellent team is always important and we suggest you check with your tax advisor, financial or retirement planner, accountant, and/or your attorney.
17. Where can I find more information about trust deed investments in California?
The California Department of Real Estate has an entire document you can read on the subject HERE.
18. Who can invest in trust deeds?
Private individuals, corporations, pension plans, 401Ks, custodianships, LLCs, retirement funds, IRAs, Roth IRAs, Self-Directed IRAs, and SEP accounts. Some retirement amounts have limits so please check with your custodian or agent.
19. Do you require fire insurance on the property?
Yes. Not only do we require fire insurance but we require the investor to inform the insurance company that the property is vacant. We require coverage in the amount of the loan or replacement guarantee.
20. Will I be given a complete profile on the property?
By the time we present the property for funding, we’ve already had an independent appraisal done on the property. We’ll send to you a copy of that appraisal along with the address for you to view the property. Much work goes into qualifying the property and the borrower before the investment is ever presented. That's the benefit of using a broker!
