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. The simplest trust deed definition is that 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. Read more.

2. How much money do I need to start?

As of January 2013, The Bureau of Real Estate (BRE) requires that no single trust deed be more than 10% of an investor's net worth. An investor's net worth does not include primary residence, automobiles, or furniture. We must have the BRE Investor Questionnaire form on file for each transaction. We our are audited quarterly and the auditor makes certain this is part of the file. 

As an example, if an investor would like a $200,000 trust deed, the form must reflect that the net worth of the trust deed investor is $2 million.The Norris Group has a range of California deed of trusts depending on the program and availability. The long-term trust deeds program ranges from $70,000-$300,000 typically and our short term programs range from $200,000-$1,000,000. Read more.

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 private mortgage notes 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 depends on the program.  Long-term rates are at 6% net to the trust deed investor and our short-term building program starts at 11% net to the investor. The trust deed investor receives interest only payments for the life of the loan. 

Example: Let's assume that you are invested in our long term rental program at 6% on a $200,000 trust deed. You receive interest-only, monthly payments of $1,000 ([$200,000*6%]/12). This would equate to $12,000 annually (12*$1,000 monthly).

When a payoff takes place, The Norris Group would try to place that money in another transaction as quickly as possible. 

In our short-term programs, loans may pay off quickly and loans may not be as available leaving money idle at times. Trust deed investors must consider overall goals for return when choosing a program. 

6. Do you pool my money with other investors?

Not typically unless immediate family members get together to invest or partners form an entity which invests in the trust deed. The Norris Group prefers 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. Please call if you have specific needs. 

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 deed of trust on a piece of physical real estate. 

9. How much do you loan?

The Norris Group has brokered loans from $50,000 to over $1,000,000.  

10. What is your loan to value that you loan on?

The Norris Group loans up to 70% of the after repaired value (ARV) of the property for our long-term loan program.

11. Do you offer 2nd and 3rd trust deeds?

No, we do not offer second trust deeds or third trust deeds. The Norris Group only offers first trust deed investments.

12. What are points?

Points are the fees The Norris Group collects points for serving as broker in a hard money loan transaction.

13. Why is my return 6% when it says 6.9% on the website?

The Norris Group charges a servicing fee annually to handle annual paperwork, insurance checks, and to check that property taxes are being paid.

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 they arise.

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 adviser, financial or retirement planner, accountant, and/or your attorney before you buy mortgage notes. If you need a referral, please call our office.

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!

 
The Norris Group Better Business Bureau rating

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