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If you’re an investor and want to get a good idea of the types of loans that FCTD originates with private beneficiaries like yourself, this Best of...
If you’re researching trust deed investments or looking for new mortgage brokers to fund or buy existing Notes from, you’ll want to know if the rate of return matches your investment goals. The last thing you want is to be a low-leverage, lower return investor repeatedly being offered high-leverage, higher yielding paper that could lead to problems and headaches down the road.
This blog post will cover the range of yields for trust deed investments on first, second, and third mortgages that FCTD has been originating in the states we operate, including:
Let’s discuss the details below.
Trust deed investment yields in California are lower than in other states because there is so much competition between lenders and brokers driving down returns. When I attend industry conferences like Geraci Law Firm’s Captivate and Innovate, there always seems to be mention of the lower yields in California compared to all the other states. Geraci should know because they provide a loan document platform (FCTD is a customer) that numerous private money lenders and brokers use to draft thousands of loan docs each month in all 50 states. They have the data and share it in their presentations or panel discussions at their conferences.
The majority of private money bridge loans FCTD originates through trust deed investors, or private beneficiaries, are around 9.00% yield. That’s where the market has been the past 4-5 years for experienced borrowers using funds for fix and flip up to 75% Loan-To-Value and other types of loans – bridge, blanket/cross-collateral, commercial properties, and rental.
We have gone outside the range of 8.00% to 10.00%, going as low at 5.50% and as high as 12.00% on bridge loans placed with private beneficiaries.
The yields on first trust deed investments are higher in other states like Washington, Oregon, Florida, and Idaho where FCTD holds mortgage broker licenses. There’s less competition in these states compared to California.
Second and third trust deed investments will have higher yields due to their junior lien position and higher risk. FCTD works with several sophisticated investors who prefer funding second and third trust deeds for the higher yield. One investor only does seconds because his target yield on investments in his retirement funds are 11.00% to 12.00%. If the loans default, he has a real estate attorney who handles loss mitigation strategies with the loan servicer.
Recently, we had an experienced investor inquire about second and third trust deed investments. He’s been funding smaller second and third mortgages for the past decade, ranging from $25,000 to $50,000 with a targeted yield of 18.00%. FCTD prefers a $100,000 minimum loan amount with 10.00% to 13.00% interest rates on second trust deeds, so it’s not likely we’ll have loans for this investor.
If these yields on trust deed investments are within the range of your targeted returns, please reach out to us to discuss what the loan characteristics that you'd be comfortable with funding.
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