That collateral is worth 35 to 40 percent more than what they put out. A deed of trust is recorded to protect their claim. Imagine if you could buy a stock at 60 percent of its value with a guarantee that someone will pay you 12 to18 percent on your money or you get the stock at full value. I bet many of you are thinking those rates are criminal.
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Real Estate Investing: Risks and Benefits
The biggest issue with these is that most investors dont do even the most basic due diligence on the investment sponsor, and even if they want to its hard to do. Few investors, for example, review a sponsors credit report, detailed investing history and tax returns on past deals. Nor do most investors contact banks, check criminal or civil litigation histories or consult lawyers and others the sponsor has dealt with in past real estate deals. Benefits:You could get a fair return on investment for the risk. You wouldnt deal with management hassles, and the sponsor probably has more investment experience than you do.
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