There are at least a few answers to that question, and of course the answer is different for everybody. One of the biggest reasons why not everybody invests in Trust Deeds is because the market for alternative investments like these isn’t necessarily well-known. A much smaller percentage of investors venture into alternative investments than they do into traditional investments like stocks and bonds. It’s possible that it’s a matter of simplicity, commonality, and comprehensibility. It’s easy to buy a share of stock without significant working knowledge of the market, but it’s not so easy to get into Trust Deed Investing. It takes time, usually more capital, and at least a decent working knowledge of how the process works.

 

Another reason that not everybody invests in Trust Deeds is because there are risks involved just like anything else. Investing at the wrong time, in the wrong place and under the wrong set of circumstances can lead to significant losses, and many investors that have stepped foot into the Trust Deed Investing arena have experienced just that. During the real estate boom years investors poured million of dollars into Trust Deed Investments that were secured by worthless (by today’s standards) real estate. Some made money for a while, but eventually it all came crashing down and many people lost significant amounts of money. This is what we call “market risk,” which is the possibility that the real estate your Trust Deed is secured by isn’t worth the loan that you’ve made against it in the event of a foreclosure. It should be noted, however, that market risk is mitigable if property is properly valued and an appropriate equity cushion is structured into each deal.

 

There are other risks involved with Trust Deed Investing that may keep some investors away as well. For instance, there is the potential for legal disputes with the borrower, fraud, and even bankruptcy. While these things are typically rare if Trust Deed Investments are well-structured, they can have a drastic effect on the success of any given investment. In these situations it takes very experienced and knowledgeable advisors to sort through such a situation.