Conservative High Yield Investments

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What other forms of hard money lending are there that are secured by collateral? The Trust Deeds I do generally involve land development, commercial land improvements, or personal mortgage swing loans.


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Oh jeez, when you said that you were working in trust deeds, I assumed you were buying discounted paper. I guess that explains the relatively (IMO) lower yield.

One way to expand your trust deed business is to buy discounted paper. Usually you need to find seller-carried notes and buy the cash flow for a reasonable discount. Basically the note holder will sell the note to you at a discount off the face value of the note. So if I sold a property and had a note for $50k paying 8%, $605/month for 120 months, I could sell that note to you for $38,000 cash. Your yield on $50,000 would be 14% in that case. I've found it to be pretty common to get about a 12-14% return on decent discounted paper.

Now, another thing that you could do is hard money lending. HMLs are generally used by people that want to acquire a property, add significant value to that property in a short period, then resell or refinance. Mostly HMLs are used by flippers, but not always. HMLs generally charge between 10-14%+ and up to 5 points up front for invested funds. 4 points and 12% is pretty standard in my experience. Generally the borrower makes no payments during rehab.

Normally HMLs will lend only 65 or 70% of the after repair value of a property. so that is pretty safe, IMO.