Trust Deeds

Deed of Trust vs Mortgage

✓ Real Estate Loans

Real estate loans are made to borrowers for various purposes including purchasing real estate, refinancing existing mortgages, or funding property renovations.

✓Deeds of Trust and Mortgages

In trust deed and mortgage investing the borrower pledges real estate as collateral for the loan. Similar to a mortgage, a deed of trust is a security instrument that is recorded against the real estate pledged as collateral for the repayment of the loan. The mortgage or deed of trust, as applicable, is recorded in the land records (e.g. County Recorder’s Office) where the property is located to create a lien on the real estate. The differences between a mortgage and deed of trust are:

For simplicity, we will use “deed of trust” or “trust deed” to describe investing in either deeds of trust or mortgages.

Trust Deed Investing

Trust deed investing is a form of real estate investment where investors provide financing for loans secured by deeds of trust against real estate. In essence, investors act as lenders, providing funds to borrowers for real estate purchases or refinancing. These loans are secured by the underlying property, providing investors with a level of security and collateral that is often absent in other forms of investment.

✓Secured Investment

Trust deed investing is considered a secured investment because the loan is backed by the underlying real estate property. If the borrower defaults on the loan, the trust deed investor who owns deed of trust has the right to foreclose on the property and recoup their investment by selling it.

✓Passive Income Generation

Trust deed investors earn returns in the form of interest payments made by the borrower. These interest payments are typically made monthly and may provide investors with a steady stream of passive income.

✓Risk Factors

Like any investment, trust deed investing carries certain risks. These may include the risk of borrower default, fluctuations in property values, economic downturns affecting the real estate market, and potential legal issues related to foreclosure proceedings.

✓Investor Roles

In trust deed investing, investors can take on different roles:

Advantages of Trust Deed Investing through Wilshire Finance Partners

By investing in trust deeds through Wilshire Finance Partners, we can assist with the investment as the investor’s professional manager. There are several advantages Wilshire can offer to trust deed investors:

✓Professional Management

Trust deed investing requires expertise in, among other things, evaluating real estate properties and assessing the creditworthiness of borrowers. The professionals at Wilshire Finance Partners specialize in trust deed investments, have the resources to source and conduct due diligence on potential trust deed investments, and have deep knowledge, experience, and expertise in managing individual trust deed investments and trust deed investment portfolios. The professionals at Wilshire Finance Partners help the investor make informed investment decisions, including trust deed selection, buying and selling trust deeds, and overall portfolio management and administration.

✓Customization

Working together with the investor, Wilshire Finance Partners and the investor have the flexibility to customize their trust deed investments based on the investor’s financial goals, risk tolerance, investment objectives, and preferences. This customization can include factors such as underwriting criteria, terms and conditions of the underlying trust deeds, geographic location, sector preferences, property types, and other investing criteria to create a trust deed investment that aligns with the investor’s desired level of risk and return objectives.

✓Risk Management

Trust investments managed by Wilshire Finance Partners enjoy the benefit of risk management strategies to help protect investors' capital and optimize returns. These strategies include thorough underwriting processes, ongoing monitoring of the trust deed’s performance, and proactive management, servicing, and administration of the underlying trust deed.

✓Access to Trust Deed Investments

As an active originator of new trust deed investments, Wilshire’s investors may gain access to a more consistent flow and broader range of trust deed investment choices that are unique to Wilshire Finance Partners and may not be available to other investors.

✓Transparency

Investors with Wilshire Finance Partners have transparency into all of their trust deed holdings and transactions within their account. They receive regular reports to view their portfolio's holdings and transactions. This transparency allows investors to monitor their investments closely and gain insight into the performance of the underlying assets held within the account.

✓Direct Ownership of Trust Deeds

Unlike pooled trust deed investment vehicles like the WFP Income Fund or WFP Opportunity Fund, investors holding individual trust deeds through Wilshire Finance Partner directly own the trust deeds held within their account. This provides additional transparency and greater control over the individual trust deed investments in the portfolio.

✓Diversification

Wilshire Finance Partners can provide trust deed investors with access to a diversified portfolio of trust deeds. Diversification is essential in mitigating risk, as it helps spread exposure across multiple properties, borrowers, and loan types.

✓Regulatory Compliance

Trust deed investing is subject to various legal and regulatory considerations, including compliance with securities laws, real estate regulations, and foreclosure procedures. Investors holding trust deeds managed by Wilshire Finance Partners receive assistance to help ensure that the trust deed investments and management, servicing and administration of the trust deed investment complies with applicable law and regulation.

✓Minimum Investment Requirements

Due to the broad range of trust deed investments, each investment may have minimum investment requirements which vary depending on the asset allocation, investment style, underwriting criteria, terms and conditions of the underlying trust deeds, geographic location, sector preferences, property types, and other investing criteria the investor may require. Please contact us for more information.

✓Fees

Like other investment products, Wilshire Finance Partners charges fees for trust deed portfolio management and advisory services. Please contact us for more information.

Considerations for Investors

There are several important factors investors should consider when investing in trust deeds. These include manager experience and expertise, fees, minimum investments, and risk factors:

✓Research and Due Diligence

Investors interested in trust deed investments are encouraged to identify potential managers with expertise in trust deed investments. Thereafter, the investor should conduct research and due diligence to evaluate the track record, education, licensing, knowledge, experience, reputation, and qualifications of each potential manager. In conducting the due diligence, investors should consider factors such as investment philosophy, risk management approach, regulatory compliance, and client service capabilities.

✓Interview Potential Managers

The investor should schedule meetings or interviews with the shortlisted managers to discuss their investment strategies, performance history, and fee structures. The investor should ask questions about the manager’s experience in trust deed investing, approach to portfolio construction and management, risk management practices, and client communication.

✓Structure and Fees

The investor should discuss the structure and fees applicable to trust deed investing. In addition to management fees, transaction costs, servicing fees, and other fees and expenses should be discussed.

✓Minimum Investments

Managers often have minimum investment requirements, which can vary depending on the manager or the individual trust deed investment. Minimum investments for trust deed can range from tens of thousands of dollars to millions of dollars. Investors should inquire about the minimum investment threshold for the trust deed investments they are considering and ensure that it aligns with their investment budget and objectives.

✓Alignment

The investor should consider whether the manager’s investment approach aligns with their financial goals, risk tolerance, investment objectives, preferences, and any specific restrictions or preferences the investor may have with respect to the underlying trust deed investments. The investor should feel comfortable that the manager has the ability to create and manage a portfolio of trust deed investments that aligns with the investor’s desired level of risk and return objectives.

✓Check Backgrounds and Reviews

The investor should check federal and state agencies to ensure that the manager is properly licensed and in good standing. The investor should also confirm that there are no civil, criminal or regulatory complaints against the manager. Confirm the length of time the manager has been managing trust deed investment portfolios. Look for reviews, ratings, or testimonials from independent sources or industry organizations to assess the manager's reputation and credibility.