Trust deeds and mortgage notes investment are real estate investments you can do using your Solo 401k money. Of course, your Solo 401 k must be the self directed type so that you can decide to invest outside the traditional investment options. Trust deeds and mortgage notes are similar in nature except that trust deeds have swifter process compared to mortgage notes. In fact most states in the US including Alaska and California are utilizing trust deeds in securing real estate loans rather than mortgage. We recommend Sense Financial for self-directed IRA or 401k.
Trust deeds and mortgage notes investment are two similar real estate investments but each has its own advantages for your Solo 401k
If you will look closely between these two types of real estate loan investment, the major difference is only when foreclosure occurs. In trust deeds, when the debtor fails to make payments and totally abandons the debt, foreclosure can be initiated without the need to bring the matters into court. This is called non-judicial foreclosure. The trustee’s role will come in, and as a title company, they can execute the foreclosure of the loan and put the borrower’s property into power of sale foreclosure.
Majority of power of sale foreclosure could satisfy the total amount of debt including fees, and the borrower can get remaining amounts from the proceeds of the sale, if there is any. In mortgage notes investments, only judicial foreclosure applies if the lender wishes to recover his investment. This means that foreclosure is pursued by filing a case against the borrower. We all know that when matters are taken into court, timeframe and legal fees apply.
If there is one advantage mortgage notes investment has over trust deeds is that you can pursue for deficiency if ever the value of the property or the proceeds from the sale is not sufficient to the amount you invested. Whether you invest on either of these types, you can be guaranteed with monthly payments and/or real estate property.