Immense Passive Income Cash Flows in 6 Easy Steps

NEWPORT BEACH, Calif. - May 8, 2016 - PRLog -- Step Number 1 Invest in Secured Trust Deeds

Investing in secured trust deed backed by real estate Investments can be a lucrative cash flow opportunity.  An investor can often times generate anywhere from 9% yield per year up to 13% yield per year on a passive income basis.  The key in investing in high-quality Trust Deeds  is the underlying quality of the asset it is backed by.   All trust deed Investments are backed by specific real estate assets.

Step Number 2 Evaluate Overall Portfolio Allocations

A tremendous part of investing and trust  deed assets is ascertaining the overall allocation of an investors portfolios.  Evaluation of a portfolio allocation is important because over exposure in a concentrated investment type can cause adverse returns to a portfolio overall performance.  For this reason it is recommended an investor take no more than 15% of their portfolio allocated towards trust deeds.

Step Number 3  Conduct Analysis On The Sponsoring Company's Credit Quality and Asset Composition

The financial professional specializing in trust deed Investments can provide tremendous amount of guidance for a prospective investor.  This guidance includes conducting analysis on the sponsoring firms credit quality and ability to provide future cash flows for the investor.  It is also advisable and investor consider the asset composition of the sponsoring firm to protect and overly concentrated positions in a organization.  Although trust deed Investments are high yield they are secured by the underlying  asset attached providing security.  In essence, the sponsors  credit quality is not as important as the underlying asset the trust deed is secured by.

Step Number 4 Understand the Impact on Term of the Float

One of the most important factors for an investor participating in trust deed Investments is the term of the underlying trust deed investment.  The term is important because as the term of the trust deed investment is longer the asset price will be more volatile to interest rate fluctuations.  For this reason it is advisable that an investor understand this particular characteristic of trust deed Investment.  Short time horizons of one year or less are often more favorable, but longer time horizons are available too.

Step Number 5 Have Plenty of Equity Protection in Deal

Having plenty of equity protection in a trust deed investment is tantamount in protecting a debt position.  Clients investing in trust Deeds must be strictly focused on having sufficient equity to cover any perspective default in a note. Investors can conduct this type of evaluation by  analyzing the market values of the subject property being used as security.  It is advisable that investor have at minimum 80% loan-to-value ratio in place on a particular deal, or a 20% equity protection.  Often times professional developers can create more equity to investors to sweeten up the terms.

Step Number 6 Liquidity  of Underlying Investment is Significant

The factor which most investors do not put a high amount of concentration in is making sure that the process flow of the underlying corporation floating the trust deed has a short time frame of return of money.  In other words, an investor in some instances require that the term of the loan stay under 6 months to 1-year.  This particular characteristic ensures that the investor keeps their money in motion thereby keeping their money liquid for other Investment opportunities.  This process assist in mitigating overall interest rate risk on a portfolio.

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