But trust deed investors know this, so the competition for good hard money apartment loans is fierce. While you can often earn 8% to 12%* investing in commercial first trust deeds, you might only be able to earn 6% to 7% investing in good apartment loans. Is the lower yield worth it? Probably.
A lot depends where we are in the real estate cycle. If its been ten years since the last real estate crash, I’d probably choose the lower-yielding apartment loan. On the other hand, if the bottom of the real estate cycle was reached just two years ago, I’d probably choose the higher-yielding commercial deal.
* Remember, folks, I have often said that I would personally never invest in a first trust deed yielding more than 9%. If the interest rate is any higher than 9%, the higher monthly payments often break the back of the borrower.