I have people call me occasionally and ask if they can make a return on deeds of trust like they make on property. And my best answer is, "Sometimes. But then, most people don't know the return they make off real estate, and the interest rate is not the return you make on a deed of trust. And even when you know your return, the two are not comparable: five percent return on equity is more than five percent return on a note."
To learn the return you make on real estate, you have to know the costs and income from the property, the costs of the financing, and the after tax dollars out. CCIM and AIR both have forms for understanding expense and income on properties: go to their websites and get them. Fill them out.
Why isn't five percent equal to five percent?
Well, here's where tax comes in. The tax rate on equity (combined state and federal, California people), is about 25%. The tax rate on trust deed proceeds is about 40%. So for your $5000 income on $100,000 invested, you're getting either $3000 or $3750: and that's a difference worth noting.
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