California Trust Deed Investing FAQs
by TrueBridge Loans

A deed of trust is a legal document used to secure a loan on real estate. In California, it’s commonly used instead of a mortgage and involves three parties: the borrower, the lender, and the trustee. The trustee holds the title until the loan is paid off.

The main difference is the foreclosure process. A deed of trust uses a faster, non-judicial foreclosure, while a mortgage typically involves a longer, court-supervised process. In California, most home loans use a deed of trust.

Trust deed investments are when investors lend money for real estate purchases secured by a deed of trust. The investor earns interest from the loan, and the property serves as collateral.

You earn money through the interest paid by the borrower. As the investor, you’re essentially the lender, and the borrower makes monthly payments to you until the loan is repaid.

Trust deed investments can be relatively safe, but they carry risks. The loan is secured by real estate, but property values can fluctuate, and borrowers can default. Working with experienced lenders helps reduce these risks.

To get started, you typically work with a trust deed lender or broker who can help you find investment opportunities. You’ll want to review the property, borrower, and loan terms to assess the risk and return.

Returns can vary, but trust deed investments typically offer interest rates between 7% and 12%. This depends on the loan’s risk, the borrower’s credit, and the property value.

The property can be foreclosed if the borrower defaults. Also, the investor can own the property or sell it to recover the investment. The foreclosure process with a deed of trust is typically faster than with a mortgage.

Trust deed investments usually have terms of 6 months to 5 years. The length of the investment depends on the loan agreement between the lender and the borrower.

Yes, you can lose money if the borrower defaults and the property value has dropped. However, since the investment is secured by real estate, there is collateral, which reduces the risk of losing your entire investment.

You transfer property into a trust by creating a living trust and signing a grant deed to move the title of the property into the trust’s name. This is commonly used for estate planning.

Yes, you can use self-directed IRAs or other retirement accounts to invest in trust deeds. It’s a good way to diversify your retirement portfolio while earning interest income.

A deed investment refers to lending money secured by real estate through a deed of trust. The investor earns interest on the loan, and the property serves as collateral.

Yes, trust deed investments can fail if the borrower defaults and the property’s value isn’t enough to cover the loan. Choosing a strong borrower and valuable property reduces this risk.

You choose the right investment by evaluating the borrower’s creditworthiness, the property’s value, and the loan-to-value (LTV) ratio. Lower LTV ratios are typically safer investments.

For many investors, trust deeds are worth it because they offer higher returns than traditional savings accounts or bonds. However, it’s important to assess your risk tolerance before committing.

Not easily. Most trust deed investments are for a fixed term, and you’ll need to wait until the loan matures to get your funds back. In some cases, you can sell your position to another investor, but this isn’t always a quick process.