The Down-Low You Must Know about Trust Deed Investing

You’ve heard of deeds and trusts, but have you ever heard of a trust deed? We’re not pulling your leg. This is a legitimate financial tool that can help you with your future. Here’s the down-low on what you must know about trust deed investing.

What a Trust Deed Is

In any of these real estate transactions—the purchase of a home, say—a lender gives the borrower money and a promissory note in exchange for a trust deed. The promissory letter states that the loan must be repaid with interest, and the trust deed transfers the property’s legal title to the lender until the loan is repaid.

This continues throughout the loan’s repayment period. If the borrower defaults, the lender takes complete control of the property.

Why a Trust Deed Is Better Than a Mortgage

In bank and private loans, trust deeds and mortgages are used to create liens on real estate, and both are recorded as debts in the area where the property is located. It is crucial to remember that a mortgage involves only two parties: a borrower and a lender.

Conversely, a trust deed involves three parties: a borrower, a lender, and the trustee. The trustee holds the lien title for the lender’s benefit. If a borrower defaults, the trustee will initiate and complete the foreclosure process at the lender’s request. 

Although trust deeds are sometimes associated with generic mortgages, these are not mortgages. A mortgage is not technically a loan for buying a property; it’s an agreement that pledges the property as collateral for the loan.

How Trust Deed Investing Works

Investors looking for juicy yields sometimes turn to the real estate sector, especially trusts. When an investor lends money to a developer working on a real estate project, the investor’s name goes on the trust deed as the lender, which forms the basis of trust deed investing. The investor collects interest on his loan; his principal is returned to him in full when the project is finished. A trust deed broker usually facilitates the deal.

What Institutions Consider Trust Deed Investing?

Banks rarely lend money to developers or parties who don’t have a stellar credit history or several outstanding loans. These developers may have little choice but to turn to high-interest trust deed lenders.

These lenders often charge high interest because they take a different risk. They are investing in real estate developments rather than stocks or bonds, and they do not know if the development will make money since they do not see the development details. This is a different kind of investment from what they’re used to, which is riskier. These lenders can still expect to make some money because real estate investments often appreciate over time.

In general, trust deed investing is not very liquid, so investors cannot get their money out when they want to. Additionally, trust deed investments only pay interest; there is no chance of getting capital appreciation.

Lenders can find themselves at the mercy of unscrupulous developers, who might exploit any legal discrepancies in the trust deed contract and cause expensive legal entanglements that harm the investor’s investment.


Trust deed investing has its unique appeal. If you have money to spare, are looking to diversify your portfolio, and want a chance at a high return, this is one way to go. Be aware of the risks involved to protect your assets best.

That’s why you should talk to experts on trust deed investing, like those from Century City Mortgage! We’re a lender that offers personalized services that suit the unique needs of clients such as yourself. Apply now!