First Trust Deeds: Investing 101

For some borrowers, first trust deeds are the best option to leverage the equity in your home. In response to this demand, savvy investors are likewise turning to first trust deeds as an option offering competitive rates of return. But what exactly is a first trust deed? What types of protections exists for investors? And how can interested investors participate? That’s the topic of this post, First Trust Deed Investing 101. Keep reading to learn more!

The difference between first trust deeds and mortgages

A loan made via a First Trust Deed is very similar to a mortgage. The basic difference is that there are three parties in a trust deed: the borrower, the lender and the trustee. The trustee holds the deed while the loan is being paid. Also, there is a signed promissory “note” that defines all the terms of the loan. If the borrower defaults on the loan, the trustee starts the foreclosure process. In a mortgage, the lender has to go to court to get the foreclosure going.

Trust deed investing is attractive today because it pays a comparably high rate of return and the investments are secured by real estate. Further, once the loan has been made, the rate of return associated with the First Trust Deed doesn’t change. An investor in a First Trust Deed that has a term of two years receives a check each month for the amount of interest the borrower is being charged.

Real estate as collateral

In its simplest form, a first trust deed is a loan against collateral. At Evoque Lending, that collateral is specifically California real estate. As in all cases, this collateral serves to protect the lender’s investment. This leads us to one of the most important considerations in trust deed investing: the true value of the collateral.

It’s very important that trust deed investors consider the size of the loan they are making in relationship to the real estate that is the collateral. This is one reason why trust deed investors use a service like Evoque Lending, where we have more than 15 years of experience evaluating California properties and potential borrowers.

First trust deed loan terms

Trust deed investors maintain control over their investments. At Evoque Lending, we have no minimum investment amount and loans are available for terms that are as short as several months or as long as several years.

So to answer the questions asked in the headline of this article we would sum this information up and say that trust deed investing is investing your money in notes that are secured by real estate. These notes pay a very competitive rate of return and terms vary from months to years, depending on your needs.

Investing in First Trust Deeds with Evoque Lending

At Evoque Lending, we specialize in First Trust Deeds for properties located in California real estate, including Los Angeles and San Francisco. To learn more about Evoque, click here to get started!