Let's start with the basics. When you invest in a trust deed, you loan money and secure the loan with a first lien on the real estate as collateral. Called a "deed of trust", it works like a mortgage; a private mortgage recorded by the county recorder that shows the investor as the beneficiary. Sometimes, the borrower's personal guarantee secures the loan in addition to the deed of trust. Trust deed loans involve three parties: the lender, the borrower, and a trustee selected by the lender. The trustee acts on the lender's behalf, holds the lien on the title to the property, and takes possession of the real estate if the borrower defaults. Trust deed loans are particularly popular in California because it is a non-judicial foreclosure state and the process can take just three months. Oh, the best part is that it costs nothing to invest in trust deeds.
