A trust deed is a document used in 20 US states instead of a mortgage, specifying that an independent third party will hold property in trust until a loan from the lender to the borrower is fully repaid. Trust deed investments have a reputation for providing high yields with lesser risk than traditional investments, but investors are warned to avoid conflicts of interest, undervalued loans, and to ensure diversification. For safety, investors should use a neutral third party like a title company for closings and seek to be in first position when funding trust deed investments.

1. The Basics of Trust Deed
Investment
By: Joshua Mischke

2. The Basics of Trust Deed Investment
A real estate investment leader in Denver, Colorado, Joshua (Josh) Mischke has owned and
operated his own firm for more than a decade. One of Joshua Mischke’s areas of expertise is
investing in trust deeds.

3. The Basics of Trust Deed Investment
Although trust deeds are less common than they used to be, 20 US states still require these
agreements in lieu of a mortgage for real estate purchases that involve outside financing. Briefly
defined, the trust deed is a document specifying that an independent and neutral third party will
hold a specific property in trust until the lending party receives full loan payment from the borrower.

4. The Basics of Trust Deed Investment
Over the years, trust deed investments have garnered a reputation for providing high-yield streams
of income with overall risks lesser than most traditional investments. The American Association of
Private Lenders (AAPL), however, warns against getting involved with trust deed investments that
may suffer from conflicts of interest among lenders, borrowers, and the brokers who serve them.
The AAPL also cautions investors to avoid trust deeds with undervalued loan-to-own underwriting
scenarios, and to ensure their trust deed ventures are well-diversified.

5. The Basics of Trust Deed Investment
As a precaution, investors should close all trust deed or mortgage investments using a neutral 3rd
party such as a licensed title company. For added safety, an investor should strive to be in first
position when funding a trust deed or mortgage investment.