The Basics

For there to be a Trust Deed Investment, there needs to be at least two parties; a borrower and a lender. For one reason or another, a borrower needs a loan and is seeking someone to provide it to them. In return for making the loan, the lender will receive monthly interest payments and security for the loan in case those payments are not made. In the case of Trust Deed Investing, the security (or collateral) for the loan is real estate. We call it “Trust Deed Investing” because the lender’s interest in the borrower’s collateral is secured by a Trust Deed (or Deed of Trust). Another term commonly used in some states is “mortgage”. In short, the lender holds the deed to the property in trust until the loan has been repaid, and therefore the instrument that identifies the lender’s interest is known as the Deed of Trust (or DOT).