Although trust deed investments are less common than more traditional investments, the basics of a trust deed investment are simple. But first, what is a trust deed investment?

Simply put, a Trust Deed Investment is a short-term loan secured by real estate.

At PenCap, we primarily seek out and service loans on which our investor has a first position. This provides greater security for our investors. When considering trust deed investments, there are five factors to review:

1.     Value of the property being provided as collateral

2.     Amount of the loan requested

3.     Loan-to-value ratio

4.     Net Equity

5.     Borrower’s credit worthiness

Although trust deed basics appear simple, our team offers unparalleled service and can guide you in choosing investments that best suit your risk tolerance, complement your existing portfolio, and matches your investment timelines.

A Trust Deed Investment is a short-term loan (maturity under five years, with the majority maturing in two years or less) made to a professional real estate investor. The loan is secured by the property in question.

Often, these professional real estate investors are buying properties at foreclosure sales, with the intention of renovating the properties and reselling them for a profit. During the purchase and renovation process, often these real estate investors will turn to private lenders rather than banks to finance the project. The loan made by the private investor is evidenced by a promissory note and secured by a Deed of Trust on the property in question.

PenCap provides the opportunity for investors to participate as the sole lender or as part of a fractionalized investment. We only service loans where our investor(s) have a first position secured lien on either income producing commercial property or non-owner occupied real estate assets. This allows us to offer conservative investments with a loan-to-value of up to 60% while still allowing our investors to reasonably expect 11% to 13% annual returns[1].

Trust Deed investments generally offer relatively high returns and are well secured. As such, they are a great option for those looking to diversify their portfolio with fixed-rate investments. Real estate, while subject to some of the same fluctuations as the traditional investment market, is nevertheless a tangible asset. An investor can visually inspect the property and have an independent appraisal done. He or she can get a “feel” for the project, and many of our investors appreciate having a quantifiable connection to their investment.


[1] Rates may vary. Past results are not a guarantee of future performance.