Trust Deed Investing in California: A Guide for Accredited Investors

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For California investors who already know real estate but want a more passive way to put their capital to work, trust deed investing has quietly become one of the most attractive options on the table. It is income-producing, secured by real property, and structured under decades of state regulation designed specifically to protect the lender.

This is a working guide to how trust deed investing actually functions in California, what returns to realistically expect, what risks come with the territory, and how to evaluate the private lender that arranges the deal.

What is a trust deed investment, in plain English?

When you invest in a trust deed, you are the bank.

You are the bank.

A private real estate borrower needs a short-term loan. You fund it. Your name (or your LLC’s name, or your self-directed IRA’s name) is recorded on the deed of trust, you appear on the title policy as the insured, and you collect a monthly interest check tied directly to your investment. The loan is secured by the property. If the borrower stops paying, you have the right to foreclose and recover your principal from the collateral.

That structure is fundamentally different from a real estate investment trust, a mortgage fund, or a private debt fund where you buy shares in a pooled vehicle and rely on a manager’s decisions across hundreds of underlying assets. With a direct trust deed investment, you are looking at one specific property, one specific borrower, one specific position. You see the appraisal. You see the underwriting. You decide whether the deal fits your portfolio before any capital moves.

At Mayacamas Lending, we built a concierge approach around this. We source the deals, underwrite them, service the loan, and collect and disburse the monthly payments. The investor’s job is to decide whether each opportunity is the right fit.

Who is investing in trust deeds today?

The typical Mayacamas trust deed investor is someone who already knows real estate. They have built a portfolio, sometimes over decades, and are now looking for a more passive way to keep their capital working in the asset class they understand. Many are retired or approaching retirement, and trust deed income supplements other sources without requiring active property management.

Some are motivated by something else. They want to put capital behind the next generation of real estate operators. They remember being on the borrower side at 35, needing someone to take a chance on a deal the bank would not touch. A trust deed investment lets them be that capital source, with the structure and protections of a properly underwritten secured loan rather than a handshake.

The capital itself often comes from the sale of a business, a long-held property, a 1031 chain that has run its course, or a self-directed IRA looking for tax-advantaged yield.

How is a trust deed actually structured?

There is no single answer. The structure depends on the investor’s experience, the size of the deal, and the position the investor wants to take.

A less experienced trust deed investor typically stays in first position. The first lien holder gets paid first, controls the foreclosure process if it is ever needed, and carries the cleanest risk profile in the capital stack.

A more experienced investor may consider second-position trust deeds. The return is higher, often meaningfully so, but the risk profile is different. A second-position investor sits behind a first lien and, in a workout scenario, needs both the experience and the liquidity to bring the first lien current if necessary in order to control the outcome.

Investments can be funded as whole notes (one investor funds the entire loan) or as fractional positions where multiple investors fund the same loan, structured to comply with California’s multi-lender rules. They can be held in an individual’s own name, in an LLC, in a family trust, or in a self-directed IRA. Most experienced investors hold them in an entity for liability separation and estate planning. Trust deed interest is generally treated as ordinary income for tax purposes, which is one reason self-directed IRAs are a common funding source. Investors should consult their CPA on the tax implications specific to their situation.

What returns can a California trust deed investor expect?

Typical Mayacamas trust deed returns run 10 percent interest-only per year, paid monthly directly to the investor. That figure is what the investor receives, not the borrower’s gross rate.

Returns vary by deal. Second-position investments typically pay higher than firsts, deals with lower loan-to-value may price slightly tighter, and unique property types can shift the number in either direction. The Mayacamas Green List, our private monthly briefing, sends investors a deal summary on each available opportunity, laying out the risk and reward so the investor can decide whether that specific deal is the right fit for their portfolio.

Compared to public market yields on bonds and dividend equities, the gap is significant. Compared to active real estate ownership, the trade is passivity for upside. A trust deed investor will not benefit from appreciation in the underlying property. They will collect their stated yield, on time, for the life of the loan, with the property standing as collateral.

How is a Mayacamas trust deed underwritten to protect the investor?

The underwriting starts with the collateral.

Mayacamas underwrites to independent third-party property valuations. Values are not generated internally. They come from licensed outside appraisers engaged through standard channels.

Our framework targets a conservative loan-to-value ceiling, generally in the range of 65 percent on first position trust deeds, with combined loan-to-value evaluated on subordinate position deals. That posture is conservative on purpose. It means even in a meaningful market correction, the collateral value continues to exceed the loan balance, which is what protects principal in a worst-case workout.

We screen dozens of deal submissions every month. Only a small percentage clear underwriting. Most of the borrowers we approve own the underlying real estate outright or near it, have solid credit, and are working through a temporary squeeze, often as entrepreneurs navigating cash flow timing rather than a deteriorating asset.

Saying no to the wrong deals is what makes the yes deals work.

A real Mayacamas trust deed

Case Study

A borrower in Sonoma Plaza owned a commercial property outright. They had previously sold their operating business but kept the real estate as a long-term income asset. A tenant dispute escalated to litigation, and they needed attorney funds quickly to protect their position.

We funded a first-position loan at under 30 percent loan-to-value on the property. A Mayacamas investor took the full position. The investor receives 10 percent annual interest, paid monthly, secured by a property where the collateral cushion is roughly three-to-one against the loan balance. The borrower has a clear path to resolution. The investor has a working monthly income stream with strong downside protection.

Low LTV, strong collateral, solid borrower, temporary catalyst. That is the box we underwrite to.

What are the real risks of trust deed investing?

Every honest pitch lays out the downside.

The primary risk is non-payment. If a borrower stops making the monthly payment, the investor’s cash flow stops with it. The interest continues to accrue against the property and is recoverable in a foreclosure or payoff, but during that window, the income stream pauses. Investors who depend on the monthly check for living expenses need to model that scenario into their planning.

A second risk is market value. If California real estate values move sharply downward and a foreclosure becomes necessary at the same time, the collateral cushion compresses. This is why we hold to the 65 percent LTV ceiling. A 35 percent equity cushion absorbs a lot of downside before principal is at risk.

A third risk is specific to second-position investors. If the first lien falls behind, the second-position investor may need to bring the first current to preserve their right to control the foreclosure process. That requires both experience and reserve capital. It is one of the reasons we steer less experienced investors to first-position deals.

Trust deeds are also less liquid than public market investments. You can sometimes sell your position to another investor before maturity, but it is not instantaneous. Plan to hold to the loan’s term.

How does California regulation protect trust deed investors?

California has built one of the most developed regulatory frameworks for trust deed investing in the country. The structure is designed to protect the investor at every step.

Mayacamas Investor Safeguards

How your capital is protected.

Licensed broker oversight. Mayacamas operates under California Department of Real Estate license number 02306252. Our Broker of Record carries the duties that come with that role under California real estate law.

Investor suitability framework. California regulation requires brokers arranging trust deed investments to confirm a given opportunity is suitable for the investor’s financial profile, experience, and goals. Mayacamas works inside that framework.

Concentration guidelines. California’s regulatory framework provides guidance that no single trust deed should represent more than 10 percent of an investor’s net worth (excluding primary residence, furnishings, and vehicles) or 10 percent of adjusted gross income. We underwrite investor placements with that guidance in mind.

Independent property valuations. Property values are based on independent third-party appraisals rather than internal estimates.

Conservative loan-to-value posture. Our underwriting framework targets a conservative loan-to-value range so collateral cushions are real and durable.

Recorded position and title insurance. Trust deed investments are recorded as the investor’s secured interest, with title insurance reflecting that position.

Regulated servicing. Loan servicing for Mayacamas-arranged trust deeds operates within the trust accounting and reporting requirements that apply to California licensed real estate brokers.

How to evaluate a private lender before you wire capital

The most important diligence a trust deed investor performs is not on the loan. It is on the lender arranging it.

Three checks matter. First, are the property valuations being done right? An independent third-party appraisal from a recognized licensed appraiser is the floor. If the lender provides their own internal valuation in place of an outside appraisal, that is a flag.

Second, is there real due diligence on the borrower? Credit, experience, exit plan, character. A broker who funds anything that closes is not protecting the investor. They are protecting their commission.

Third, is the deal actually underwritten? A real underwriting file shows the work: appraisal, title, borrower file, exit analysis, conservative assumptions on costs and timing. If you cannot see the underwriting, do not fund the deal.

Ask any lender for a sample deal package from a closed transaction, with personal information redacted. The quality of that package tells you almost everything.

How to get started with Mayacamas

Trust deed investing is not for every investor, and we do not believe in being the right answer for every portfolio. The first step is a conversation. We walk prospective investors through how the structure works, what returns to realistically expect, what risks come with it, and what the California regulatory framework requires on both sides. The goal is to make sure trust deeds belong in the portfolio before any deal moves.

For investors who decide it is a fit, the Green List is the next step. It is our private monthly briefing for trust deed investors, with closed-deal recaps, deals that did not close and why, lessons from the underwriting pipeline, and a preview of the next 60 days of expected opportunities.

If you want to understand how trust deed investing could fit alongside the rest of your portfolio, we are available.

This article is for general informational purposes only. It is not an offer to sell or a solicitation of an offer to buy any security, and it does not constitute investment, tax, or legal advice. Trust deed investments arranged by Mayacamas Lending Inc. are subject to applicable California real estate and lending regulations, including investor suitability requirements administered through the California Department of Real Estate. Returns are not guaranteed. Principal is at risk. Past performance is not indicative of future results. Investors should consult their own financial advisor, CPA, and attorney before making any investment decision.

About Mayacamas Lending

Mayacamas Lending Inc. is a California Department of Real Estate licensed mortgage broker (DRE #02306252) based in Santa Rosa, Sonoma County. We arrange first and second position trust deed investments for accredited and suitable California investors, secured by business-purpose real estate loans across commercial, multi-family, single-family investment, and value-add properties throughout California. Our team came up through community banking, and we underwrite to a real exit.

This article is provided for educational purposes only and does not constitute financial, investment, tax, or legal advice. Readers should consult a licensed financial advisor, CPA, and attorney before making any financial or investment decision.