A Primer for Ryker Capital Clients

Suggested Reading: The CA DRE Guide to Trust Deed Investing

Trust deed investments offer an alternative way to earn high-yield income by becoming the lender in a real estate-secured transaction. Rather than buying property directly, investors lend money to a borrower (often a developer or property owner) and receive a promissory note secured by a deed of trust recorded against real estate. In return, the investor earns interest income, typically paid monthly, for the life of the loan.

These investments can be a compelling option for those seeking passive income backed by real property—but like any investment, they involve risk. Understanding how trust deed investments work, and what to watch for, is essential to making smart, informed decisions.

How It Works

In a typical trust deed investment, there are three parties involved:

Trustor (Borrower): The person or entity borrowing money.

Beneficiary (Lender/Investor): You, the investor providing the capital - you are the Lender.

Trustee: A neutral third party who holds the legal title to the property in trust (hence the term Deed of Trust) until the loan is repaid or, in case of default, initiates the foreclosure process.

The promissory note outlines the repayment terms, while the deed of trust secures the investor’s interest in the property.

Why Investors Choose Trust Deeds

Investors are drawn to trust deed investments for several reasons:

Attractive Returns: Yields often exceed those of traditional fixed-income products like bonds or CDs.

Monthly Income: Loans typically pay interest monthly, providing steady cash flow.

Secured by Real Estate: The investment is collateralized by a tangible asset, adding a layer of protection compared to unsecured debt.

At Ryker Capital, these benefits are maximized through thoughtful underwriting, conservative loan-to-value ratios, and a focus on in-demand California real estate markets we know intimately.

Understanding the Risks

No investment is without risk. Trust deed investments carry the possibility of borrower default, market volatility, and potential loss of principal. Some of the key risks include:

Borrower Default: If the borrower fails to repay the loan, the investor may need to initiate foreclosure.

Property Value Decline: If the real estate backing the loan drops in value, recovering the full investment may be difficult.

Illiquidity: These are not liquid investments; your capital is typically tied up for the term of the loan.

At Ryker Capital, we help mitigate these risks through deep due diligence, robust borrower vetting, and a commitment to structuring deals that prioritize investor security.

Due Diligence and What to Look For

A strong trust deed investment starts with strong fundamentals. Here’s what every investor should evaluate:

Loan-to-Value (LTV) Ratio: Lower LTV means more equity cushion in case of default. We aim to keep LTVs conservative.

Borrower Strength: Review financials, track record, credit history, and project feasibility.

Property Type and Location: Market trends, zoning, and future development potential all affect value.

Loan Terms: Know the interest rate, repayment schedule, maturity date, and any exit strategies.

Additionally, verify that the Mortgage Loan Broker (MLB) managing the investment is properly licensed with the California Department of Real Estate, and that the offering complies with state regulations.

Foreclosure: The Last Resort

If a borrower defaults, the trustee can initiate a non-judicial foreclosure—a faster and less expensive process than judicial foreclosure. However, the recovery of your investment depends on the value of the property and any senior liens in place. That’s why understanding the capital stack (who else has a claim on the property) is crucial.

Single-Lender vs. Fractionalized Loans

Trust deed investments can be structured for a single investor or fractionalized among multiple investors. If you participate in a multi-lender deal (sometimes called a "fractionalized" trust deed), it must comply with California’s "multi-lender law," which places additional rules and disclosure requirements on the transaction. Ryker Capital ensures all fractional deals meet these standards, protecting investors from regulatory oversights.

Ryker Capital’s Role

We don’t just connect capital to opportunity—we actively manage the sourcing, underwriting, structuring, and servicing of every trust deed investment we offer. Our team performs detailed due diligence and ongoing borrower monitoring. When you invest with Ryker, you’re leveraging not only our market expertise but also our disciplined approach to risk and return.

Conclusion

Trust deed investing can be a smart strategy for those seeking income, security, and portfolio diversification—especially when managed by a trusted partner like Ryker Capital. With the right information, a careful review process, and experienced guidance, investors can take advantage of these opportunities with confidence.

Interested in learning more about our current trust deed offerings or how to become a lender? Contact our team at info@rykercapital.com or call 805.858.9700.

Frequently Asked Questions

1. What is a trust deed investment?

A trust deed investment involves lending money to a real estate borrower and securing that loan with a deed of trust on the property. As the investor, you become the lender and earn regular interest payments, typically monthly, while the real estate acts as collateral for the loan.

2. How is my investment secured?

Your investment is secured by a first or second position deed of trust on real property, typically in California. In the event of borrower default, the property can be sold through foreclosure to recover your investment.

3. What kind of returns can I expect?

Returns vary by loan and market conditions, but trust deed investments often offer yields upwards of 12% or more annually, paid monthly. At Ryker Capital, we focus on structuring deals with strong risk-adjusted returns. Keep in mind that investors willing to accept lower returns often find the lowest risk opportunity.

4. How often will I receive income?

Most of our trust deed investments pay monthly interest income, via check in the mail or directly deposited to your account from the servicer. You’ll receive predictable, passive cash flow backed by real estate.

5. What are the risks involved?

As with any investment, there is risk of loss. Borrowers can default, property values can decline, and foreclosures may take time. Ryker Capital mitigates these risks through strict underwriting, conservative loan-to-value ratios, and due diligence on every borrower and asset.

6. Who handles loan servicing and collections?

Ryker Capital uses the best 3rd-party servicing firms and manages all aspects of loan servicing set up. We handle borrower communications, payment collection, default communications and—if necessary—foreclosure proceedings, so you can invest passively.

7. What’s the minimum investment?

Our minimum investment typically starts at $50,000, although it may vary depending on the offering. We work with both individual accredited investors and institutional partners.

8. Do I need to be an accredited investor?

Yes, most of our offerings are limited to accredited investorsas defined by the SEC. If you’re unsure whether you qualify, we’re happy to walk you through the criteria.

9. Can I invest through a retirement account (IRA/401k)?

Yes, many of our investors use self-directed IRAs or other retirement accounts to invest in trust deeds. We can coordinate with your custodian to facilitate the process.

10. What types of properties secure these loans?

Ryker Capital primarily lends on California real estate, including residential 1-4 units, multifamily, and commercial properties. We focus on areas with strong market fundamentals and borrowers with viable exit strategies.

11. What happens if the borrower stops paying?

If a borrower defaults, Ryker Capital will communicate with the Borrowers and the Lenders (you) and if necessary Ryker initiates the foreclosure process in accordance with California law. The property is then sold at auction or acquired, and proceeds are used to repay investors. We manage this process for you and keep you informed every step of the way.

12. Can I visit the property securing my investment?

Yes. Transparency is important to us. We can provide property details, photos, and in many cases, investors can schedule a visit or third-party inspection. We have 3rd-party inspectors who can also visit the property on short notice anywhere in the state.

13. How long is my money tied up?

Most loans have terms between 12 and 36 months. Your capital is typically returned at maturity unless the loan pays off early or the borrower defaults and foreclosure is required.

14. Is there a secondary market or early exit option?

Trust deed investments are not liquid, and there is no formal secondary market. However, in some cases, we may help facilitate a transfer to another investor. Investors should be prepared to hold until maturity.

15. How do I get started?

Contact us at info@rykercapital.com or call 805.858.9700. We’ll walk you through our current offerings, investor onboarding, and help determine if trust deed investing aligns with your financial goals.