Trust deed investing offers an attractive alternative to traditional real estate investment—especially in a complex and competitive market like California. By acting as the lender (rather than the landlord), trust deed investors can earn steady returns secured by real estate collateral. But not all trust deeds are created equal. To achieve high returns and protect your capital, you need to focus on the right properties in the right markets.

Here are 5 essential tips to help you identify high-ROI opportunities in California for trust deed investing.

1. Target Undervalued Sub-Markets with Stable Demand

Not all California real estate is overpriced. Some markets—especially inland and rural areas—offer high rental yields, motivated sellers, and strong borrower demand.

Pro Tip: Focus on areas with:

• Low median home prices relative to rents (e.g., parts of Butte, Kern, or San Bernardino Counties)

• Steady population growth or rebuilding efforts (like Paradise, CA)

• High barriers to new construction

These sub-markets can offer higher interest rates on loans and safer equity cushions for investors.

2. Look for Borrowers with Exit-Ready Projects

High ROI trust deed opportunities often involve borrowers with a clear and achievable exit plan, such as:

• A fix-and-flip strategy with equity built in at purchase

• A construction project with solid resale comps

• A refinance of a performing asset that’s temporarily unbankable

Avoid borrowers who are vague about their exit strategy or overleveraged—your ROI depends on their success.

3. Use Loan-to-Value (LTV) as a Risk and Return Filter

One of the best ways to protect your trust deed investment while maximizing return is to buy into low LTV positions. Aim for:

• First position loans with LTVs of 60%–70% or lower

• Second position loans only if the combined LTV is under 70% and there's a strong track record

Lower LTV = more equity protecting your capital, which gives you a better chance of recovering your investment if something goes wrong.

4. Work with Local Brokers Who Understand California Law

California has unique legal and regulatory rules, including:

• Non-judicial foreclosure procedures

• Licensing under the California DRE or DFPI

• Restrictions on consumer-purpose lending (i.e., Dodd-Frank compliance)

Working with a California-licensed private money broker gives you access to pre-vetted deals, clear paperwork, and built-in legal protections. Trust deed investing is often only as good as the underwriting—so work with someone who understands the risks and the market.

5. Analyze the Real Estate, Not Just the Paper

Even though you're investing in a note and deed of trust—not the property directly—you still need to underwrite the real estate:

• Run comps to verify the appraised value

• Confirm rentability or resale market

• Inspect the location (e.g., flood zones, fire zones, economic indicators)

High ROI trust deed investors treat each deal like a mini flip—they analyze the asset behind the loan and assess the downside, not just the promised interest rate.

Final Thoughts

California remains one of the most opportunity-rich states for trust deed investing—if you know where to look and how to underwrite. By focusing on undervalued areas, borrowers with clear exit strategies, and low-risk positions, you can earn high, passive returns while preserving capital.

At Trust Stone Capital, we specialize in originating well-secured business-purpose loans in high-yield California markets. Interested in seeing our current offerings? Contact us today to learn how to start earning 9%–11%+ returns backed by California real estate.