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It's easy to evaluate a single trust deed investment on its own merits: the property, the loan-to-value ratio, the borrower's plan. It's less common for investors to step back and ask how that one deal fits into their broader portfolio. That second question matters just as much as the first.
A single trust deed, no matter how well underwritten, is still one position tied to one property, one borrower, and one exit strategy. If that borrower's plan is delayed, or the local market softens, an investor with all their capital in that single deal feels the full effect of it. Spreading capital across several trust deeds, each with its own property, borrower, and timeline, reduces the impact of any single deal underperforming.
Diversification within trust deed investing can take a few forms: spreading capital across different property types, different loan-to-value ratios, different geographic pockets within Southern California, or simply different maturity dates so capital isn't all coming due, or all tied up, at the same time. None of this eliminates risk, but it changes concentration risk into something closer to portfolio-level risk, which is generally a more manageable position to be in.
At JMJ Funding, we work with investors to think through position sizing as part of the conversation, not just deal selection. A deal that's a good fit for a portfolio at ten percent of capital may be a poor fit at fifty percent, even though the underlying loan hasn't changed at all. That distinction is part of investing responsibly in this space, and it's a conversation worth having before capital is committed, not after.
