Have you ever wondered how investors hold properties all over the country and are able to accomplish the financing? If you’ve ever tried to get multiple mortgages, you quickly learn that traditional banks put a cap on the number of properties they’ll let you have leveraged at one time. They often cannot handle larger loans either. Somehow the big dogs manage to get around that though. One of the ways they do it is going to a real estate mortgage fund for getting the capital they need to expand their portfolio.
That provides an avenue for investment for those that want to make some money in the real estate industry but do not want to deal with a portfolio of properties. By investing in a real estate mortgage fund, you are in essence funding others to do so while providing yourself with an income stream, often secured against a first position mortgage. There are a number of reasons why this can make sense for your investment needs.
Experts in Charge
With a real estate mortgage fund, all the underwriting is taken care of for you. You do not have to wear that hat like you would if you were looking to finance a project on your own. They make sure the borrower is credit worthy and the property meets set guidelines. They take care of making sure the property is appraised, the title is clear and the calculations are accurate. With a real estate mortgage fund, the management is done by mortgage bankers or brokers that have been certified by the State.
While there are mortgage investment vehicles that allow you to join with other investors to provide the financing for a single project, this does not give you the protection of diversity that is desired by many investors. With a real estate mortgage fund, you are investing in the fund as a whole so that a late payment or even a default may only affect you minimally. It may not even affect you at all due to the reserve amounts set up in the fund and the fact that the manager covers shortfalls.
In addition to the security provided by the diversification and manager accepted risk, you also enjoy further security because the fund itself usually secures all loans through a first position mortgage. They have the expertise to know when it is time to foreclose as well as locate another investor to take over the property. Imagine the headache you would have if you had to do handle a foreclosure and sale and you can appreciate the benefit of having a real estate mortgage fund team handle it should it happen. Again, with experienced underwriters involved, the risk of default is limited.
Having the security of an investment backed by hard assets is more desirable to some investors over more risky investments such as futures, commodities, stocks and bonds.
If you were to hold a mortgage on a property or even be part of a group that did so, it can be difficult to liquidate your position if need be. You would likely have to take a discount to sell your position and it could take time to locate another interested investor. Depending on the terms you may even have to wait until the borrower has paid off the loan. By investing in a real estate mortgage fund, your position is far more liquid.
This is due to two reasons. First of all, most funds are set up with enough reserves to handle a certain percentage of payouts by investors that need or want to get out of the investment. Secondly, a well-managed and profitable fund will have a number of investors wanting into the fund, waiting for someone to exit so that they can.
Outside of a real estate mortgage fund, you will experience periods where your money is not invested and thus not earning anything at all. This happens every time a lender pays off their loan and you are stuck between investments waiting on locating one and dealing with the paperwork. With a real estate mortgage fund, managers keep this from happening as the number of investments in the fund is constantly revolving to provide a steady, uninterrupted revenue flow for you and other investors in the fund.
No Lack of Opportunities
There is practically no limit to the number of investors that turn to a real estate mortgage fund for financing their projects. The availability of funds, ability to fund multiple properties, desirable term options and higher loan amount abilities all make these a wise option for them. That means there are no lack of opportunities for those that want to enjoy an income flow from the efforts of these investors.
One of the most enjoyed aspects of investing in a real estate mortgage fund is knowing a predictable time frame on your investment. This is advantageous if you need a specific income flow or have a plan in place for reinvestment. This reliability and predictability makes retirement planning a breeze compared to other more volatile investment options. Having your money being invested into properties secured by first position mortgages gives you peace of mind that your plans won’t be derailed by an unexpected failure.
Meets Various Investment Goals
With the wide variety of performance goals across multiple real estate mortgage fund options, it is easy to locate one that matches your goals and risk tolerance. These funds will provide you with information in making your decision, such as their underwriting criteria, historical performance figures and how much the managers have invested.
With the many benefits involved with investing in a real estate mortgage fund, this type of investment can make a lot of sense and should be a part of your investment portfolio. When you want to achieve uninterrupted cash flow, secured by first and second position mortgages, these funds are worth taking a look at.
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