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Investing in real estate has long been considered a reliable and lucrative way to grow one’s wealth. Among the myriad of options available, trust deeds and mortgage funds stand out as popular choices for investors seeking to capitalize on the potential of the real estate market. It’s not uncommon for individuals with experience in trust deeds to also invest in mortgage funds. In this article, we will explore the reasons behind this trend, including their experience in mortgage investments, the appeal of regular cashflow, and the security of real estate. Additionally, we will highlight how investing in mortgage funds offers a more passive approach compared to individual trust deeds.
One of the primary reasons why individuals who have previously invested in trust deeds turn to mortgage funds is their accumulated experience in the world of real estate investments. Trust deeds typically involve direct investments in specific real estate projects, often requiring a deep understanding of the local market, borrowers, and property valuations. Investors who have honed their skills in this area are well-equipped to navigate the complexities of mortgage funds.
With their prior experience, they can assess the risks associated with mortgage fund investments more effectively. They are better prepared to evaluate the underlying mortgage assets and the fund’s management team, making informed decisions that align with their financial goals.
One of the most attractive features of mortgage funds is the consistent monthly cashflow they offer. Investors receive regular interest payments generated from the pool of mortgages held by the fund. This monthly income can serve as a stable source of passive income, which is especially appealing to those investors seeking to supplement their regular earnings or achieve financial independence.
Individual trust deeds, on the other hand, might not provide this level of consistent cashflow. Payments can be sporadic, depending on the terms of the specific trust deed, the performance of the underlying property, and the reliability of the borrower. Mortgage funds aggregate numerous mortgages, distributing income more consistently, which can be particularly enticing to experienced investors who appreciate a reliable income stream.
Investors often value the tangible nature of real estate investments, and this is especially true for those who have experience with trust deeds. Real estate assets have historically demonstrated resilience, even during economic downturns. Trust deeds typically involve secured loans backed by the underlying property, providing a level of security that many investors find comforting.
By investing in mortgage funds, individuals can diversify their real estate portfolios without the need to oversee individual property management. The security of real estate is preserved, as the fund’s underlying assets consist of a broad range of mortgages secured by various properties. This diversification helps mitigate risk and can provide peace of mind to seasoned investors.
Perhaps one of the most significant reasons experienced trust deed investors venture into mortgage funds is the passive nature of the latter. Trust deeds often require active management, including due diligence, negotiations with borrowers, and monitoring property performance. While these activities can be rewarding, they can also be time-consuming and demanding.
In contrast, investing in mortgage funds is a more hands-off approach. Fund managers handle the day-to-day operations, including selecting and managing the mortgage assets. This allows investors to benefit from real estate without the administrative burden, making it an attractive option for those who seek a more passive investment experience.
The decision to invest in mortgage funds after gaining experience with trust deeds is a logical progression for many smart real estate investors. With their knowledge and expertise, they are well-prepared to evaluate the risks and rewards of mortgage fund investments. The allure of regular cashflow, the security of real estate assets, and the passive nature of these investments make mortgage funds an attractive addition to their portfolios. As the real estate market continues to evolve, these investors are poised to reap the benefits of this synergistic combination of investment strategies.
Brock VandenBerg is the President of TaliMar Financial and Fund Manager of TaliMar Income Fund I. Mr. VandenBerg started investing in individual trust deeds in 2008, providing capital to real estate investors taking advantage on the housing crisis. He soon brought in outside investors to share in this lucrative opportunity to earn above market returns. After funding over $375 million in short-term loans and attracting over 500 investors, Mr. VandenBerg launched TaliMar Income Fund I in 2021 to offer investors a much more efficient way to invest in individual trust deeds. Currently, TaliMar Income Fund I invests on behalf of over 220 individual investors with over $60 million in assets under management.
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