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What is a Real Estate Lending Fund?

A real estate lending fund pools investor dollars to lend to developers. In this manner, a fund can own dozens to hundreds of performing loans, mitigating risk of single point failure. Instead of one investment into one loan, a fund investor can put one investment into a fund containing multiple loans.

Why You Should invest in a Real Estate Lending Fund

This type of investment is the embodiment of passive income. There is the attractive element of a predictable monthly stream of income and this is especially alluring for retirees and other fixed income investors. The 8%-12% interest rates gives you a higher yield than savings, bonds, and dividend paying stocks. 

There is security in the capital stack. These loans are backed by real estate, so in the capital stack, the first trust deed is in the safest position and is the first in line to be paid back. On the other hand, equity is the most at risk, but, the upside is higher too. When it comes to debt investing, there is no upside; The returns are capped by the interest rate on the loan. Investors are comforted knowing their investment is secured by a hard asset.

Diversification is another great thing that comes along with investing in a real estate lending fund. By investing in a fund you spread out risk across many loans thereby mitigating single loan default risk. Additionally, assets in a fund are diversified by geography, developer, maturity date, and asset type. All of this goes together to optimize predictability if income stream. 

Who Should Invest in a Real Estate Lending Fund?

  • Accredited investors who seek stable monthly income with capital preservation as their primary objective.
  • Investors who seek passive income through real estate.
  • Investors seeking higher yield than cash, CDs, and bonds.
  • Retirees would find this investment attractive as well.

If you have any questions regarding real estate lending funds or any other real estate lending products, you can contact one of the mortgage specialists here at Real Estate Funding Solutions by sending a message or scheduling a call on www.realestatefundingsolutions.com.

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