For investors seeking exposure to real estate markets without directly owning properties, mortgage-based investments offer compelling opportunities. Two popular options are mortgage real estate investment trusts (mREITs) and mortgage funds which provide distinct approaches to generating returns from real estate debt.
Mortgage real estate investment trusts (mREITs) allow investors to earn money from real estate without owning physical property by investing in mortgages and mortgage-backed securities. A key advantage of mREITs is their high dividend yields, as they must distribute at least 90% of their profits to investors. This often makes them attractive for passive income.
Mortgage funds combine investors’ capital and are spread across multiple loans, offering diversification and reducing the risk tied to any single borrower. Instead of being linked to one loan, investors own a share of the overall fund, benefiting from a more stable and balanced return as gains and losses are spread across a portfolio of loans. Unlike mREITs, these funds offer different structural advantages and limitations.
The fundamental structure of mREITs and mortgage funds creates distinct investment experiences for investors.
Uncorrelated Returns – Mortgage funds and mortgage REITs can provide steady, passive income, even when the economy is uncertain. Unlike stocks and bonds, which move with market trends, these investments generate returns from real estate-backed loans.
Multiple Layers of Security – Private lenders like Red Tower Capital use conservative loan-to-value (LTV) ratios to protect investors. This means the value of the real estate securing the loan is higher than the loan amount, creating a safety net if the market shifts. By keeping lending standards high, these funds minimize risk while preserving capital.
Exposure to High-Quality Assets – Investing in mortgage funds or mortgage REITs gives you access to carefully selected real estate-backed loans. Every loan goes through a strict underwriting and approval process to ensure it meets quality and risk standards. This approach helps investors confidently invest in well-secured assets, knowing they are backed by thorough due diligence and expert analysis.
Steady Income for Retirees – For retirees looking for consistent income, mortgage REITs and mortgage funds can be a great fit. These investments generate interest-based returns, which often outperform traditional savings accounts or bonds and provides retirees with a dependable cash flow without the volatility of the stock market.
Portfolio Diversification –Mortgage funds and mortgage REITs provide diversification by offering exposure to a mix of property types, including residential and commercial, as well as different geographic markets. This diversification allows investors to spread their risk across different sectors and regions, reducing the impact of localized economic downturns or sector-specific challenges.
Both mortgage funds and mortgage REITs offer unique opportunities for investors looking to earn passive income, diversify your portfolio, and gain exposure to the real estate market. At Red Tower Capital, we specialize in creating secure, high-yield investment opportunities for investors. Our team of experienced professionals manages carefully curated portfolios designed to deliver consistent returns while maintaining strong risk management practices.
Take the next step in diversifying your investment portfolio with alternative investments. Contact Red Tower Capital today to learn more about our current investment opportunities and how we can help you achieve your financial goals.