Diversify Your Portfolio

Red Tower Capital looks at several factors when evaluating a potential loan investment. Initially, property type and location are the first items we examine. We usually favor mainstream real property in metropolitan areas where there is a resale market. This includes properties such as: homes, apartments, commercial, retail and industrial buildings. In the targeted metro locations, these types have greater mass appeal, an active market and more widely available financing. The next significant item is the ratio of the loan amount to the value of the real estate being pledged as security. This is referred to as the loan-to-value ratio, or LTV. For example, a loan of $300,000 secured to a property valued at $500,000 would have an LTV of 60%. All else being equal, the higher the LTV, the greater the lending risk generally.  There are other factors also.

Red Tower Capital collects various information on potential loan investments during its due diligence process. The amount and specific information required varies by property type, loan amount and perceived risk. If the loan amount, LTV and/or risk is relatively low and the property is a home, for example, we might collect less information than for a larger, higher LTV complicated commercial property. Information includes such items as: loan application, appraisal or other evaluation, preliminary title report, credit report and additional title information. In many cases, we may obtain further information such as tax returns, other income documentation, further MLS/real estate sales information, purchase contract (for purchases), leases and rent roll (for a rental property) and bank statements, etc.

Private mortgage investing is a secure way to achieve a solid yield and consistent cash flow. When properly underwritten, there is relatively low risk of loss because any given loan is secured by real property with value in excess of the loan amount. They are also a safe and convenient way to invest in real estate without having to manage or maintain a property.

Liquidity requirements differ based on the investment vehicle. Investments in RTC VI, for example, can begin to be redeemed after an initial 12-month period, subject to fund liquidity. Investors can increase their investment at any time if membership interests are still being offered.

Income is generated from payments received on the loans made by the fund and thereafter is distributed to the investors. Distributions are dependent on the performance of the total loan portfolio and calculated based on the amount each member has invested in the fund. Investors in RTC VI have the option of receiving cash distributions quarterly or reinvesting them.