WSJ story: Private mortgage lending

[csgraff]

Do you feel that the potential "headwinds" wouldn't hurt a private mortgage fund as well? If the US goes back into recession and the stock market tanks would not the private mortgage fund do poorly as well?


The WSJ article suggests that the expenses are at least 1-1.5%. Compared with Vanguard's REIT index at 0.1% that's a pretty steep headwind.

I realized I completely whiffed on addressing these issues, even though its a moot point in this instance. (as I won't be investing)
I don't/didn't feel this investment would behave in step with the stock market. That was only based on the past performance of the fund. Its return graph was similar to what you'd see for a fixed investment, no relation to any past market ups and downs.

The fees are an issue. It begins at 1%, then gives management a larger piece of the returns if they exceed 10%/year. You could look at that either as incentive or exploitation, I guess, but they were up front about it.

 

[tryan]

I looked a hard money RE loans last year. 2 investors came forward with : 3% fee to the broker, 12% interest, 80% LTV, 1 year term, first position only. Pretty tough sell considering the junk mail I get offers CC cash advances for: 3% fee, 0% interest, unsecured, 1 year term. I ended up financing the purchase myself. Banks still won't touch investors without day-jobs.

Last two notes I carried were at 8% and 6%, 30 and 20 year loans with a 5 year balloon payment. First positions only. One put down 20% the other 70%. First borrower never missed a payment and refi'd out in 5 years. Second has his first payment due next month ... he has a 70% skin in the game. I have first position. Not too worried about this one.

 

[SumDay]

Good job Tyran. My dad should have taken lessons from you. He was big on zero down. As I have learned, a mortgage without equity is a rental with debt.