Managed by Enact Partners, the EP Guardian Fund is a private mortgage fund that offers investors an opportunity to invest in a diversified portfolio of short-term loans secured by commercial real estate, non-owner occupied residential, construction, fix and flip, mixed-use, and similar investment properties. Investing in private mortgage funds is especially attractive to anyone looking to step away from traditional stocks and bonds and/or don’t want the responsibility and stress of managing real estate assets themselves.
Here’s a closer look at why investing in a private mortgage fund could make sense for you:
1. Potential for Higher Returns
The higher interest rates charged to borrowers seeking quick or flexible access to capital through a private loan benefit investors by offering the potential for greater returns compared to traditional investments (such as bonds or savings accounts). In essence, given the higher interest rates charged to borrowers, an investor’s capital in a private mortgage fund has the chance to grow rapidly in a short period. Of course, while higher interest rates can potentially accelerate the growth of an investment, it’s important to consider all factors and risks involved.
2. Diversification
Private mortgage funds help investors diversify their portfolios and reduce overall risk. Diversification is a key principle in investing—it means spreading investments across different assets to mitigate risk. By including private mortgage funds in their portfolios, investors are balancing out the potential volatility of the stock market with the more stable, predictable returns of private loans.
3. Steady Income
Investing in private mortgage funds typically generates regular, monthly payments to investors, much like receiving dividends from stock investments or interest from a savings account. This can be particularly attractive for retirees looking to supplement income. The predictability of these payments can help in budgeting and financial planning, ensuring there is a reliable income source each month.
In addition, such regular payments can help cushion against the ups and downs of more unpredictable investments, offering a way to balance less stable aspects of an investor’s portfolio. This allows investors to plan with greater confidence, knowing they have a steady financial foundation from which to manage other financial ventures and obligations.
4. Access to Niche Markets
Private lending can open doors for investment into to niche markets, offering unique opportunities that traditional financial institutions often overlook. These niche markets can include small businesses, real estate developers, and builders who might not qualify for conventional financing due to lack of credit history or unconventional business models.
Supporting small businesses through private loans can be particularly rewarding. Many small enterprises struggle to secure funding from banks and large lenders due to stringent lending criteria. By providing them with the necessary capital through a private loan, investors can help these businesses grow and succeed, which can also lead to job creation and community development.
For real estate developers and builders, whether it’s residential properties, commercial buildings, or renovation projects, private mortgage funds often provide the necessary financing. This can result in attractive returns for investors. Additionally, real estate often serves as collateral, adding a layer of security to the investment.
5. Lower Volatility
Stocks can be particularly volatile, reacting quickly to economic news, geopolitical events, or changes in market sentiment. Private loans, however, tend to be less volatile because they are secured by collateral and depend on borrower cash flow rather than market conditions. This stability can provide a cushioning effect during market turbulence, leading to a more predictable and stable financial outlook over time.
6. Collateral and Security
Loans financed through a private mortgage fund are frequently backed by real estate collateral, which adds a significant layer of security to the investment. Real estate collateral refers to property or land pledged by a borrower to secure a loan. This means that if the borrower fails to repay the loan, the lender has the legal right to seize the collateral to recover the owed amount.
This security cushion is a critical aspect of private lending. Real estate often appreciates in value over time, providing a stable and reliable asset to back the loan. The tangible nature of real estate collateral means that the investment is anchored in something substantial and of lasting value.
Collateral-backed loans are attractive because they reduce the risk of a total loss should a borrower default or a project fail. While thorough due diligence by Enact Partners during the loan approval process makes such failure unlikely, in the event of a default, the lender can sell the property to recoup the investment.
7. Potential Tax Benefits
Depending on where an investor lives, the interest payments from private loans might enjoy preferential tax treatment, leaving more money in the investor’s pocket. This could translate to lower tax rates on income earned from these investments, enhancing overall profitability. Consequently, net returns from private loans could surpass those of other income sources, such as dividends or interest from traditional savings accounts. This tax efficiency makes private lending not only a potentially lucrative investment but also a smart strategy for investors looking to optimize their financial portfolios.
8. Increased Role
Investors in private mortgage funds can sometimes work closely with borrowers and lending decision makers to strengthen relationships and provide valuable guidance and support. Such close collaboration can lead to more efficient and effective project management, potentially reducing risks and enhancing the likelihood of a project’s success. Moreover, private lenders can leverage their expertise and experience to offer strategic advice, helping borrowers navigate challenges and make informed decisions.
9. Opportunity for Impact Investing
Private mortgage fund investing allows investors to fund ventures they feel can make a difference—be it small businesses, startups, or underserved borrowers. It’s a chance for investors to contribute to the greater societal good while also doing well financially for themselves.
Who Can Be an Investor?
Our investors come from a variety of backgrounds and life experiences. They tend to be retired individuals, couples, and businesspeople who are seeking sound investment opportunities focused on asset protection and growth through consistent monthly cash flow.
Investors in the EP Guardian Fund must be accredited. Individuals must have earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years and reasonably expects the same for the current year, OR a net worth of over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
All Investments Are Risky
While investing in private mortgage funds can be incredibly rewarding, it also comes with risks like all investments. It’s crucial for investors to meticulously evaluate all investment opportunities.
Here are several reasons investors choose to invest in the EP Guardian Fund:
- Excellent Yield—Enact Partners, as Manager of EP Guardian Fund, has delivered annualized yields between 8% and 11%—with no losses—since the company started in 2013.
- Security—Loans are secured by tangible, diversified real estate assets, all of which are 1st Trust Deeds, with an average Loan-to-Value ratio of approximately 50%.
- Diversification—The fund enjoys a diversity of loan types: construction, property improvements, office buildings, retail, housing, and land across the western United States.
- Distributions/Dividends—Investors have a choice of monthly distribution vs. reinvested distributions (simple interest vs. compound interest).
Interested? Let’s Talk About Investing
(760) 407-3045 | [email protected] | www.enactpartners.com
