Mortgage Funds vs Private Lending
G&P Mortgage Fund
On it’s face, there probably does not seem to be significant differences between investing in a mortgage fund versus direct private lending. In some regards, this may in fact be true, however there are some differences and they should be understood by potential investors.
Mortgage funds are pooled investments. They spread the risk of private mortgages over a number of investors and a number of loans.
Mortgage funds offer a predictable and stable source of income.
A fund manager is able to invest in loan types which can increase the return on the fund without putting significant risk on any one investor.
A fund will collect payments for their loans, and deal with any delinquent clients or loans in default.
A loan in default will have minimal effect on your expected return.
A mortgage fund will ensure all legal documents are drawn up to protect their investors, with policies in place to minimize any potential defaults.
Although mortgage funds have a management fee (similar to manager P2P lending), the diversification through varied loan types and benefits of a ‘hands off’ investment more than make up for any difference in return.
Private Lending
Direct private lending, or peer to peer (P2P), is the practice of lending your own capital to fund an entire mortgage for a borrower. As mentioned in the mortgage fund description, this is essentially the same product in the eyes of the borrowers, but there are fundamental differences when you are the investor.
Peer to peer lending leaves you on the hook for the entire investment and any potential defaults. If the client stops making payments, your income has also ceased.
The monthly payments do provide a predictable source of income, until there is an issue.
Private lending requires the investor to minimize risks by choosing only the safest deals. These deals generally return the lowest returns, which limit your ROI.
You are responsible for collection of payments, chasing delinquent clients and dealing with forced sales in order to protect your investment.
A loan in default provides no regular income if you are relying on your investments to fund your living expenses.
Your attorney will draw up standard mortgage documents for your borrowers, but it would be difficult to compete with the legal work and knowledge the mortgage fund puts into their security documentation.
Reasons to Choose a Mortgage Fund
Regulated by TCI FSC
We do things the right way. We are regulated by the Turks and Caicos Financial Services Commission and have yearly audits to provide transparency to our investors.
Consistent Income
Predictable income is important to most of our investors. Returns can and do fluctuate, but generally you can count on a consistent source of income.
Diversification
Your investment will be pooled with many other investors, and spread over a large number of high quality properties in the Turks and Caicos.
Knowledge and Experience
The G&P Capital team is comprised of lawyers, accountants and mortgage professionals who bring their extensive knowledge and experience to the fund.
Hands Off Investment
Unlike the extensive time and effort required to manage your own private loans, a mortgage fund allows you to sit back and collect your returns.
Tools and Technology
GPC uses cutting edge mortgage technology to manage all aspects of our mortgage files and investor records.
Fund Diversification vs Private Lending
Diversification Strategy
Existing Properties
The majority of our mortgages are on income producing properties in the tourist zones of Providenciales.
Construction Financing
The fund will also consist of construction financing. Under the right circumstances, these loans are safe, and provide a significant premium to returns.
Land Loans
Land is another component in the fund which we are generally low risk and we are able to charge a premium.
Other Islands in TCI
Although the bulk of our loans are in Providenciales, we have good quality loans on other islands in TCI which increase our net returns.