Successful mortgage pool funds are professionally managed and most of them are designed to deliver predictable, consistent and conservative returns. Some funds give the investors the option of re-investing distributions into the pool.




Established Mortgage Pool Funds




Investors might have the tendency of vetting past fund results rather than making an interview and evaluating the manager. Vetting past results is a good start but getting to know the Fund Manager is key for the future fund’s performance.




Start-up and Small Funds




Evaluating the experience of the fund manager is crucial. They must prove experience in both, real estate and lending. 




Small private funds focus on small deal sizes, thus more likely to find, move fast and capitalize local opportunities. These deals are not as obvious or desirable to a large institutional firm. Valuations can be more subjective because they are based on local comps, market conditions and performed by local real estate investors with different criteria and levels of expertise. 




Large (institutional) mortgage pool funds




These funds tend to produce lower returns because these funds have too much capital to invest and not enough deal flow to create profitable opportunities. An Institutional Real Estate Fund may not have the “boots on the ground” to see those market opportunities, and not only about acquisitions, but also in marketing and managing deal-flow while looking for a better return on investment.




At Capital Insiders, we encourage investors to look at some metrics when evaluating a mortgage pool: 




Structure of the fund, competition, environmental issues, interest rates, licensing, bankruptcy, litigation, foreclosure, loan participation, leverage, U.S. Securities Laws, regulations, usury laws, conflict of interest, alignment, construction loans, LTV, LTC, DLF, DLA, distant geographical locations, diversification, market share, market collapse, due diligence, lack of cash-flow, underwriting, insurance, title work, etc.




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