High-yielding secured notes are exactly what they say they are: notes that pay a higher rate of interest.
Traditionally, this classification was established to determine which notes were below investment grade. In other words, high yield meant high risk.
In the case of real estate secured notes, however, a higher yield can still offer a great deal of protection to the investor.
Let’s dig into five things you should know about high-yielding secured notes, including how you can find a fund manager dedicated to transparency and investor satisfaction.
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1. The history behind ‘high yield’
As an experienced investor, you most likely have investor colleagues on all ends of the risk spectrum. Many probably invest in the stock market, some in bonds, and others in real estate.
If you’re reading this, chances are you’re interested in diversifying.
But what’s the deal with “high yield”? Historically, high-yield notes or bonds have lower credit ratings than investment-grade bonds because they are more likely to default. In fact, those who invested in high-yield bonds were considered to be taking as much risk as one would with stocks.
Leading credit agencies S&P Global Ratings and Moody classify high-yield bonds with certain ratings that reveal the default risk. However, high-yielding secured notes are a different ballgame, undergoing greater scrutiny from expert eyes.
2. Benefits to high-yielding secured notes
The greatest benefits to high-yielding secured notes are the higher yield and higher expected returns, but there are additional benefits when it comes to real estate secured loans.
Consistency
High-yield notes are still a form of fixed-income investing, where investors are paid fixed interest payments throughout the life of the loan.
This provides the best of both worlds: the consistent income of “safer” investment options with the higher yields of “riskier” investments.
Less hassle
If you’ve always wanted to invest in real estate but were deterred by the amount of work involved in being a landlord, real estate secured notes are a no-hassle alternative. You get the benefits of the investment with no rent collection or repair responsibilities.
Security
Many seasoned investors would be surprised to hear the words “security” and “high yield” in the same sentence. But with secured loans, investors have additional protection along with a higher yield.
However, the level of security depends on who you’re investing with. You need to make sure the loans were originally screened and underwritten by licensed professionals who are committed to protecting investors.
3. Where you invest is extremely important
You can’t expect all high-yielding notes to carry low risk. Not all brokers or fund managers are the same. You’re going to have to do your research and find a respected, reputable, professional group of experts who have an excellent track record.
Marquee Funding Group is a pioneer in delivering quality real estate secured loans. Through Marquee Capital Fund 1, investors can passively invest in high-yielding secured notes from a wide range of mortgage products.
By offering well-underwritten private money loans in both the consumer and commercial marketplace, we can provide investors a diverse portfolio of secured notes.
Loans are carefully scrutinized by our team of professionals based on:
- Quality of collateral
- Borrower’s financials and ability to repay
- Title verification
These steps ensure investors are as protected as possible.
4. High-yield notes diversify your portfolio
Whether you’re into high-risk or safe, steady investments, diversifying your portfolio is essential to hitting your long-term term financial goals and balancing your risks.
By investing in various industries, you ensure that your investments aren’t all influenced by the same factors.
Real estate secured notes make a solid addition to your portfolio, because you mix higher yields with additional security that the stock market can’t provide.
5. The high yield market is growing
While the traditional high yield market has seen rapid growth in the past decade, working with a funding group that supplies private money loans is a market that has been largely untapped but quickly gaining steam.
Private lending has become a staple in the financial services industry, and is projected to be over $1 trillion in volume. Private money lenders fill a void traditional lenders leave, easily navigating deals these lenders are unable to do.
Marquee Capital Fund 1 limits investor exposure with a sharp eye for deals that make the most sense. Our team provides:
- Prudent underwriting
- Diversification via a pool of mortgage-backed securities
- Investments in a wide range of mortgage products
Our target return is 8% to 9.5%, with a preferred return of 8%.
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With Marquee Capital Fund 1, qualified investors can benefit from the deals of our quality borrower base and quickly earn higher yields.
We offer portfolio reporting tools for increased transparency, because Marquee is interested in building long-term relationships with investors.
The fund also may elect REIT status, which allows investors to deduct 20% of qualified REIT dividends from their income tax return.
Investors are considered accredited if any of the following statements are true:
- Your annual income is greater than $200,000 (for the past two years)
- Your joint household income is greater than $300,000 (for the past two years)
- Your net worth is greater than $1 million (excluding your primary residence)
If you are an accredited investor, start investing with Marquee today.
We look forward to helping you further diversify your portfolio and reach your investment goals.
Photo by Dylan Gillis on Unsplash
