Our income needs in retirement are complex and can shift from year to year.
Many individuals, either nearing retirement or thinking ahead, want to ensure they can maintain a comfortable lifestyle with maximum flexibility.
One increasingly popular income-generating investment type is mortgage real estate investment trusts (mREITs).
In this article, we’ll explore how they work, the specific benefits for retirement, investing strategies, and how you can gain access to Marquee Capital Fund 1.
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How do mREITs work?
Most people who have heard of REITs think of equity REITs, companies that own and operate income-generating real estate.
While equity REITs are a solid investment, many retirees are turning to mortgage REITs for one key difference: They can invest in mortgage-backed securities (MBS) and real estate-related assets rather than own physical properties.
How mREITs generate income
Unlike traditional REIT income, generated primarily through leasing space and collecting rents on properties, mortgage REITs earn income from the interest earned on their mortgage investments.
Mortgage REITs typically offer higher dividend yields than traditional equity investments, which provides a steady income stream ideal for retirees.
Mortgage REITs include residential properties, commercial properties, and MBS.
What are the benefits of investing in mREITs for retirement income?
Mortgage REITs are sound real estate investments that provide the benefits of real estate without the hassle of managing properties yourself.
Let’s look at the other key benefits of investing in mortgage REITs for retirement income.
High yields
Mortgage REITs allow investors to earn passive, high-yielding fixed income that holds for the long term.
They are required by law to distribute at least 90% of their taxable income to shareholders as dividends.
As a result, this secure investment often outperforms the stock market and treasury bills.
Long-term growth potential
Many mREITs allow investors to reinvest their dividends to purchase additional shares, which can lead to compounded growth over time.
By reinvesting dividends, retirees benefit from both the income generated by the dividends and the potential appreciation of the additional shares, resulting in significant long-term growth.
Diversifies retirement portfolio
Because mREITs invest in MBS and other mortgage-related assets, they provide exposure to a different asset class than traditional stocks and bonds.
The income generation combined with potential capital appreciation can boost the overall performance of your retirement portfolio.
Hedge against market volatility and inflation
Mortgage REIT performance is typically more closely tied to real estate and mortgage markets than the broader stock market.
Including mREITs in your retirement portfolio provides a hedge against market volatility.
But that’s not all—it also offers protection against inflation, as real estate values tend to increase over time.
Tax benefits
Mortgage REITs are pass-through entities, which means you can access savings at tax time.
Depending on the state you live in, you may have other tax benefits as well. Work with a tax preparer to understand the full benefits and considerations.
What are the potential risks and considerations for retirees?
As with any investment, mortgage REITs come with certain risks and considerations.
Let’s look at the most common challenges and solutions for mREITs concerning retirement income.
Interest rate or market fluctuations
Rising interest rates can affect borrowing costs for mREITs, potentially reducing existing MBS’s market value.
Economic downturns could also impact performance.
Solution: Diversify your portfolio with a mix of asset classes to mitigate overall risks, and invest in mREITs with interest rate hedging strategies to protect investors from rising rates.
Management risks
Mortgage REIT performance relies heavily on the management team making the decisions.
You will face greater investment risks with an inexperienced team.
Solution: Choose mREITs with a strong performance track record and effective risk management practices.
Marquee Funding Group’s mortgage REIT funds are flexible but not speculative private loans. Rather than closing deals and churning them out, we finance responsible investments.
We provide full-circle servicing and adhere to the highest auditing standards. We have the same level of duty of care and fiduciary responsibility as publically traded funds.
Strategies for investing in mREITs for retirement
Mortgage REITs can be complex, but with the right team supporting you, investors can anticipate a stable, high-yield income lifetime.
Here are the best strategies for investing in mREITs for retirement.
Take a balanced approach
A balanced approach ensures you effectively manage risk while earning a stable income.
The key to this balance is diversification, spreading risk across different asset classes and income sources.
This might include a mix of mREITs, equity REITs, stocks, and bonds.
Regularly monitor your investments
Monitoring your investments involves monitoring interest rates, real estate market trends, and economic conditions.
It also involves periodically “rebalancing” your portfolio to maintain your desired level of risk.
Of course, you don’t have to do this alone. Your team of financial experts should include a trusted advisor and a fund manager.
Choose carefully
To maximize your investment potential, you must choose your mREITs carefully.
Marquee Funding Group believes in building deep-rooted connections with our clients and investors.
To form these partnerships, we are a vertically integrated company that raises capital, sources loans, and manages all loan servicing, processing, and escrow in-house.
We can limit investor exposure through Marquee Capital Fund 1 with the following approach:
- Diversification via a pool of MBS
- Investing in a range of mortgage products and property types throughout the U.S.
- Underwriting that looks for the full story and true valuations
- Scrutinizing loan applications for the quality of collateral, verification of title, and borrower financials and ability to repay
- Loans screened and underwritten by licensed professionals that emphasize principal and yield preservation
Private mortgage REITs are offered to accredited and institutional investors by organizations that provide mortgages.
Because they aren’t listed on a major exchange—and aren’t subject to most SEC regulations—their compliance costs are lower, and they yield higher dividends.
How to invest with Marquee Funding Group
Start investing in private mortgage REITs through Marquee Capital Fund 1, a mortgage fund of quality real estate-secured loans.
With our fund, you can passively invest in high-yielding secured notes through a range of underwritten mortgage products—with a preferred return of 8%.
Start investing with Marquee Funding Group today!