Nearing Retirement? Why Mortgage REITs are a Smart Choice for Predictable Income
5 minute read
September 30, 2023


Investors, in general, are continually in pursuit of one vital element: predictable income and stability in their portfolios, but especially those who are nearing retirement and will soon need to rely on their investments.

Searching for stability, reliable income, and consistent returns leads many to explore various alternatives, and one option that stands out is Mortgage Real Estate Investment Trusts, also known as mREITs.

What are mREITs? And why are they such an astute choice for those seeking reliable income streams?

Let’s Start Investing

Overview of mortgage REITs (mREITs)

Mortgage REITs are a unique category of Real Estate Investment Trusts (REITs) that primarily focus on investments in mortgages and mortgage-backed securities.

Unlike traditional equity REITs, which invest in physical properties, mREITs operate exclusively in the financial markets, making them somewhat unique options in the real estate investment landscape.

How do mREITs generate income?

Mortgage REITs function as intermediaries between borrowers and lenders in the real estate finance ecosystem.

They raise capital from investors and utilize these funds to purchase mortgages or mortgage-backed securities issued by government agencies or private institutions.

These trusts generate income primarily through the interest earned on the mortgages they hold in their portfolios, as well as gains from the buying and selling of mortgage-related securities.

Managers of mREIT funds have a legal obligation to distribute no less than 90% of their taxable income to shareholders as dividends. This feature makes them appealing to investors who seek positive yields.

What is the difference between mREITs and equity REITs?

Investors must distinguish between mREITs and equity REITs, as they serve different roles within the real estate investment spectrum.

Equity REITs invest directly in physical properties, such as residential or commercial real estate. They derive income from rental payments and property appreciation.

In contrast, mREITs deal with the financial side of real estate by investing in debt instruments, making them more akin to financial institutions than property managers.

While both types of REITs offer the potential for income, the source and risk profile of that income vary significantly.

Start investing with Marquee Funding Group today.

Benefits of investing in mortgage REITs

As investors seek predictable income, mortgage REITs (mREITs) stand out as a compelling choice.

Steady dividend income

Mortgage REITs are renowned for their consistent dividend payments.

These trusts are required by law—as we mentioned earlier—to distribute a significant portion of their taxable income to shareholders, often resulting in higher dividend yields compared to other types of investments.

This reliable stream of income can provide financial stability and peace of mind, making it an attractive option for income-focused investors, including retirees.

Diversification in an investment portfolio

Adding mREITs to your investment mix can enhance diversification. Diversification is a fundamental strategy for risk management, spreading your investments across different asset classes.

Since mREITs operate in the financial sector and are influenced by interest rate movements, they often have a low correlation with traditional equity investments.

This means that when stock markets are volatile, mREITs may offer stability and act as a counterbalance in your portfolio.

Exposure to the real estate debt market

Investing in mREITs provides exposure to the real estate debt market without the responsibilities of property ownership.

These trusts invest in mortgages and mortgage-backed securities, allowing investors to indirectly participate in the real estate market.

This indirect exposure can be advantageous, especially when the real estate market experiences fluctuations or when direct property ownership is impractical.

Risks associated with mortgage REITs

As with any type of investment, there are risks associated with mortgage REITS. Common ones include their sensitivity to interest rates and varying types of borrowers. But it’s important to find a mREIT that is in line with your risk tolerance.

An expert team is also paramount when it comes to how the fund is managed.

Higher-risk investments have higher returns but are not for every investor. Hard money loans are unique but some lenders are more speculative than others.

You should understand the remedies that a specific mortgage REIT will take should a loan go bad.

The Marquee Capital Fund 1, for example, screens the quality of the collateral, the borrower’s financials, and the ability to repay, as well as verification of title to ensure that investors are protected.

Predictable income from mREITs—the bottom line

If you’re an investor nearing retirement who’s looking for a solid bet for predictable income, Mortgage Real Estate Investment Trusts (mREITs) emerge as a compelling choice.

These mortgage funds offer a blend of dividends, diversification, and exposure to the real estate debt market that’s hard to beat. However, like any investment, it’s crucial to strike a balance between risks and rewards.

Diligent research and risk management are essential.

Connect with expert advice through Marquee Funding Group

Navigating these challenges and optimizing the benefits of mREITs can be tricky; it’s wise to seek expert guidance.

Marquee Funding Group, with its wealth of experience and expertise in the real estate and investment sectors, can provide the insights and strategies needed to achieve the right balance in your investment portfolio.

Whether you’re a seasoned investor looking to enhance your income stream or someone new to the world of mREITs, the journey toward predictable income is within reach.

Start investing with Marquee Funding Group today and take the next step toward financial stability and a more secure future.

Your investment choices matter, and with the right guidance, you can make them work for you.

Photo by John Schnobrich on Unsplash

Share on LinkedIn
Email this Article
Print this Article