Real Estate Debt Funds—The Benefits of Mortgage Funds Over Individual Trust Deed Investments
7 minute read
September 30, 2023


At Marquee Funding Group, we have decades of experience as innovators of mortgage funds and real estate lending—including real estate debt funds.

To us, it’s no surprise that real estate debt funds have gained popularity with savvy investors continually seeking winning combinations of stability and returns.

In this article, we’ll explain why real estate debt funds are worth adding to your portfolio and why they’re frequently chosen over individual trust deed investments.

We’ll illustrate the potential of mortgage funds to help you reach your investment goals.

Let’s Start Investing

Mortgage funds vs. individual trust deed investments

Discerning investors know how essential it is to grasp the key distinctions between mortgage funds and individual trust deed investments and determine which aligns best with their financial goals.

Diversification: spreading risk across multiple properties

When you invest in a mortgage fund your capital isn’t tied to a single property.

Instead, it’s strategically spread across a diversified portfolio of real estate assets. This diversification acts as a robust risk mitigation tool, reducing the impact of underperforming properties on your overall returns.

In contrast, individual trust deed investments concentrate your risk on a specific loan, leaving you vulnerable to its unique dynamics.

Risk-adjusted returns: balancing risk and reward

Investing, no matter what kind, will have an element of risk—the key is to balance this risk with the potential for reward. This is where mortgage funds excel.

They are managed by experienced professionals who laboriously evaluate, underwrite, and monitor each investment. These experts handle loan selection, regulatory and complaint checks, documentation, and other complexities on your behalf.

This rigorous approach helps to ensure that your investments are well-aligned with your risk tolerance while still offering attractive returns.

Individual trust deed investments, while potentially lucrative, aren’t as easily accessible for new investors. Real estate expertise isn’t necessarily required to invest however it’s easier for more experienced investors to assess and manage risk effectively.

Passive income: earning interest with less effort

Mortgage funds provide an excellent avenue for passive income generation, with high-yielding fixed income and protection of the principal capital.

As an investor in a mortgage fund, you receive regular dividends without the day-to-day responsibilities of property management.

This hands-off approach contrasts with the more involved nature of individual trust deed investments, where active management and oversight are typically required.

Additionally, the income from trust deeds is often limited and doesn’t offer room for additional appreciation and growth.

Predictability: stable returns in a volatile market

In an unpredictable economic climate—like the one we’re in now—predictability in investment returns is highly valued.

Individual trust deed investments can be subject to the whims of a single property’s performance, potentially leading to more erratic returns.

Discover how Marquee Funding Group can be your trusted partner on the path to financial success.

The role of private lending and hard money loans in powering mortgage funds

When dealing with real estate debt funds, private lending and hard money loans play a pivotal role, often enabling a better growth environment for mortgage funds.

How mortgage funds utilize private lending

At the heart of many mortgage funds lies the concept of private lending.

  • These funds act as intermediaries, connecting investors seeking attractive returns with real estate borrowers in need of financing.
  • By pooling the investments of numerous individuals, mortgage funds can provide the necessary capital to borrowers while diversifying risk for investors.
  • Private lending within mortgage funds typically involves lending to experienced real estate developers and professionals who are well-versed in property acquisition, development, and resale.

The beauty of this arrangement is that it allows individual investors to participate in real estate markets that might otherwise be out of reach.

It’s a win-win scenario: borrowers gain access to essential capital, while investors benefit from the interest generated by these loans, all managed and overseen by experienced professionals.

The benefits of hard money loans for real estate investors

 Hard money loans are prized for their speed, flexibility, and swift approval process.

They’re often utilized by real estate investors and developers for property acquisitions, renovations, or bridge financing when traditional banks may not be an option.

In hard money lending, a borrower’s creditworthiness is considered, but unlike traditional bank loans, the borrower is not the sole lending criteria and loan approval typically hinges on the collateral’s value. These loans also require a lower loan to value than traditional banks.

This approach emphasizes efficiency and convenience without compromising the fundamental purpose.

By incorporating hard money loans into mortgage funds, you can enjoy the benefits of these loans while spreading your risk across a wide portfolio of properties.

Portfolio management: expertise and experience

For any real estate debt fund, one of the most compelling advantages you can find is expertise and experience—particularly in portfolio management.

Professional underwriting and loan-to-value ratios

Seasoned portfolio managers within mortgage funds possess a deep understanding of the real estate market’s nuances.

They employ rigorous underwriting processes to evaluate potential investments, considering factors like property value, location, and borrower qualifications.

Loan-to-value (LTV) ratios are carefully calculated to ensure that investments remain within acceptable risk parameters. This diligent approach helps mitigate the inherent risks associated with real estate investments.

When evaluating a borrower’s specific loan, Marquee also looks at the story behind the metrics and leverages its expertise in real estate to get deals done that make financial sense and are not overly speculative.

Active management for optimal performance

Portfolio managers continually monitor the performance of investments, responding swiftly to market changes and adjusting strategies as needed.

This proactive approach ensures that your investments are well-positioned to weather market fluctuations and capitalize on emerging opportunities.

Unlike individual trust deed investments—where the burden of active management falls squarely on the investor’s shoulders—mortgage funds relieve you of this responsibility. 

Enjoy the benefits of a professional’s oversight while focusing on your broader investment objectives.

Making the right investment with Marquee Funding Group

As we’ve explored the varied landscape of real estate debt investments, it becomes evident that mortgage funds have a distinct edge over individual trust deed investments.

Mortgage funds offer many advantages:

  • Offer you a portfolio approach that spreads risk across multiple properties
  • Deliver risk-adjusted returns
  • Provides passive income
  • Offer predictability
  • Ensure professional oversight
  • Tax advantages

Regarding tax advantages, investors are entitled to a Qualified Business Income Deduction earned from trusts, including from REIT dividends.

“Marquee Capital Fund 1” elects REIT status to deduct 20% of qualified REIT dividends from income tax returns so investors only pay taxes on 80% of dividends earned.

Investors also won’t need to pay property taxes, purchase home insurance, or manage any other expenses of real estate investing.

In addition to this direct benefit, a private mortgage REIT also provides the benefits of real estate investing without having to manage the legal and financial aspects of lending directly to borrowers.

These attributes collectively prove mortgage funds can serve as a cornerstone to your investment strategy.

If you’re seeking an investment avenue that combines the potential for attractive returns with the peace of mind that comes from expert management and diversification, connect with Marquee Funding Group today.

Explore strategies that align with your financial goals. Our team of experts stands ready to assist you in making the right investments for your financial future.

Start your investment journey here with confidence and expertise by your side.

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