While there are many great reasons to invest in first mortgage debt, below are the top 10 reasons.
#1 – High Returns
First mortgage debt investments typically provide higher returns compared to other fixed-income investments, such as treasury bonds or certificates of deposit.
#2 – Secured Investment
First mortgage debt is secured by the underlying property, making it less risky compared to unsecured debt.
#3 – Priority
First mortgage debt has a priority over other debts, such as second mortgages or unsecured loans, which gives investors a higher level of protection.
#4 – Steady Income
First mortgage debt investments can provide a steady stream of income in the form of monthly interest payments.
#5 – Diversification
Investing in first mortgage debt can provide diversification to an investment portfolio, reducing overall investment risk.
#6 – Low LTVS
Average Loan-to-values on first mortgages are 65%, providing a large equity cushion in the event of property value declines.
#7 – Predictable Payments
First mortgage debt typically has predictable payment schedules making it easier for investors to plan their income.
#8 – Short-Term Investment
First mortgage debt investments can be short-term, which provides investors with flexibility and the ability to adjust their investment strategy as needed.
#9 -Inflation Hedge
First mortgage debt investments can provide an inflation hedge, as interest rates tend to rise with inflation
#10 – High Demand
The demand for first mortgage debt is high, particularly in stable real estate markets, providing investors with opportunities for exit strategies.
It’s important to note that investing in first mortgage debt is not without risks. It is important to work with reputable companies and perform due diligence to mitigate these risks and protect your investment.