Can I choose which mortgage I want to invest in?

One of the more common questions asked by investors is whether it’s possible to select which mortgage they invest in. The answer is yes. APG’s Direct Investment Fund lets you choose the individual loan you invest in, based on your own criteria.

It’s not available to all investors, though. Because this type of investing suits those with the time and resources to do their own due diligence, it’s only available to Wholesale Investors.

A Wholesale Investor is a person or entity that has obtained an accountant’s certificate within the preceding six months stating that the client:

• has net assets of at least $2.5 million, or
• has a gross income of $250,000 p.a. for each of the last two financial years.
  Or a person or entity that invests a minimum of $500,000 for their first investment.

Direct investing carries more risk than the Pooled Mortgage Fund, because your capital sits in a single loan rather than being spread across a portfolio of around 30. If a borrower defaults, you’d wait for the recovery process to complete before receiving capital and return, whereas in the Pooled Fund, other performing loans continue generating distributions in the meantime.

In exchange, direct investors get full visibility and control over exactly which loan they’re backing, and the ability to select for the specific term, LVR or security profile that suits them. This is the trade-off that makes direct investing, and its comparatively higher target returns, suited to Wholesale Investors who are comfortable assessing that risk themselves.

Differences Between Pooled Funds and Direct Investing

Minimum Investment Amount

The minimum investment amount for investing in an individual loan is usually $250,000, however we can reduce this to $100,000 for first time investors. The minimum investment for the Pooled Mortgage Fund is $10,000 for Retail Investors or $25,000 for Wholesale Investors.
Risk

As mentioned above there is more risk with investing in one particular loan rather than in a portfolio of loans.Should the borrower for the direct investment go into default then the investor would need to wait for the recovery process to be completed before receiving their capital and return. Whereas, in the Pooled Mortgage Fund, if one of the borrowers goes into default and the other loans in the portfolio are still performing, then the investor will still be receiving regular distributions.

Passive vs Active investing

The Pooled Mortgage Fund is passive in nature. For investors who don’t have the time to manage their investments closely, having a set-and-forget set up is beneficial. An investor can rely on the experience of the Mortgage Manager to source the borrowers, conduct the due diligence and manage the loan repayment. If you are interested in investing in an individual loan you will receive all the paperwork for that loan to help you make the decision on whether to invest or not. This includes a summary of all the details of the loan, the due diligence conducted by the Mortgage Manager and the valuation of the security property. To invest in a Direct Mortgage you need to be a lot more involved.

Distributions

If you invest in a direct mortgage you will receive your capital and return at the end of the loan term (usually 6-12 months depending on the loan). The return will depend on the loan you are invested in. In the Pooled Mortgage Fund distributions are paid quarterly based on the interest paid by the borrowers in the portfolio during the quarter.

Availability

The majority of the loans completed by Active Property Group are funded by the Pooled Mortgage Fund. Only on occasion do we open up the opportunity to invest directly into an individual loan. This is because we generally have enough funds available through the pool to fill most loans, however, if it is a larger loan or we don’t have enough funds in the pool at that time then we will open it up to direct investors.

Here is a breakdown of the key features of our Pooled Mortgage Fund and Direct Mortgage Fund:

Pooled Mortgage Fund

• Quarterly distributions
• Open to both Retail and Wholesale investors
• Invest via individual, joint, trust, company or SMSF entities
• Minimum investment $10,000 for Retail investors or $25,000 for Wholesale investors
• Retail investors pay a 0.5% p.a. fee to our Trustee, Primary Securities which operates the fund
• No Application or Withdrawal Fees
• Investment diversified across portfolio of loans (approx. 30 loans at any one time – mix of mostly 1st mortgages and some 2nd mortgages)
• Quarterly redemptions available
• Passive investment – rely on expertise of mortgage managers to select loans
• Online Investor Portal available
• Option to reinvest distributions and compound interest

Here is the link to the Information Memorandum (for Wholesale Investors) and Product Disclosure Statement (for Retail Investors) for the Pooled Mortgage Fund.

Direct Mortgage Fund

• Select which loan to invest in based on interest rate, term, LVR, security property location etc.
• Make decision based on loan documentation – due diligence, valuations and loan summary
• Only select loans (usually larger ones) are open to direct investors
• First in, first served
• Only open to Wholesale investors
• Invest via individual, joint, trust, company or SMSF entities
• Minimum investment $250,000 (can reduce to $100,000 for first time investors)
• Invested for term of the loan – payout at end of loan term.
• Interest rate based on individual loan
• Active investment – you make final decision on which loan to invest in

Here is a link to the Information Memorandum for the Direct Mortgage Fund.

Those interested in investing exclusively in individual loans may contact us and request to be added to our direct investor list. Those part of this list will be informed when a direct opportunity becomes available. Keep in mind that our direct investment option is only available to Wholesale Investors and has a minimum investment of $250,000.

About APG’s Direct Investment Fund

APG’s Direct Investment Fund gives Wholesale Investors the ability to select individual, registered first and second mortgages secured against Australian real estate. Each opportunity is backed by full due diligence from our experienced mortgage managers, including borrower assessment, property valuation and loan documentation so you can make an informed decision on every loan you consider.

Unlike a pooled fund, direct investing puts you in control: you review the loan details and decide whether it fits your own risk appetite and investment goals before committing capital.

Direct opportunities aren’t available continuously — we open them to our direct investor list as they arise, typically for larger loans or when Pooled Fund capital isn’t sufficient to fill a loan on its own. To learn more or register your interest, you may book a call to speak to our Investor Relations team and they will gladly answer any question you may have.

This information is of a general nature and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances. The returns mentioned are not guaranteed. You risk losing some or all of your investment. If you have any questions about investing in private mortgages then please send us an email [email protected] or message us via our Contact Page.

If you have any questions about investing in private mortgages then please send us a message via our Contact Page.