Why pooled mortgage funds are great passive income streams for beginner investors
Let’s face it, most of us are looking for ways to grow our wealth, however, the busy nature of our lives makes it difficult to start a side hustle and bring in some extra cash.
When you’re time-poor, it makes sense to look for passive income strategies that are going to allow you to earn decent distributions without requiring a huge amount of time to manage.
But there are a few things you should do before diving head first into the world of investing. It’s important to get your finances in order as well as do your research about which investment options are best for you. Consider the amount of risk you’re comfortable with as well as being clear about what it is you want to achieve.
Getting started with traditional investment options such as property can have considerable hurdles, especially in the current economic climate. Rising interest rates and inflated property prices and high entry costs mean this investment option is simply out of reach for most people.
Hence, more and more investors are looking to alternative investment options such as pooled mortgage funds where the barrier to entry isn’t as steep, which is also an attractive passive investment option for beginners and seasoned investors alike.
How do I start passive investing?
Passive income can be a great way to help you generate extra cash. So let’s look at what passive income actually is.
What is passive income?
Passive income is regular earnings from a source other than your regular employment or business. Most importantly, they shouldn’t require large amounts of time on your behalf in order to generate the income – hence the name ‘passive’ income. Many people think that passive income is about getting something for nothing. But the reality is, good passive investments shouldn’t be a risky get-rich-quick scheme that makes you feel overly anxious but provide a regular return on your investment.
It’s important you take a few key steps before starting out. That way your investment is much more likely to help you achieve your goals.
Steps to passive investing
- Any investment option will need you to put in some time and effort. So the first step to starting passive investing is to do some research. It’s important that the passive investment option you choose considers your existing financial situation, what you want to achieve, and your appetite for risk.
- If you’ve narrowed down your list of suitable options, now’s the time to dig a little deeper and consider how much time and input will be needed from you. Many so-called passive investments are not so passive. Some might need more work from you upfront, such as writing an educational piece or filming instructional videos. While others, although claiming to be passive, actually need you to be inputting and making decisions regularly such as monitoring the stock market, or maintaining an investment property. Work out how much time, effort and money you can realistically commit to your “passive” investment.
- If you think you’ve found the perfect passive investment for you, now’s the time to chat to the experts. Choosing a reputable passive investment that offers guidance and support is a great way to start out.
If you take a little time before committing you’re more likely to choose the right passive income option to suit your situation.
And it’s important to remember If you’re looking into something that seems a little too good to be true, it probably is. You want to find something that considers and balances return with appropriate risk.
What is an example of passive investing?
While there are a lot of different passive income options available, not all will give you what you’re looking for. From shares and real estate to selling an e-book or renting out your spare room, options are aplenty.
Technology has also opened up a world of opportunity for passive income options. Because it’s accessible, easy to use, and costs are minimal, there are many more ways to try and generate a passive income.
From creating TikToks and YouTube content to blogging and selling websites you’re really only limited by your creativity. But the reality is these options might actually need more of your time than you’re able to give. And how successful they’ll be is a complete unknown.
When you’re starting out, it may be a good idea to look for passive income options that have stood the test of time such as pooled mortgage funds.
What are pooled mortgage funds?
As the name suggests a pooled mortgage fund pools your money with other investor contributions into a larger fund spread across many investments.
When you invest in a pooled mortgage fund, your money is exposed to a range of loans. You then receive the average interest from all the loans, less the management fees.
Pooled mortgage funds are ideal for investors looking for a passive income stream that is relatively simple for you to manage as an investor while making your money work harder for your future.
Pooled mortgage funds are a true set and forget passive investment.
Pooled mortgage funds can create genuine passive income streams. But you need to find one that provides you with the flexibility you need so you can achieve your own specific goals.
For instance, Active Property Group’s pooled mortgage fund offers investments from as little as $10,000. That makes this type of investment so much more accessible for a lot more people.
How do pooled mortgage funds work?
You choose how much you invest and over what period of time. Once your investment has been established, there is very little for you to do.
As borrowers pay back their loans, you as an investor collect interest payments at regular intervals; with APG, it’s every quarter. You can choose how long to stay invested as the option to redeem is offered on a quarterly basis. This isn’t the case with all mortgage funds so make sure you check that this level of flexibility is available.
Active Property Group balances their pooled mortgage fund to maximise investment returns while also ensuring an appropriate level of capital security.
APG’s Pooled Mortgage Fund is a great option because:
- they undertake extensive due diligence on their borrowers
- the loans are managed by professionals
- the loans are secured by Australian real-estate
Because Active Property Group’s Pooled Mortgage Funds are actively managed by an experienced, professional fund manager, it allows you to get the benefits of a true passive investment.
Pooled mortgage funds offer diversification
One of the biggest tips any investor is given is to diversify their investments. Diversification lowers risk. It means not all your eggs are in one basket, so if something goes wrong you haven’t lost it all.
Active Property Group’s pooled mortgage funds aren’t used for just one mortgage. Money is invested across a range of mortgages. This not only diversifies your portfolio, it also reduces your risk by spreading it out across multiple mortgages. If one borrower defaults on their loan, not all is lost. You still have a number of other loans paying a return.
Pooled mortgage funds for beginners
Investing in mortgage funds is easier for beginner passive investors than you may think.
Plus it’s suitable for both small and large investment amounts. In the case of Active Property Group, all investors are eligible to invest in their pooled mortgage fund starting at $10,000.
If you’re after a true set and forget passive investment options, get in touch with the mortgage fund manager. Take the opportunity to ask questions and learn more about the investment from the people who know it best.
Remember it’s always a good idea to get advice from experts. People who know the ins and outs of the product. Get in touch to find out more about opportunities to boost your income passively by investing in pooled mortgage funds.
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