Transition from Individual Trust Deeds to a Mortgage Fund Investment

ransition from Individual Trust Deeds to a Mortgage Fund Investment

Investing in real estate can be highly rewarding, but it also comes with its challenges. This case study explores why a seasoned investor, who had traditionally invested in individual trust deeds, decided to transition to investing in TaliMar Financial’s mortgage fund. The transition was driven by the superior quality of loans offered by the mortgage fund, the reduced management burden, the benefits of compounded interest, diversified risk, increased liquidity, and favorable tax deductions. 


Investor Profile: 

Type: Individual real estate investor 

Previous Investments: Individual trust deeds 

Experience: Over 20 years in real estate investing 

Investment Amount: $500,000 

The Challenge 

While individual trust deeds had been a profitable investment vehicle for the investor, several challenges became increasingly burdensome: 

Quality of Loans: The loans sourced through brokers varied in quality, sometimes resulting in higher risk. 

Management Effort: Identifying suitable trust deeds required significant time and effort, followed by ongoing management of the loan servicing. 

Investment Diversification: The investor’s portfolio was concentrated in individual loans, posing higher risk if a single loan defaulted. 

Liquidity Issues: Individual trust deeds often lacked liquidity, making it difficult to access funds when needed. 


The Solution: Transitioning to a Mortgage Fund 

After thorough research, the investor decided to transition to TaliMar Financial’s mortgage fund. Here’s why: 

1- Higher Quality Loans: Rigorous Underwriting Standards: The mortgage fund adhered to strict underwriting standards, ensuring higher quality and lower-risk loans compared to those sourced from individual brokers. 

2- Reduced Management Burden: Professional Management: The fund’s professional management team handled all aspects of loan servicing, freeing the investor from the cumbersome task of loan administration. 

3- Compounded Interest: Reinvestment of Dividends: The investor could reinvest dividends back into the fund, earning compounded interest and enhancing overall returns. 

4- Diversified Risk: Portfolio Diversification: Investing in the mortgage fund spread the investor’s risk across a diversified portfolio of loans, reducing exposure to any single loan’s performance. 

5- Increased Liquidity: More Liquid Investment: The mortgage fund offered greater liquidity compared to individual trust deeds, allowing the investor to access funds more readily if needed. 

6- Tax Advantages: Qualified Business Income Deduction: The investor benefited from a 20% qualified business income (QBI) tax deduction, significantly improving the net return on investment. 


Investment Process 

Initial Consultation: The investor had an in-depth consultation with TaliMar Financial to understand the fund’s structure, benefits, and potential returns. 

Investment: The investor allocated $500,000 to the mortgage fund. 

Reinvestment Plan: A strategy was implemented to reinvest dividends for compounded growth. 


Performance and Returns: 

Annual Return: The mortgage fund delivered consistent annual returns, exceeding the investor’s previous earnings from individual trust deeds when considering the lost interest income between investments. 

Reduced Workload: The investor no longer needed to spend time identifying and managing loans, allowing them to focus on other investment opportunities and personal interests. 

Enhanced Liquidity: The investor had access to funds with relatively short notice, providing financial flexibility. 

Tax Savings: The 20% QBI deduction resulted in substantial tax savings, enhancing the overall profitability of the investment. 


This case study underscores the advantages of transitioning from individual trust deeds to a mortgage fund investment. For this seasoned investor, the move to TaliMar Financial’s mortgage fund provided higher quality loans, reduced management burdens, the benefits of compounded interest, diversified risk, increased liquidity, and favorable tax treatment. 

Key Takeaways 

Quality and Risk Management: Mortgage funds with stringent underwriting standards can offer higher quality loans and better risk management. 

Operational Efficiency: Professional management of the fund alleviates the administrative burden on individual investors. 

Compounded Growth: Reinvesting dividends within a mortgage fund can significantly enhance long-term returns. 

Diversification: Spreading risk across a portfolio of loans reduces the impact of any single loan defaulting. 

Liquidity and Flexibility: Mortgage funds generally offer more liquidity than individual trust deeds, providing investors with greater financial flexibility. 

Tax Benefits: Investors can benefit from substantial tax deductions, improving net returns. 

About TaliMar Financial 

TaliMar Financial is a private mortgage fund that offers investors the ability to participate in the growing market of private real estate debt. Since 2008, TaliMar Financial I has focused on providing real estate investors and operators with the capital they need to purchase, renovate, and operate residential and commercial properties. Our experienced executive team has funded over $450 million in short term debt secured on residential and commercial real estate primarily throughout Southern California and has returned over $40 million to investors in monthly distributions.  



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