If you invest in a pooled mortgage fund there is a danger the fund will become illiquid and be frozen. It will then be many years before you are able to recover a percentage of your capital. In this sense you are not so much investing in real estate as you are betting on the management of the fund. By contrast if you invest directly into mortgages the management risk is eliminated. This is because your name goes on title*, you decide what properties to invest in, and you decide how to deal with defaults, no matter how bad things get no-one can call a liquidator in to feast on your hard-earned money. If you hold a registered first mortgage your investment is as secure as if you were the registered owner of the same piece of real estate unencumbered.
A direct mortgage investment means that no matter what happens you will always have, even in the worst case scenario, the land you loaned against. You can foreclose and so become the owner, you can rent, sell or develop. If there is a great recession, a worldwide pandemic, or hyper-inflation, the intrinsic value of your investment will remain safe. During the economic crisis the security property can usually be rented out and so continue to earn you income. When the downturn is over your capital will be there waiting for you. Indeed, it may have significantly increased thanks to the effects of compound interest and rising property prices. You will not be cheated by liquidators and lawyers feasting on the corpse of yet another failed mortgage fund.
The other major upside of direct mortgage investing is that the returns you receive are usually much higher than those a mortgage fund will pay. This is because there are no management fees and you are able to charge higher rates for odd-shaped loans which, in your opinion, are nonetheless safe investments.
These benefits have always been known to high net worth investors with family offices at their disposal. The problem for the small investor has always been that it requires immense work to find suitable deals. Prior to the advent of Omicron it was necessary for an investor to call dozens of brokers. The brokers would usually be lukewarm because when they last called that investor with a deal all the investor’s money was out on loan. It was a frustrating and tedious process for all involved.
Omicron enables small investors to invest with ease by leveraging off the network effect of the Omicron platform. You simply tell Omicron what money you are looking to place and the platform then brings it to the attention of brokers who have suitable deals.
*Unless you decide to use a trustee.