Why Become an Investor?
At a time when home sales are declining and property prices are stagnating, you may be wondering how a mortgage investment can improve your portfolio. Here are five reasons why investors should consider adding investing with Fluent to their portfolios.
Cash Flow - Passive Income
Mortgage investments are aimed at investors who want to generate cash flow by lending money to home buyers in exchange for interest. These mortgages typically have higher interest rates and fees than traditional banks and credit union loans. Well-structured mortgage portfolios at a reputable non-bank financial institution could generate significant cash flow. Dependent on the scale of an investor’s risk tolerance and available investment capital, an investor can earn anywhere from 8% to 12% annually with Fluent Capital Lending.
Investment Portfolio Diversification
Adding an alternative investment like mortgages to your portfolio provides strong diversification benefits during periods of volatility in public markets. A well-structured mortgage portfolio is also diversified geographically and by mortgage type to provide a suitable blend of risk adjusted returns.
Risk Mitigation
A mortgage portfolio invests in mortgages (debt), not real estate (equity), which means it provides exposure to the housing market without the risk or liabilities of property ownership. However, each mortgage is backed by the underlying property, which significantly reduces the risk.
Non-Correlated with Public Markets
Over the past 12 years, holding uncorrelated assets doesn't seem to be an immediate priority when equities are in a bull market. Diversification works best when assets are uncorrelated or negatively correlated with one another so that as some parts of the portfolio fall, others rise. Over time, the need for exposure to uncorrelated assets becomes more apparent. Mortgage investments are uncorrelated with public markets and do not share the same volatility profile as the S&P 500, emerging market stocks and commodities, etc. In other words, investing in mortgages is not directly affected by the volatility of the underlying property value.
Ideal For Retirement Planning
Unstable market conditions are a reminder that risk and uncertainty must be considered when investing for the long term. If the value of your portfolio falls in a bear market, it's important to invest in high-yielding investments that will generate returns over time. Mortgages are ideal for retirement planning as they provide passive income while being eligible for tax advantaged investment plans such as RRSP, TFSA and RRIF. As such, a mortgage can help you optimize your retirement life without worrying too much about the cyclical nature of the public market.
Target Portfolio Construction
Fluent Capital Lending Inc. is a diversified portfolio of private mortgages focused on residential 1st mortgages in the GTA with modest allocation to select, highquality residential 1st construction loans, residential 2nd mortgages and commercial loans.
| Target Average Mortgage Metrics* | ||||
|---|---|---|---|---|
| Allocation | LTV Avg. | LTV Max. | Avg. Amount | |
| Residential 1st | 65% | 70% | 75% | $750,000 |
| Residential Construction | 15% | 60% | 65% | $1,500,000 |
| Residential 2nd | 15% | 75% | 80% | $125,000 |
| Commercial 1st | 5% | 70% | 75% | $1,000,000 |
| Blended Average | 69.3% | 74.3% | $781,250 | |
*Target mortgage metrics (including geography, mortgage types and positions) are not guaranteed, except as set out in the Fund’s investment restrictions. These figures were determined by management and illustrate management’s belief with respect to average mortgage metrics based on various assumptions and subject to certain risks.