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Investing in a private mortgage fund can be a lucrative way to diversify your portfolio, especially for those looking to tap into the real estate market without direct property ownership. However, due diligence is crucial. To ensure you’re making a sound investment, here are the top ten questions you should ask the fund manager before committing your capital.
Brock VandenBerg, Fund Manager for TaliMar Income Fund I, shares his responses to these important questions, offering valuable insights into the organization behind TaliMar Income Fund.
Brock VandenBerg: Since 2008, TaliMar Financial has been providing high net worth investors and family offices with a platform to invest in high yield, secured real estate debt. The original trust deeds were funded by me personally. Shortly thereafter, I opened the investment opportunity to friends and family. By 2020, TaliMar Financial was managing over $50 million in active loans on behalf of over 200 individual investors. In late 2020, we launched TaliMar Income Fund I to provide our investors a more consistent approach to investing in private real estate debt and take advantage of some of the tax advantages the fund offered. As of July 2024, TaliMar Income Fund I has over 300 investors with over $80 million invested earned a YTD return of 9.6%.“
Understanding the longevity and history of the fund is vital. A fund manager with a long track record demonstrates stability and experience in managing market cycles. Ask about the fund’s inception date, key milestones, and how they have navigated past economic downturns.
Brock VandenBerg: TaliMar Financial has ten team members managing loan origination, closing, servicing, investor relations, and various other functions. Every member of the team has come from either the real estate investment or lending industry and brings their unique knowledge and experience to ensure we maintain a healthy loan portfolio and maximize the return to our investors.
The size and expertise of the team managing the fund are critical indicators of its operational capacity. Inquire about the backgrounds of key team members, their roles, and how they contribute to the fund’s success. A well-rounded team with experienced professionals in underwriting, asset management, and loan servicing can significantly impact the fund’s performance.
Brock VandenBerg: As of June 30th, the average loan-to-value ratio is 64.44% with our target ARV to be at 65% of less. This is to ensure that if the borrower were to default on the loan, we would have a healthy cushion of equity to protect the principal balance of our loan
A fund’s historical performance in managing loans can provide insights into its risk management practices. Ask for statistics on the number of loans issued, the success rate, and the default rate. Understanding how the fund handles defaults and the measures in place to mitigate risks is essential.
Brock VandenBerg: Primarily single-family residence, with a small percentage of commercial and other mixed-use properties.
Different funds may focus on various property types, such as residential, commercial, or mixed-use properties. Clarify the fund’s investment strategy and property preferences to ensure they align with your investment goals and risk tolerance.
Brock VandenBerg: We focus on the Southern California market though the fund allows to fund loans throughout the Western United States. Currently, over 80% of our loan portfolio is secured on property in San Diego County.
Geographic diversification can affect the fund’s risk and return profile. Ask which markets the fund primarily operates in and why those markets were chosen. Understanding the economic conditions, growth potential, and risks associated with these areas is crucial for assessing the fund’s potential.
Brock VandenBerg: As of June 30th, the average loan-to-value ratio is 64.44% with our target ARV to be at 65% of less. This is to ensure that if the borrower were to default on the loan, we would have a healthy cushion of equity to protect the principal balance of our loan.
The LTV ratio is a key risk indicator. A lower LTV ratio suggests that the fund is conservative in its lending practices, providing a cushion against market fluctuations. Inquire about the average LTV ratio across the portfolio and how it has evolved over time.
Brock VandenBerg: Redemption requests can be made to our Investor Relations department at any time. We do have a 90-day requirement to disburse the funds back to investors depending on Fund liquidity at the time of request, number of redemptions in the queue, and amount of funds desired. A follow-up call will be made with our Investor Relations team at the time of request to discuss the disbursement timeline expectation.
Investors should keep in mind that a high number of redemptions in a short period of time will delay our ability to process distributions.
Liquidity is an important consideration for investors. Ask about the procedures for withdrawing funds, including any lock-up periods, notice requirements, and potential fees. Understanding the liquidity terms will help you align your investment with your financial planning needs.
Brock VandenBerg: The Fund is open to accredited investors in the form of individual ownership, joint partnerships, trusts, entities, and IRA funds on accepted custodial platforms. Many of our first-time investors enter the Fund as individuals or through a trust, with over 50 percent reinvesting their monthly distributions to earn compounded interest. Investors are more than welcome to open multiple accounts, add funds at any time to their existing accounts, and transfer investment positions between accounts. The Investor Relations department processes these requests daily and works closely with our fund administrator and custodians to smoothly facilitate onboarding. Our quickest processing time between investment request and funding was less than 2 hours.
The composition of the investor base can provide insights into the fund’s credibility and stability. Inquire about the types of investors, such as high-net-worth individuals, family offices, or institutional investors, and their respective shares of the fund. A diverse and reputable investor base can enhance the fund’s resilience and credibility.
Brock VandenBerg: Yes, the Mortgage Fund is structured as a REIT. This allows non qualified investor funds to receive the 20% Qualified Business Income (QBI) tax deduction. Additionally, retirement funds are not subject to Unrelated Business Taxable Income (UBTI). We always recommend that you speak with a qualified tax professional about the tax consequences of investing in the Fund.
Real Estate Investment Trust (REIT) status can offer significant tax advantages. Ask whether the fund is structured as a REIT and how it leverages these benefits. Understanding the tax implications can help you assess the net returns and tax efficiency of your investment.
Brock VandenBerg: Since its inception in 2021, our Fund has consistently delivered increasing historical returns. In 2023, our year-to-date (YTD) annualized return reached 9%, surpassing the 7.78% achieved in 2022. As of the current year, our 2024 YTD return stands at 9.61%.
A common question from investors is how correlated is the Fund return to the Fed Funds rate.
The answer is they are loosely tied. The primary driver of return is the average interest rate of the loans securing the loan portfolio. That rate is dictated by the supply of capital funding these types of loans. As the supply of capital drops, especially during market uncertainty, and demand remains constant or grows, rates will increase. The inverse is also true if the supply of capital grows.
Our strategic focus on the Southern California real estate market allows us to differentiate ourselves by offering competitive rates to borrowers. The region’s robust demand for properties provides a steady and lucrative environment, so that in the event of a rate cut, we would not be affected significantly.
Historical returns are a crucial metric for evaluating a fund’s performance. Request data on the annualized returns over the past 3 to 5 years and compare them to industry benchmarks. Additionally, ask about the factors driving these returns and any anticipated changes in the future.
Brock VandenBerg: Continuing to capture the chosen urban markets provides a lucrative platform to expand TaliMar Income Fund at an increased rate. By assembling a dedicated team that prioritizes excellence within each department and cultivating strong relationships with external stakeholders, we are poised to drive sustained growth into the future.
Finally, understanding the fund manager’s vision for the future can provide valuable insights into the potential for growth and innovation. Ask about their outlook on the real estate market, emerging trends, and how the fund plans to capitalize on new opportunities. This question can also reveal the fund manager’s strategic thinking and adaptability to changing market conditions.
By asking these questions, you can gain a comprehensive understanding of the fund’s operations, risk management practices, and growth potential. This due diligence is essential for making an informed investment decision in a private mortgage fund.
TaliMar Income Fund I offers investors the ability to participate in the rapidly growing demand for private real estate debt. The fund is comprised of a diversified portfolio of short-term loans secured primarily on residential single family and multi-family properties throughout California. The fund manager, TaliMar Financial, was established in 2008 and has successfully funded over $500 million in loans. Investors in the mortgage fund include high net worth investors, family offices, and private equity funds who are seeking consistent monthly income, the security of real estate, and the tax benefits of a mortgage fund structured as a real estate investor trust.
Disclosure: This advertisement is for informational purposes only and does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can only be made by the Private Placement Memorandum (“PPM”) and related subscription documents. Any investment in TaliMar Income Fund I involves significant risk. You should not enter into any transactions unless you fully understand all such risks and have independently determined that such transactions are appropriate for you. Business Purpose Loans arranged through TaliMar Income Fund I, LLC (DFPI CFL License No. 60DBO-137778).
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