Interview: VentureCrowd Launches Mortgage Fund for Investors

The current market conditions have many investors looking for new and innovative ways to maximise their return, which is what led to Venture Crowd launching a new investment mortgage fund. Canstar caught up with VentureCrowd to find out more.

Q. What led to the launch of this new mortgage fund?

A. The VentureCrowd Mortgage Fund is creating an opportunity for new and emerging investors to reap the rewards at a time when many traditional investment options are seeing a drastic downturn due to the current economic state. The greatest rewards from property assets take place at the beginning – before building commences and a finished dwelling is developed. But until now, the opportunity to invest in the value creation that takes place in these early stages of the process has been reserved solely for the wealthy and highly connected. Everyone else has only been able to participate at the end, when a home or property has been built. This is where the retail focused VentureCrowd Mortgage Fund is changing the game.

VentureCrowd has had a number of wholesale funds in the market such as the Super High Yield Fund (which pays 12%). We know that these kinds of funds are attractive to investors, and wanted to create a similar fund that was accessible to retail investors. The Mortgage Fund is a retail fund aimed at democratising the opportunity for investment, and while the investment range is smaller in volume when compared to a wholesale investment fund, the healthy return offered has proven to be attractive.

The VentureCrowd Mortgage Fund’s investment opportunity is being driven by the growth of the property market in South East Queensland, which is a strong place to invest and is only set to grow further, with undersupply and growing demand. Queensland’s population is expected to exceed 6 million by 2030; marking a CAGR of 1.7% – higher than the average population growth of Australia as a whole. In spite of this growth, the number of new house sales has been below average, which indicates that there is an under supply issue impacting the property market. If this trend continues – and we anticipate that it will – Queensland is expected to continue experiencing a strong demand for new housing, which will be supported by large infrastructure projects. Additionally, with COVID-19 causing remote work to become more commonplace, the suburbs outside of the Brisbane metropolitan area are expected to experience a higher than average increase in demand as the requirement to commute reduces.

Q. How does it work?

A. The VentureCrowd Mortgage Fund invests in a portfolio of loans to developers of residential, commercial and industrial real estate projects across Australia. This broad mandate gives the fund the flexibility to make loans at varying stages of a property development project, and therefore creates greater portfolio diversification.

The fund is targeting a 7% p.a. distribution to investors paid monthly in arrears. Loans are secured by first or second registered mortgages over secure property assets, with the terms of each loan, including the interest rates charged, varying depending upon the risk and the level of security held by the fund.

Q. Why is this opportunity important / why should investors be involved?

A. Until now, many people have been conditioned to believe that the only option available to them is to work hard, save for a deposit and buy a finished house or apartment from a developer. If you’re lucky, you might secure 3-5% capital growth over time, but even that is unattainable for many. Before you even get started, you need a 10% deposit, to pay for legal fees, and the cost of stamp duty – and with every year of additional saving, property prices are going up and making the whole process very difficult for the majority of people.

The VentureCrowd Mortgage Fund is giving new and emerging investors access to what once would have once been a wholesale product. Our community has told us that they want an income producing product which is backed by mortgages on Australian real estate, and this is exactly what the new VentureCrowd Mortgage Fund does. We’re making property investment available to everyone from as little as $5,000 through the managed investment fund which invests in the early stages of the property development process. These stages provide the greatest opportunity for value creation, and help to create a product that provides a mortgage backed, supplemental income stream.

Q. What has the uptake been like?

A. The VentureCrowd Mortgage Fund only recently launched, and we are therefore in the early phases of engaging with the market. Given that other investment options are currently only offering low returns, we anticipate that this product will likely be very popular – especially with millennials who are looking for investment opportunities that provide them with the opportunity to become involved in the property market.

Millennials have been ignored by the financial markets for far too long, and this is in spite of the fact that 75% of the workforce will be part of the millennial category by 2025. This is the same demographic group that has the highest percentage of smartphone ownership and uses this device more than any other generation. The generation who grew up on their mobile phones is beginning to turn 40 this year, with many beginning to assume middle and senior management roles. The adoption of real estate technology – and investment opportunities like VentureCrowd’s mortgage fund – is only set to increase, with the new fund creating a complete digital banking experience, with no charges for set up, contribution or withdrawal fees.

Q. What is the average estimated return? How much do you need to start investing?

A. Those choosing to invest need a minimum of $5,000, and we are targeting 7% p.a. return, paid monthly.

You can find out more and learn if this investment is right for you at the VentureCrowd website.