Why investors are putting their money into private debt.

With rising housing loan commitments and an average term deposit rate of just 0.3% with the big four banks, their margins are pretty healthy. And here’s what they don’t want you to know: as an Australian wholesale investor, you can reap the benefits of the housing boom, without having to buy or sell bricks and mortar.

How? By investing in private real estate debt.

A private debt marketplace

In 2012 we saw a compelling opportunity to match untapped sources of capital with growing demand amongst property investors and developers. Investors are looking for yield they can’t find in traditional asset classes. And developers want faster access to capital to jump on opportunities and get their projects across the line.

AltX operates as a marketplace, connecting the capital with borrowers. So a retiree on the Gold Coast could invest in a new apartment development in Balmain. Or a regional property owner could take a slice of a commercial property opportunity in the city.

Instead of buying or selling property – which can be an expensive and slow process – you put your money into the property deal itself through private real estate debt. Your capital serves as a loan to commercial borrowers who need funding and can provide the first mortgage as security. You effectively become the bank, and in return, receive regular fixed income as interest on the loan. And you can jump on new deals daily, with a minimum investment of $50,000.

With in-house property research, loan management, and collections team on the side, you can access institutional-grade opportunities with a lot less time and effort. And that’s another good reason to not only be the bank – but potentially beat the banks at their own game.

Thanks to our team’s due diligence, we have funded over 850 loans valued at $1.75 billion. It’s simple: if we aren’t comfortable putting our money into the deal, we don’t offer it to you.

The golden trifecta

If you’re looking for reliable returns, lower capital risk, and diversification, private real estate debt could be the perfect addition to your portfolio.

Through AltX you receive returns of between 5% and 9%, depending on relative risk – and get 100% of your capital returned.

This all makes real estate debt a sound alternative strategy. But you do need to know what you’re getting into before committing to a private mortgage lender. Check their tenure and track record with regulators. Find out if they’ve isolated risks by setting up separate Special Purpose Vehicles for each loan. And if you can, partner with someone who has skin in the game.

The way we transact has changed. Yet financial markets remain fixed on traditional portfolio mix structures that no longer deliver on your expectations. And when interest rates are likely to remain low for some time, it’s time to think outside the box.