True Passive Income & Who It's Suitable For

Our next speaker is Lauren Taylor, Managing Director at Active Property Group.

Her presentation topic is true passive income and who it's suitable for.

Active Property Group is the fund administrator for PMAC Trust, a pooled mortgage fund which provides investors the opportunity to invest in a diversified mortgage fund that delivers passive income on a quarterly basis.

The trust provides investors exposure to short-term business loans secured by Australian real estate.

Lauren Taylor was the head of investor relations at APG from 2018.

And in 2022, she took the step into the managing director role.

She's the first point of contact for all investors and believes great communication helps to develop strong relationships and lasting trust.

Welcome to the presentation, Lauren.

Thanks, Angelina.

It's great to be here.

So as Angelina said, I'm Lauren Taylor and I'm the Managing Director of funds management company, Active Property Group.

And today I want to talk to you about passive income and more specifically, what actually is classified as true passive income.

And I also want to talk about who we're seeing are the types of investors that are interested in setting themselves up with passive income streams.

So first of all, what is passive income?

So according to Forbes, passive income refers to income that does not need a significant commitment of time or money.

So let's take a look at what are some of the more popular so-called passive income strategies out there.

So first off, the most popular passive income strategy is to purchase an investment property and rent that out.

But as most landlords would attest, it still requires a fair amount of effort on your behalf in terms of making tenant selections, arranging repairs if required, and dealing with issues that always seem to arise.

And that's even if you are working with a property manager.

And we also go back to the definition from Forbes on what is passive income.

It shouldn't require a significant amount of money to get involved.

But of course, any purchase of property does require quite a lot of upfront funds.

And then there's also the effort of sorting finance as well.

So not quite as passive as you would hope.

So secondly, investing in the share market is also considered another popular passive income strategy.

But again, you know, there's quite a lot of effort in terms of researching companies, keeping an eye on the market, and of course, buying and selling.

Lastly, a lot of people talk about side hustles, side hustles, sorry, that was a Freudian slip, as a way to create a secondary income stream.

And so the most common of these is Airbnb being at your property or your room, creating an online course and selling that or starting in affiliate marketing.

But each of these still requires a large amount of effort, either upfront or ongoing, such as organising Airbnb cleaners, creating your online course and then figuring out how to market that.

and then also educating yourself about affiliate marketing.

So what do we consider to be actually a true form of passive income?

So, well, I believe that pull mortgage funds are one of the very few types of passive income out there.

So what is a pull mortgage fund?

So as the name suggests, a pull mortgage fund pulls the funds from multiple investors

and then those funds are then lent out to multiple borrowers.

The loans that the borrowers take out are secured by property and then the investors earn interest based on the interest paid by borrowers as regular distributions.

So what makes it truly passive?

So,

mortgage funds are ideal for investors who are looking for passive income because you don't need to actively participate in the investment.

So as an investor you rely on the experience and expertise of the fund manager who sources the borrowers

conducts extensive due diligence and then manages the loan from start to finish and make sure that it's paid back on time.

So as an investor, you can literally just sit back, relax and wait for your quarterly distribution.

So who will pull mortgage funds suitable for?

So finding a good source of passive income is of course, the dream for all investors.

And when we first started our fund eight years ago, we had an offering that was only available for wholesale investors.

And our investor base was mainly made up of high net worth individuals and family officers who were looking to set themselves up for retirement.

But we have seen a shift in the type of investors that are looking for passive income opportunities.

And that includes towards younger investors.

And we've also seen a growth in the interest that we're getting from female investors.

As such, we decided to launch a retail offering so that we could open up our funds to this audience.

And it is certainly done just that.

So in the three years since we launched our retail fund, we've seen the popularity of our pooled mortgage fund for young investors and for female investors really take off.

So I think a large part of this comes down to higher property prices and high interest rates has made getting your foot on the property ladder quite difficult.

And also we've had a couple of years of fluctuating markets so that the share market has been a little volatile and therefore people are looking for other options.

I also feel that the APG's approach to providing useful information to those investors who are perhaps not as experienced or are a bit nervous about starting investing has really helped to make young investors feel more comfortable enough to take that first step into investing.

And I also feel that we're a little bit different to some of the bigger listed funds out there.

You know, when when an investor does require information, they can give us a call.

They come through to one of the members of our small investor relation relations team.

So you get to know the people who are looking after your funds and you get that personalised experience, which makes people feel valued and more comfortable.

And I guess it's with that that we've seen a lot of our investors come back and reinvest with us again and again.

So a bit of information about our Poor Mortgage Fund.

As I said, we started in 2015.

We have our own in-house lender called Private Mortgages Australia, and they specialise in short-term business loans that are secured by Australian real estate.

So in terms of short-term, the loans that we do are generally between six to 12 months.

And because of the short-term nature of the loans, our borrowers are willing to pay a higher interest rate, which we then pass on to our investors.

So we predominantly do first mortgages with a few second mortgages thrown in here and there, which offers those higher returns to the fund.

The absolute maximum loan to value ratio that we will lend at is 75%.

However, it's often a lot lower than that.

So at the moment, our current portfolio has a average LVR that's around 57%.

And we operate under an independent trustee called Primary Securities Limited.

They oversee everything that we do and make sure that we're making the best decisions for our investors.

And we're also externally audited each and every year.

So when you invest in our Pool Mortgage Fund, you receive quarterly distributions.

The minimum investment amount is $10,000 for retail investors or $25,000 for wholesale investors.

There's no lock in periods and we offer called redemptions on a quarterly basis.

So when you look at our website and you see what returns we are offering, that is the return that you get.

That's net of fees.

Other than for retail investors, there is a 0.5% per annum retail fee.

And the reason for that is that our retail fund is operated by the trustee and that fee is deducted from your quarterly distribution and goes straight to them.

Our fund, when you invest, you're instantly diversified in that your funds are spread out over the entire portfolio of loans, which is generally around 30 loans at any particular point.

And when you come on board, you also get access to our online investor portal, which allows you to check your investments at any point and also download your distribution statements and quarterly reports.

You can also choose to sign up for our distribution reinvestment plan, which allows you to reinvest your distributions and compound your interest.

And although we can't guarantee this will always be the case, I can say that our distributions and retentions have been paid on time every quarter since the fund started.

So I guess the most important thing that you're all wanting to know is what our returns are looking like at the moment.

And I'm very pleased to say that we delivered a 9.42% per annum return in the September quarter.

And we are expecting, but not guaranteeing that our return for the December squat quarter should also be strong.

And so

I'm going to leave it there on that note.

If you have any questions, then please get in touch.

I'd love to hear from you.

And if you did want to get in touch, then the best place to do that is investor relations at activepropertygroup.com.au.

Or you can jump on our website, download our investor pack, or our information memorandum, or product disclosure statement.

Thanks very much for listening today and I'll hand back over to you, Angelina.

Thank you, Lauren.

Thank you for the presentation.

Do you have time for two questions?

Yes, of course.

Yeah.

All right.

Great.

The first one being what types of investors do you see mostly investing in your fund?

So as I mentioned in the presentation, we have seen a growth in terms of young investors coming on board.

And it's been really great to see the number of female investors that have started investing with our fund as well.

But I would say that, you know, when we started, you know, the the types of investors that were most interested in in our fund, those who those who have, you know, their self-managed superfunds set up family trusts, companies, so it is a really broad range of, of investors.

I would say that, you know, the

there are wholesale investors that have their SMSFs and trusts are probably still the predominant investors.

But yeah, we have certainly seen some really great growth in individual investors and young and female investors, which is great.

And you talk to investors a lot, Lauren.

So what is the most common question or questions you get asked by prospective investors?

I'd say probably the most common question is probably about risks.

So obviously, we have to say all of our risks are listed in our information memorandum or product disclosure statement.

But I guess with any mortgage fund, the biggest risk is

is the risk of default from borrowers.

And of course, we can mitigate that risk through due diligence that we conduct before we do any loan.

And then of course, I guess the beauty of a full mortgage fund is that when you do invest, you're diversified across the entire portfolio.

So if one of the loans goes into default, then you still have the other 29,

30 that are performing and therefore you still receive your quarterly distribution.

Thank you Lauren for the presentation and the questions.

Thank you very much.

Great to see you.

Take care.