Weighing Risk and Return in Private Real Estate Debt
Adam Kirk
Adam Kirk
Adam Kirk
May 20, 2025
May 20, 2025
May 20, 2025
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A Guide for Wealth Advisors
As wealth advisors look to diversify client portfolios and generate reliable income, private real estate debt is becoming an increasingly attractive proposition.
Described by many AltX investors as their “sleep well at night” investment, this asset class offers a conservative position within a diversified portfolio, with the benefit of first mortgage security and a low correlation to equity market volatility.
However, as with any investment, private debt carries risks. Understanding and managing these risks is essential for informed portfolio construction and client guidance.
Why Private Debt Appeals to Income-Focused Investors
From an income perspective, private real estate debt offers a level of predictability not often found in equities. Interest payments are governed by legally binding loan agreements and are typically paid monthly or quarterly, unlike dividends, which are paid at the discretion of the issuing company.
In addition, private debt investments are typically secured by a first registered mortgage, giving investors senior rights to the underlying property in the event of a loan default. This provides a legal and financial safety net, enhancing downside protection in uncertain markets.
Key Risk Factors to Evaluate
While private debt is relatively conservative compared to other alternatives, it is not without risk. Advisors should consider the following categories when conducting due diligence or evaluating platforms on behalf of clients:
Borrower Risk: Financial distress, failure to meet repayment terms, or requests for loan extensions may signal future issues.
Property Risk: Overestimated or incorrect valuations, or sharp market declines, can impair loan security.
Enforcement Risk: Legal costs, delays in recovery, or issues with loan documentation may hinder the recovery of capital.
Liquidity Risk: Private debt investments are not liquid or tradeable. Clients must be prepared to commit capital for the term of the loan (typically 3 to 36 months).
Risk Mitigation in Practice
AltX, for example, provides transparency at the individual deal level, giving investors visibility into:
Loan-to-Value Ratio (LVR): A core risk metric, LVR reflects the equity buffer protecting the investor’s capital. A 70% LVR, for instance, offers a 30% cushion against property value decline.
Location and Asset Type: Core metropolitan areas or income-generating properties often represent lower risk profiles.
Borrower Profile: A track record of successful project delivery and a credible exit strategy significantly reduce execution risk.
By spreading capital across multiple loans with varying LVRs, geographies, and property types, investors can build a diversified private debt portfolio that aligns with their risk appetite and income requirements.
Portfolio Structuring: Direct vs Managed Approaches
When advising clients, it’s important to tailor private debt exposure to their preferred level of engagement and risk tolerance.
Direct Investment in Individual Deals: Appeals to clients who want transparency, control, and the ability to select specific opportunities based on personal or professional preferences.
Managed Private Debt Funds: Ideal for clients seeking a hands-off allocation that aligns with a defined investment mandate. These funds typically offer pooled diversification, professional oversight, and capital management.
AltX offers both approaches, including its AltX Credit Fund which received a ‘Recommended’ rating from Independent Investment Research (IIR)* and independently rated as ‘Commended’ by Evergreen Ratings**. This provides confidence for advisors looking to allocate on behalf of clients within a structured, risk-managed framework.
Supporting Clients with Strategic Alternatives
Private real estate debt can complement traditional income investments and provide clients with greater capital stability and cash flow visibility, particularly important for SMSFs, retirees, and high-net-worth investors seeking to preserve wealth while generating consistent income.
For advisors, the key lies in thorough due diligence, platform selection, and matching the structure of the investment to the investor’s goals, timeline, and risk profile.
To learn more, please reach out to our Advisor Relations team.
Disclaimers
*Evergreen Ratings Pty Ltd (Evergreen Ratings) is Authorised Representative 001283552 of Evergreen Fund Managers Pty Ltd trading as Evergreen Consultants (ABN 75 602 703 202, AFSL 486275). The group of companies is known as ‘Evergreen’. Evergreen is authorised to provide general advice to wholesale clients only. **This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research (IIR) (ABN 11 152 172 079), a corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report and received fees for its preparation.
This content is provided for general informational purposes only and does not constitute financial, investment, or professional advice.
As wealth advisors look to diversify client portfolios and generate reliable income, private real estate debt is becoming an increasingly attractive proposition.
Described by many AltX investors as their “sleep well at night” investment, this asset class offers a conservative position within a diversified portfolio, with the benefit of first mortgage security and a low correlation to equity market volatility.
However, as with any investment, private debt carries risks. Understanding and managing these risks is essential for informed portfolio construction and client guidance.
Why Private Debt Appeals to Income-Focused Investors
From an income perspective, private real estate debt offers a level of predictability not often found in equities. Interest payments are governed by legally binding loan agreements and are typically paid monthly or quarterly, unlike dividends, which are paid at the discretion of the issuing company.
In addition, private debt investments are typically secured by a first registered mortgage, giving investors senior rights to the underlying property in the event of a loan default. This provides a legal and financial safety net, enhancing downside protection in uncertain markets.
Key Risk Factors to Evaluate
While private debt is relatively conservative compared to other alternatives, it is not without risk. Advisors should consider the following categories when conducting due diligence or evaluating platforms on behalf of clients:
Borrower Risk: Financial distress, failure to meet repayment terms, or requests for loan extensions may signal future issues.
Property Risk: Overestimated or incorrect valuations, or sharp market declines, can impair loan security.
Enforcement Risk: Legal costs, delays in recovery, or issues with loan documentation may hinder the recovery of capital.
Liquidity Risk: Private debt investments are not liquid or tradeable. Clients must be prepared to commit capital for the term of the loan (typically 3 to 36 months).
Risk Mitigation in Practice
AltX, for example, provides transparency at the individual deal level, giving investors visibility into:
Loan-to-Value Ratio (LVR): A core risk metric, LVR reflects the equity buffer protecting the investor’s capital. A 70% LVR, for instance, offers a 30% cushion against property value decline.
Location and Asset Type: Core metropolitan areas or income-generating properties often represent lower risk profiles.
Borrower Profile: A track record of successful project delivery and a credible exit strategy significantly reduce execution risk.
By spreading capital across multiple loans with varying LVRs, geographies, and property types, investors can build a diversified private debt portfolio that aligns with their risk appetite and income requirements.
Portfolio Structuring: Direct vs Managed Approaches
When advising clients, it’s important to tailor private debt exposure to their preferred level of engagement and risk tolerance.
Direct Investment in Individual Deals: Appeals to clients who want transparency, control, and the ability to select specific opportunities based on personal or professional preferences.
Managed Private Debt Funds: Ideal for clients seeking a hands-off allocation that aligns with a defined investment mandate. These funds typically offer pooled diversification, professional oversight, and capital management.
AltX offers both approaches, including its AltX Credit Fund which received a ‘Recommended’ rating from Independent Investment Research (IIR)* and independently rated as ‘Commended’ by Evergreen Ratings**. This provides confidence for advisors looking to allocate on behalf of clients within a structured, risk-managed framework.
Supporting Clients with Strategic Alternatives
Private real estate debt can complement traditional income investments and provide clients with greater capital stability and cash flow visibility, particularly important for SMSFs, retirees, and high-net-worth investors seeking to preserve wealth while generating consistent income.
For advisors, the key lies in thorough due diligence, platform selection, and matching the structure of the investment to the investor’s goals, timeline, and risk profile.
To learn more, please reach out to our Advisor Relations team.
Disclaimers
*Evergreen Ratings Pty Ltd (Evergreen Ratings) is Authorised Representative 001283552 of Evergreen Fund Managers Pty Ltd trading as Evergreen Consultants (ABN 75 602 703 202, AFSL 486275). The group of companies is known as ‘Evergreen’. Evergreen is authorised to provide general advice to wholesale clients only. **This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research (IIR) (ABN 11 152 172 079), a corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report and received fees for its preparation.
This content is provided for general informational purposes only and does not constitute financial, investment, or professional advice.
As wealth advisors look to diversify client portfolios and generate reliable income, private real estate debt is becoming an increasingly attractive proposition.
Described by many AltX investors as their “sleep well at night” investment, this asset class offers a conservative position within a diversified portfolio, with the benefit of first mortgage security and a low correlation to equity market volatility.
However, as with any investment, private debt carries risks. Understanding and managing these risks is essential for informed portfolio construction and client guidance.
Why Private Debt Appeals to Income-Focused Investors
From an income perspective, private real estate debt offers a level of predictability not often found in equities. Interest payments are governed by legally binding loan agreements and are typically paid monthly or quarterly, unlike dividends, which are paid at the discretion of the issuing company.
In addition, private debt investments are typically secured by a first registered mortgage, giving investors senior rights to the underlying property in the event of a loan default. This provides a legal and financial safety net, enhancing downside protection in uncertain markets.
Key Risk Factors to Evaluate
While private debt is relatively conservative compared to other alternatives, it is not without risk. Advisors should consider the following categories when conducting due diligence or evaluating platforms on behalf of clients:
Borrower Risk: Financial distress, failure to meet repayment terms, or requests for loan extensions may signal future issues.
Property Risk: Overestimated or incorrect valuations, or sharp market declines, can impair loan security.
Enforcement Risk: Legal costs, delays in recovery, or issues with loan documentation may hinder the recovery of capital.
Liquidity Risk: Private debt investments are not liquid or tradeable. Clients must be prepared to commit capital for the term of the loan (typically 3 to 36 months).
Risk Mitigation in Practice
AltX, for example, provides transparency at the individual deal level, giving investors visibility into:
Loan-to-Value Ratio (LVR): A core risk metric, LVR reflects the equity buffer protecting the investor’s capital. A 70% LVR, for instance, offers a 30% cushion against property value decline.
Location and Asset Type: Core metropolitan areas or income-generating properties often represent lower risk profiles.
Borrower Profile: A track record of successful project delivery and a credible exit strategy significantly reduce execution risk.
By spreading capital across multiple loans with varying LVRs, geographies, and property types, investors can build a diversified private debt portfolio that aligns with their risk appetite and income requirements.
Portfolio Structuring: Direct vs Managed Approaches
When advising clients, it’s important to tailor private debt exposure to their preferred level of engagement and risk tolerance.
Direct Investment in Individual Deals: Appeals to clients who want transparency, control, and the ability to select specific opportunities based on personal or professional preferences.
Managed Private Debt Funds: Ideal for clients seeking a hands-off allocation that aligns with a defined investment mandate. These funds typically offer pooled diversification, professional oversight, and capital management.
AltX offers both approaches, including its AltX Credit Fund which received a ‘Recommended’ rating from Independent Investment Research (IIR)* and independently rated as ‘Commended’ by Evergreen Ratings**. This provides confidence for advisors looking to allocate on behalf of clients within a structured, risk-managed framework.
Supporting Clients with Strategic Alternatives
Private real estate debt can complement traditional income investments and provide clients with greater capital stability and cash flow visibility, particularly important for SMSFs, retirees, and high-net-worth investors seeking to preserve wealth while generating consistent income.
For advisors, the key lies in thorough due diligence, platform selection, and matching the structure of the investment to the investor’s goals, timeline, and risk profile.
To learn more, please reach out to our Advisor Relations team.
Disclaimers
*Evergreen Ratings Pty Ltd (Evergreen Ratings) is Authorised Representative 001283552 of Evergreen Fund Managers Pty Ltd trading as Evergreen Consultants (ABN 75 602 703 202, AFSL 486275). The group of companies is known as ‘Evergreen’. Evergreen is authorised to provide general advice to wholesale clients only. **This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research (IIR) (ABN 11 152 172 079), a corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report and received fees for its preparation.
This content is provided for general informational purposes only and does not constitute financial, investment, or professional advice.
As wealth advisors look to diversify client portfolios and generate reliable income, private real estate debt is becoming an increasingly attractive proposition.
Described by many AltX investors as their “sleep well at night” investment, this asset class offers a conservative position within a diversified portfolio, with the benefit of first mortgage security and a low correlation to equity market volatility.
However, as with any investment, private debt carries risks. Understanding and managing these risks is essential for informed portfolio construction and client guidance.
Why Private Debt Appeals to Income-Focused Investors
From an income perspective, private real estate debt offers a level of predictability not often found in equities. Interest payments are governed by legally binding loan agreements and are typically paid monthly or quarterly, unlike dividends, which are paid at the discretion of the issuing company.
In addition, private debt investments are typically secured by a first registered mortgage, giving investors senior rights to the underlying property in the event of a loan default. This provides a legal and financial safety net, enhancing downside protection in uncertain markets.
Key Risk Factors to Evaluate
While private debt is relatively conservative compared to other alternatives, it is not without risk. Advisors should consider the following categories when conducting due diligence or evaluating platforms on behalf of clients:
Borrower Risk: Financial distress, failure to meet repayment terms, or requests for loan extensions may signal future issues.
Property Risk: Overestimated or incorrect valuations, or sharp market declines, can impair loan security.
Enforcement Risk: Legal costs, delays in recovery, or issues with loan documentation may hinder the recovery of capital.
Liquidity Risk: Private debt investments are not liquid or tradeable. Clients must be prepared to commit capital for the term of the loan (typically 3 to 36 months).
Risk Mitigation in Practice
AltX, for example, provides transparency at the individual deal level, giving investors visibility into:
Loan-to-Value Ratio (LVR): A core risk metric, LVR reflects the equity buffer protecting the investor’s capital. A 70% LVR, for instance, offers a 30% cushion against property value decline.
Location and Asset Type: Core metropolitan areas or income-generating properties often represent lower risk profiles.
Borrower Profile: A track record of successful project delivery and a credible exit strategy significantly reduce execution risk.
By spreading capital across multiple loans with varying LVRs, geographies, and property types, investors can build a diversified private debt portfolio that aligns with their risk appetite and income requirements.
Portfolio Structuring: Direct vs Managed Approaches
When advising clients, it’s important to tailor private debt exposure to their preferred level of engagement and risk tolerance.
Direct Investment in Individual Deals: Appeals to clients who want transparency, control, and the ability to select specific opportunities based on personal or professional preferences.
Managed Private Debt Funds: Ideal for clients seeking a hands-off allocation that aligns with a defined investment mandate. These funds typically offer pooled diversification, professional oversight, and capital management.
AltX offers both approaches, including its AltX Credit Fund which received a ‘Recommended’ rating from Independent Investment Research (IIR)* and independently rated as ‘Commended’ by Evergreen Ratings**. This provides confidence for advisors looking to allocate on behalf of clients within a structured, risk-managed framework.
Supporting Clients with Strategic Alternatives
Private real estate debt can complement traditional income investments and provide clients with greater capital stability and cash flow visibility, particularly important for SMSFs, retirees, and high-net-worth investors seeking to preserve wealth while generating consistent income.
For advisors, the key lies in thorough due diligence, platform selection, and matching the structure of the investment to the investor’s goals, timeline, and risk profile.
To learn more, please reach out to our Advisor Relations team.
Disclaimers
*Evergreen Ratings Pty Ltd (Evergreen Ratings) is Authorised Representative 001283552 of Evergreen Fund Managers Pty Ltd trading as Evergreen Consultants (ABN 75 602 703 202, AFSL 486275). The group of companies is known as ‘Evergreen’. Evergreen is authorised to provide general advice to wholesale clients only. **This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research (IIR) (ABN 11 152 172 079), a corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report and received fees for its preparation.
This content is provided for general informational purposes only and does not constitute financial, investment, or professional advice.
