Pools That Spread the Risk

If you're not comfortable lending directly to a homeowner, a mortgage-loan pool may be more your speed. Operating like a mutual fund, the pool spreads your money over many private mortgages. Returns are generally in the 9%-to-11% range.

Investment minimums can be as little as $5,000, but you must be "accredited" to participate, with a liquid net worth of at least $250,000 for state-registered pools and $1 million for federally registered ones. The majority of mortgage pools are in California, where the private-lending industry is the most established. But if a pool is federally registered, it probably makes loans outside its home state, too.

To find pools, start by going to californiamortgageassociation.com. Then seek referrals from those in the business, quiz managers, and ask for audited financial statements. One more thing: The best pools have waiting lists.

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