Investing in mezzanine loans: a guide for private investors

Mezzanine property lending has become an increasingly popular asset class for private investors seeking income-generating, asset-backed returns. Here is how it works, and what to check before you commit.

How it works for investors

Your capital is lent to a property developer as one layer of their funding structure. You earn a fixed return, indicatively 10 to 15 percent a year, secured by a second charge against the development. The loan repays when the developer sells or refinances the completed scheme.

The security position

A properly structured mezzanine loan is protected by:

• A second legal charge against the property or development
• An independent RICS valuation confirming asset value
• An intercreditor agreement governing your rights relative to the senior lender
• Personal guarantees from the developer in most cases
• Professional monitoring of construction progress through the term

Typical shape of a loan

Understanding the risks

Mezzanine sits behind senior debt in the repayment waterfall. That means:

• In a default the senior lender is repaid first
• Your capital is at greater risk than senior lending, which is why the return is higher
• Returns are targets, not guarantees, and property values move
• Diversifying across several loans is prudent

What we do differently

Max Mezz underwrites every loan ourselves before presenting it. Our team has developed property directly, so we know what good looks like on site as well as in an appraisal. Every opportunity comes with a full due diligence pack: independent valuation, verified track record, professional cost plan, and a realistic sales and exit analysis.

Getting started

Register your interest and tell us your criteria. We will present opportunities that match your preferred return, term and risk profile.