If you’re an accredited investor looking for consistent monthly income backed by real estate collateral—without buying property, managing tenants, or watching stock tickers—a mortgage note fund may be exactly what you’re looking for.
This guide explains what a mortgage note fund is, how it generates income, who qualifies, what risks to understand, and how Labrador Lending’s Integrity Income Fund has been delivering monthly distributions to accredited investors.
Skip to any section:
- What Is a Mortgage Note?
- How a Mortgage Note Fund Works
- The Integrity Income Fund Overview
- What Is an Accredited Investor?
- Key Benefits
- Why Work with a Fund Manager?
- Comparison vs. Other Passive Investments
- Risks to Understand
- Tax Considerations
- FAQ
What Is a Mortgage Note?
Before understanding a mortgage note fund, you need to understand the underlying asset: the mortgage note itself.
When a homeowner borrows money to purchase a property, they sign two key documents:
- The Mortgage (or Deed of Trust): This document pledges the property as collateral for the loan. It gives the lender the legal right to foreclose if the borrower defaults.
- The Promissory Note (the “Mortgage Note”): This is the borrower’s legal promise to repay the debt—spelling out the loan amount, interest rate, monthly payment, and repayment schedule.
The lender that issues the loan holds the mortgage note as an asset on its books. But here’s the key insight most investors never learn: that lender can sell the note to another investor.
Mortgage Note Investing: The practice of purchasing the right to receive loan payments from a borrower. The investor steps into the lender’s position—collecting monthly payments secured by the underlying real estate—without buying or managing the property itself.
This distinction is powerful. As a note investor (or fund LP), you are the bank—not the landlord. No property management. No tenants. No repairs. Just loan payments arriving each month, secured by a real asset.
How Does a Mortgage Note Fund Work?
A mortgage note fund takes individual note investing and scales it. Instead of one investor buying one note, a fund pools capital from multiple accredited investors and deploys that capital across a diversified portfolio of mortgage notes—spreading risk while creating economies of scale in deal sourcing and management.
Accredited Investors Contribute Capital
Investors commit funds to the mortgage note fund in exchange for a membership interest. Capital is deployed as the fund sources qualifying notes that meet its underwriting criteria.
The Fund Manager Sources Mortgage Notes
Using proprietary relationships with servicers, hedge funds, regional banks, and note trading networks, the fund manager identifies performing and non-performing mortgage notes at favorable prices—often unavailable to individual retail investors.
Notes Are Underwritten and Acquired
Each note is analyzed for loan-to-value ratio, borrower payment history, property condition, and exit strategy before purchase. The fund buys notes meeting its investment criteria.
Licensed Servicers Manage Day-to-Day Operations
Loan servicers—regulated third parties—handle all borrower communication, payment processing, and escrow management. The fund’s asset management team oversees servicers and portfolio performance.
Income Flows to Investors Monthly
Interest payments from performing loans—and returns generated from resolving non-performing loans through modification, short sale, or property acquisition—flow through the fund and are distributed monthly to investors proportional to their fund interest.
Unlike a REIT, which typically holds properties, a mortgage note fund holds debt instruments. This means your returns come from interest income on loans—not from market-sensitive property valuations or rent fluctuations. The underlying real estate is your collateral, not your operating business.
The Integrity Income Fund by Labrador Lending
Labrador Lending’s Integrity Income Fund is a private mortgage note fund designed for accredited investors who want real estate-backed passive income without the operational burden of direct note ownership, property management, or servicer coordination.
The fund is managed by Jamie Bateman, a combat veteran and former Army officer who left a W-2 career to build a successful mortgage note investing business. His team includes veterans of loan servicing, compliance, asset management, and operations—bringing institutional-quality management to a boutique, investor-aligned structure.
| Feature | Details |
|---|---|
| Fund Type | Private Mortgage Note Fund (Regulation D) |
| Launched | June 2022 |
| Investor Eligibility | Accredited investors only |
| Target Annual Return | 8% preferred return (Class B) | 10% preferred return (Class C) |
| Distribution Frequency | Monthly — zero missed distributions since inception |
| Commitment Period | 12 months |
| Fund-Level Leverage | None — unlevered fund structure |
| Underlying Asset | First-lien residential mortgage notes |
| Investor Role | 100% passive — no operational involvement required |
| Reporting | Monthly portfolio updates and performance reporting |
| IRA / SDIRA Compatible | Yes — Self-Directed IRA and Roth SDIRA investment supported |
| Manager Background | Veteran-owned; founder is a career note investor and combat veteran |
| Minimum Investment | $25,000 (Class B) | $100,000 (Class C) |
| Liquidity | Illiquid private placement — not traded on public exchanges |
Investment Class Tiers
The Integrity Income Fund offers two investment classes based on commitment size:
| Class | Minimum Investment | Target Preferred Return | Distribution Frequency | Commitment Period |
|---|---|---|---|---|
| Class B | $25,000 – $99,999 | 8% annually | Monthly | 12 months |
| Class C | $100,000+ | 10% annually | Monthly | 12 months |
Zero missed distributions. Since the Integrity Income Fund launched in June 2022, it has delivered monthly distributions to investors every single month without interruption. No fund-level leverage is used, meaning returns are driven entirely by the underlying loan portfolio—not amplified by borrowed capital.
Zero missed distributions since inception. Since launching in June 2022, the Integrity Income Fund has not missed a single investor monthly distribution at the targeted preferred return rate.
“Their team communicates effectively, providing insightful updates that keep me informed about my investment.”
— Dylan Reach, Integrity Income Fund Investor
What Is an Accredited Investor?
The Integrity Income Fund is available exclusively to accredited investors as defined by the U.S. Securities and Exchange Commission (SEC) under Regulation D.
An individual qualifies as an accredited investor if they meet any one of the following criteria:
- Income Test: Annual income exceeding $200,000 individually (or $300,000 jointly with a spouse) in each of the two most recent years, with a reasonable expectation of the same for the current year.
- Net Worth Test: Individual or joint net worth exceeding $1,000,000, excluding the value of the primary residence.
- Professional License: Holding an active Series 7, Series 65, or Series 82 securities license in good standing.
- Knowledgeable Employee: A knowledgeable employee of the private fund in which they are investing.
Not yet accredited? Labrador Lending also offers a Mortgage Note Asset Management Service open to both accredited and non-accredited investors who want to build their own note portfolio with professional operational support.
Key Benefits of the Integrity Income Fund
Monthly Distributions
Receive passive income every month—not quarterly, not annually. Predictable, consistent cash flow you can plan around.
Real Estate Collateral
Every note in the fund is secured by a lien on real property, providing a hard-asset backstop for your investment.
Low Market Correlation
Returns are driven by loan performance, not Wall Street. Mortgage note funds zig when equity markets zag.
100% Passive
Zero day-to-day involvement required. Labrador Lending’s experienced team handles every aspect of fund management.
Monthly Reporting
Receive clear, detailed portfolio updates every month—full transparency without requiring your time to manage.
Veteran-Led Integrity
Founded by combat veteran Jamie Bateman. Military discipline and integrity guide every fund decision. “Invest Wise. Worry Less.”
Why Work with a Fund Manager?
Mortgage note investing can be done individually—but most accredited investors choose to invest through a managed fund for good reason. Here’s what a professional fund manager brings to the table:
Expertise & Track Record
Leverage a manager with deep experience in real estate debt, loan servicing, and portfolio management—skills that take years to develop independently.
Your Time, Freed
Actively managing notes—servicer oversight, loss mitigation, legal proceedings—is a full-time job. Outsourcing that work lets you stay focused on what matters most to you.
Consistent Deal Flow
One of the hardest challenges for individual note investors is keeping capital deployed. Fund managers maintain active pipelines and institutional relationships so your money works continuously.
Built-In Liquidity Path
Unlike many alternative real estate investments with multi-year lock-ups, the Integrity Income Fund provides a liquidity option after a 12-month commitment, subject to the operating agreement and available fund liquidity—a relatively accessible exit for a private placement.
Want to invest directly in mortgage notes with professional support? Labrador Lending also offers a Mortgage Note Asset Management Service—a hybrid approach where you own notes directly and the team handles operations. It’s available to both accredited and non-accredited investors.
How Does the Integrity Income Fund Compare to Other Passive Investments?
Accredited investors have many options. Here’s a detailed side-by-side comparison of the Integrity Income Fund against the most common alternatives:
| Investment | Target Yield | Monthly Income | RE Collateral | Market Correlated | Accredited Only | Effort Level |
|---|---|---|---|---|---|---|
| 🐾 Integrity Income Fund | 8–10% | ✓ Monthly | ✓ | Low | ✓ | Zero |
| Public REIT | 3–6% | Quarterly | ✓ (Equity) | High | No | Zero |
| Private RE Syndication | 8–15% | Quarterly/Annual | ✓ | Moderate | ✓ | Low |
| Dividend Stocks | 2–5% | Quarterly | No | Very High | No | Self-directed |
| Treasury Bonds (10yr) | 4–5% | Semi-annual | No | Moderate | No | Zero |
| Rental Property | 5–10% | ✓ Monthly | ✓ | Low | No | High |
| High-Yield Savings | 4–5% | ✓ Monthly | No | Low | No | Zero |
Yields are illustrative ranges based on market data as of early 2026. Past performance does not guarantee future results.
Target Annual Return Comparison
Who Is the Integrity Income Fund Right For?
Busy Professionals
Doctors, executives & engineers wanting income without investing their time.
Income-Seeking Retirees
Accredited retirees supplementing retirement income with monthly cash flow.
RE Investors Diversifying
Landlords adding debt-based income streams without more operational overhead.
Market Skeptics
Investors seeking lower-volatility alternatives to equity-heavy portfolios.
What Are the Risks of a Mortgage Note Fund?
No investment is risk-free. Responsible investing requires a clear-eyed view of the downside. Here are the key risks associated with any mortgage note fund—and how Labrador Lending manages them.
Risk 1: Borrower Default
If a borrower stops making payments, the fund must pursue resolution through loan modification, deed-in-lieu of foreclosure, or full foreclosure proceedings. This process can take months and incurs legal costs. Mitigation: Conservative loan-to-value underwriting and experienced asset management reduce default frequency and resolution costs.
Risk 2: Illiquidity
Mortgage note funds are private placements—not traded on public exchanges. Your capital is committed for the investment term. Only invest capital you can keep committed long-term.
Risk 3: Real Estate Collateral Decline
If property values fall significantly, the collateral backing a note may decrease in value, potentially below the outstanding loan balance. Mitigation: Conservative LTV requirements ensure an equity cushion in the underlying property.
Risk 4: Manager Risk
Performance depends heavily on the quality of the fund manager’s underwriting, deal sourcing, and asset management capabilities. Mitigation: Evaluate the team’s track record, transparency practices, and alignment of interests. At Labrador Lending, the founder invests alongside fund LPs.
- Conservative underwriting standards with disciplined loan-to-value requirements
- Operations led by Rodg de Guzman — 20+ years of administrative and operational management experience
- Monthly transparent reporting keeps investors fully informed
- Founder-led management — Jamie Bateman invests in the same notes the fund holds
How Are Mortgage Note Fund Returns Taxed?
Tax treatment varies by fund structure. Most private mortgage note funds structured as LLCs mean investors receive a Schedule K-1 annually, reporting their proportional share of income, deductions, and credits. Key tax considerations:
| Tax Aspect | What to Know |
|---|---|
| Tax Document | Schedule K-1 (LLC structures) or 1099-INT |
| Income Type | Interest income — generally taxed as ordinary income |
| Capital Gains | May apply on note dispositions (depends on holding period) |
| SDIRA Option | Hold fund interest inside a Self-Directed IRA for tax-deferred or tax-free growth |
| Roth SDIRA | Monthly distributions grow entirely tax-free inside a Roth SDIRA |
| UBTI Risk (SDIRA) | May apply if fund uses debt financing — consult a tax professional |
Always consult a qualified CPA or tax professional before making investment decisions based on tax considerations. This is general education, not tax advice.
Why Mortgage Note Funds Are Growing in 2026
Mortgage note investing sits at the intersection of two massive, expanding markets: U.S. private real estate credit and global private credit. Understanding the scale of these markets helps explain why institutional and accredited investors are increasingly allocating to debt-based real estate strategies.
$4.8 Trillion
U.S. Private Real Estate Credit Market
$3 Trillion
Global Private Credit Market (2026)
$5 Trillion
Projected Private Credit Market by 2029
$18.9 Trillion
Total U.S. IRA Assets — Eligible for SDIRA Note Investing
Institutional investors have long allocated to private credit and mortgage-backed debt for its income stability and diversification benefits. With $18.9 trillion sitting in U.S. IRA accounts and a growing share of that capital self-directed into alternatives, accredited investors now have the same access—through vehicles like the Integrity Income Fund—that were once reserved for institutions.
Free Resources for Prospective Investors
Labrador Lending offers a comprehensive library of free investor resources to help you evaluate whether mortgage note investing is right for your portfolio:
- Integrity Income Fund Overview PDF — detailed fund structure and investor information
- AI-Powered Note Investing Guide — how AI tools are changing note investing in 2025+
- Self-Directed IRA Investment Guide — how to invest in the fund through your IRA
- Monthly Webinars — live Q&A with the Labrador Lending team
- State Licensing Guide — for investors considering active note investing
Frequently Asked Questions About Mortgage Note Funds
A mortgage note fund is a pooled investment vehicle where a fund manager uses capital from multiple investors to purchase mortgage notes—loans secured by real property. Many private funds, including the Integrity Income Fund, are limited to accredited investors. Investors earn returns through the interest payments collected from borrowers, typically distributed monthly, without directly owning or managing real estate.
A mortgage note fund generates income by purchasing mortgage notes and collecting monthly interest payments from borrowers. For performing notes, income is steady and predictable. For non-performing notes (loans where borrowers have stopped paying), the fund manager works toward resolution through loan modification, short sale, or property acquisition—each generating returns distributed to investors.
Many private mortgage note funds, including the Integrity Income Fund, are offered under SEC Regulation D and require accredited investor status. You qualify as accredited if you have annual income over $200,000 (or $300,000 with a spouse) or a net worth exceeding $1 million excluding your primary residence. Some note funds are offered under SEC Regulation A, which does not require accredited status and is open to non‑accredited investors within SEC limits, but this structure is less common for private mortgage note strategies. If you are not yet accredited, Labrador Lending’s Asset Management Service is open to both accredited and non-accredited investors.
Mortgage note funds typically target preferred returns of 6–14% annually, depending on the fund’s strategy, use of leverage, and risk profile. More conservative, unlevered funds often target 6–10%, while higher-risk or leveraged strategies may target up to 14%. The Integrity Income Fund by Labrador Lending targets 8–10% annual returns, paid monthly, with no fund-level leverage. Actual returns depend on loan performance, deal sourcing, and market conditions. Past performance does not guarantee future results.
Mortgage note funds are debt-based investments, while REITs are equity-based. Debt investments are generally less volatile than equity investments because returns come from contractual loan payments rather than market-sensitive property valuations. However, both carry risk. Key advantages of note funds over public REITs include lower correlation to stock market movements and real estate collateral securing each loan. A key disadvantage is illiquidity—public REITs trade daily, while note fund interests are locked up.
Yes. Many investors hold fund interests through a Self-Directed IRA (SDIRA) or Self-Directed Roth IRA, allowing distributions to compound tax-deferred (traditional SDIRA) or tax-free (Roth SDIRA). You will need to work with a qualified SDIRA custodian. Labrador Lending supports IRA investing—visit their resources page for guidance.
Many mortgage note funds, including the Integrity Income Fund, pay monthly distributions, which can be attractive for investors seeking regular income versus the quarterly or annual distributions common in REITs and other alternatives. Since launching in June 2022, the Integrity Income Fund has not missed a single investor monthly distribution at the targeted preferred return rate.
Direct note investing requires significant time and expertise: sourcing deals, underwriting loans, managing servicers, handling delinquencies, and navigating loss mitigation. A managed fund handles all of that. Additionally, fund managers maintain institutional deal pipelines that keep your capital continuously deployed—one of the biggest challenges for individual investors. The Integrity Income Fund also provides a liquidity path after a 12-month commitment, subject to the operating agreement and available fund liquidity—which is uncommon in direct note investing or other private real estate placements.
The Integrity Income Fund offers two investment classes: Class B starts at $25,000 (targeting 8% annually) and Class C starts at $100,000 (targeting 10% annually). Both classes receive monthly distributions with a 12-month commitment period. Visit the passive investors page to schedule a call with the Labrador Lending team.
Ready to Earn Monthly Passive Income?
The Integrity Income Fund is open to accredited investors seeking real estate-backed income, monthly distributions, and zero operational involvement. Invest Wise. Worry Less.
Learn About the Integrity Income Fund Download Free Investor ResourcesDisclaimer: This article is for informational and educational purposes only and does not constitute investment advice, legal advice, or tax advice. The Integrity Income Fund is a private placement offered under SEC Regulation D and is available only to accredited investors. All investments involve risk, including the potential loss of principal. Past performance does not guarantee future results. Consult qualified legal, tax, and financial professionals before making investment decisions. Labrador Lending, LLC is not a registered investment advisor.
