Private Mortgage Investors Should Expect Late Payments, Says Gelt Financial CEO

Private mortgage lending offers accredited investors an alternative to volatile equities and low-yield fixed income, but it comes with a structural reality that many are not prepared for: roughly 10% of borrowers in a typical portfolio are slow to pay at any given time. According to H. Jack Miller, President and CEO of Gelt Financial LLC, this is not a red flag but a characteristic of the asset class that investors must understand before committing capital.

Miller explains that slow payers are not necessarily in foreclosure or default; they simply pay late as a matter of habit or circumstance. This distinction is crucial because an investor who expects consistent on-time payments may misinterpret a late payment as a sign of impending loss, leading to misplaced anxiety and poor decision-making. In contrast, an investor who understands that late payments are priced into the loan structure and managed through conservative loan-to-value ratios will respond more rationally.

Gelt Financial maintains a maximum loan-to-value (LTV) ratio of 65%, but Miller notes that conservative property valuations bring the effective average closer to 50-52%. This collateral coverage ensures that even if a borrower stops paying entirely, the investor can recover principal through foreclosure or property sale, albeit over time. “Because our LTV is lower than 65, they’re going to wait to the end. They’re going to be paid very handsomely for it,” Miller says.

Miller is equally direct about which investors should avoid this asset class. Those who need monthly interest income to cover living expenses should not invest in private mortgage lending. “If you need the interest to live on, forget it. Don’t invest with us. We’re not the right fit,” he says. If a borrower stops paying, it may take six months or a year for the capital to be recovered. This explicit screening is uncommon in a market where many platforms focus on growing their investor base, but Miller argues that mismatched investors create operational and reputational problems that outweigh the benefits of additional capital.

The investors best suited for private lending are those with capital they can afford to leave deployed for an uncertain period, who treat monthly distributions as supplemental income rather than primary income. Gelt Financial’s investor base of approximately 130 active investors, built mostly through referrals, includes IT professionals, retired fund managers, and real estate investors—people with financial sophistication and diversified income sources.

To manage investor anxiety around cash flow risk, Gelt Financial prioritizes transparency. Investors have 24/7 portal access to loan documents, borrower payment status, and closing materials. When a borrower misses a payment, investors are notified the same day. When a loan pays off, capital is distributed immediately rather than held until the next scheduled disbursement. “As soon as it happens, they’re getting notified. God forbid a borrower dies, property burns down—they’re getting notified pretty much the same day or instantly,” Miller says.

This real-time transparency contrasts with the experience of investors who work with other lenders. “Their competitors don’t make the paperwork available to them. They don’t return their calls when there’s a problem. They return their calls when there’s good news, but when there’s a problem, everyone disappears or suddenly you’re playing phone tag,” Miller observes.

Gelt Financial has followed the same operational routine for approximately 20 years: same-day problem notification, monthly distributions on the 20th (with investors receiving funds on the 21st), and full document access. This consistency is a trust signal. “The fact that it’s been done this way for 20 years, that the 20th of the month, the money goes out, they get it on the 21st—it’s very reassuring,” Miller says.

Miller also walks new investors through the firm’s worst periods, including taking back over 200 properties during the Great Recession, because he believes investors respond better to disclosed risk than to discovered risk. “I go out of my way to tell them the bad stuff,” he says.

For investors evaluating private lending platforms, the critical questions are not about advertised returns but about what happens when a borrower stops paying: how quickly the investor is notified, what documentation is accessible, and whether distributions follow a fixed schedule. Understanding these operational details is essential for making informed investment decisions in this asset class.