The entire subject of the investment of funds covers a wide range and involves a consideration of many questions. The real estate mortgage as an investment has certain advantages and disadvantages as seen by comparison with other forms of investment. The principal features to be considered are safety, income yield, and marketability.

It may be emphasized that from the point of safety the mortgage loan is superior to many other investments. It is a direct lien on the land and the improvements on the land, and if it is made for a proper proportion of the value of the property the investment is well secured and repayment practically certain. It is important, however, for the investor to be assured that his lien is a legal and enforceable one and also that there is sufficient value on the property to make it safe. To have such assurance the investor does well to make his mortgage investments through persons or corporations of unquestioned ability and financial standing, unless, of course, he has the necessary real estate knowledge and experience to act for himself. Safety is, of course, increased if payment of the mortgage be guaranteed by a reliable company.

The income yield on real estate mortgages is usually higher than the return on other prime investments. When high class bonds pay the investor from 3 l/2% to 5% per annum, real estate mortgages pay from 4 l/2% to 6% per annum. Many choice bonds have sold on a higher basis during recent years due to peculiar conditions, and the rate on real estate mortgages has been kept down by law to 6% in many States. The result has been a better relative showing for the bond, but under normal conditions the mortgage has the advantage.

From the point of view of marketability, the mortgage often must give way to other investments. A real estate mortgage is usually made for a definite term and until maturity may not be saleable except at a loss. At maturity it may be called but collection is sometimes slow. The owner of the property often must raise the money by securing the mortgage elsewhere. If the mortgage has to be enforced by foreclosure, a certain amount of delay is inevitable. Many stocks and bonds are quickly marketable, and may be sold on a few hours' notice, thus returning the investor's money more quickly than a mortgage could be collected or sold. It must be noted however that stocks and bonds fluctuate from day to day and a sale may result in considerable loss. A mortgage, on the other hand, has often but a short time to run and can usually be collected in full at maturity, and if it is sold before maturity the loss or expense in selling is almost always a small one. There have been developments in mortgage lending in recent years which have a tendency to make mortgage loans more marketable.

Against a certain disadvantage of lack of marketability of mortgages may be put the advantages of larger income yield, a great degree of safety and, usually, an early maturity date. The objection that technical skill is needed to make mortgage investments may be answered by saying that those who lack such skill may deal with reliable concerns handling mortgage investments as a business.

The Federal and State income tax laws have worked a decided disadvantage to mortgage investments and one that cannot be overlooked. The income from State and municipal bonds is exempt from taxation, and so is that from United States Government bonds to a large extent. As mortgage interest is taxable, the net return after payment of income taxes is often less to the private investor than the return on good tax-exempt securities. The larger the investor's income the more pronounced this feature becomes. It has resulted in taking a large amount of private funds out of the mortgage market.