Private mortgage investors should expect late payments, and most lenders fail to disclose this upfront, according to H. Jack Miller, President and CEO of Gelt Financial LLC. Miller, whose firm specializes in private money loans, says that roughly 10% of borrowers in a typical private lending portfolio are habitually late—not in foreclosure or default, but simply slow to pay as a matter of personality or circumstance. This reality, he argues, is structural to the asset class and must be communicated clearly to investors before they commit capital.
The distinction between a late payment and a loan in distress is critical. An investor who expects consistent, on-time monthly payments may interpret a late payment as a signal of impending loss, leading to misplaced anxiety and poor decision-making. In contrast, an investor who understands that a portion of the portfolio will routinely pay late—and that this risk is priced into the loan structure through conservative loan-to-value ratios—will respond more rationally. Gelt Financial caps its LTV at 65%, but Miller says effective valuations bring the average closer to 50-52%. At that level of collateral coverage, even a borrower who stops paying entirely leaves the investor positioned to recover principal through foreclosure or property sale, though it may take time.
Miller is equally direct about which investors should avoid private lending altogether. If an investor needs monthly interest income to cover living expenses, he says, “Forget it. Don’t invest with us. We’re not the right fit.” Because if a borrower stops paying, it may take six months or a year to recover funds. This explicit screening is uncommon in an industry where platforms often prioritize growing their investor base. Mismatched investors, he argues, create operational and reputational problems that outweigh the short-term benefit of additional capital. The ideal investor is someone with capital that can be deployed for an uncertain period, who treats monthly distributions as supplemental income, and who has diversified income sources. Gelt’s current base of approximately 130 active investors, built through referrals, skews toward IT professionals, retired fund managers, and real estate investors.
To manage investor anxiety around cash flow risk, Miller advocates for real-time transparency rather than reassurance. Gelt provides investors with 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. “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 transparency converts an anxiety-producing unknown into a manageable known, especially when compared to competitors who may not return calls during problems.
Miller’s operational approach has been consistent for about 20 years: same-day problem notification, monthly distributions on the 20th, and full document access through a live portal. This consistency is itself a trust signal. He 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 questions that matter most are not about advertised returns. They are about what happens when a borrower stops paying: how quickly the investor is notified, what documentation they can access, and whether distributions follow a fixed schedule. The quality of investor communication and operational transparency may matter as much as the underlying credit quality of the loans themselves.
