A recent article in Money magazine by Sara Max and Donna Rosato detailed the financial perils of long term care.  The costs of the expenses associated with it can destroy the finances of a family.Private Money Returns  Investing in private mortgage notes can prevent financial ruin as a result of the need for long term care.

 In the Money magazine piece by Max and Rosato, "Makeovers: Five Families Start Fresh", it was recommended that families purchase long term care insurance to protect against the costs, should it be needed.  As Rosato and Max pointed out in the article, just the costs of long term care insurance are very high.  In addition, the insurance costs should be expected to continue rising, too.

For this and other factors, investing in private mortgages is an ideal way to deal with all of the costs of long term care, from the insurance to the medical treatment.  Private mortgage notes are loans from an individual or group of investor to finance the purchase of real estate.  While an individual can provide a private mortgage for a single transaction, it is far wiser, particularly when focusing on long term care, to participate in a pool with other investors as there is more risk mitigation from the diversity of the asset base.

The returns make private mortgage notes even more compelling.

Private mortgage investing generally posts returns in the double digits.  When done well, there should be few, if any defaults.  From that, private note investing is very unique: rarely is there such a combination of high reward with low risks from a short term transaction.

Utilizing retirement accounts for private mortgage notes makes the investment even more suitable for long term care costs.  When held in a retirement account such as an individual retirement account (IRA), there are no taxes.  As a result, the investment income from a private mortgage note is tax free.  Should the private mortgage note be sold for a profit, there is no tax on the gains, either.

As the terms of a private mortgage note are set by the lender and the borrower, it can be structured to pay for long term care.  The lender could have lower payments in the early stages of the note with a balloon payment at the end, to cover future long term care costs.  There could also be terms to allow for the private mortgage provider to profit from the rise in the value of the property being financed, if desired.  In addition to the high returns, the flexibility of a private mortgage note makes it even more suitable for financing the expenses of long term care.

To protect against long term care costs, the investment income from a private mortgage note can pay for the policy.  If long term care is needed, the overall returns can pay for the medical expenses.  The need for long term care is an event that no one wants to happen.  Investing in private mortgage notes makes it much easier to deal with all of the costs of long term care.