How To Invest in Private Mortgages
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RATE OF RETURN IN MORTGAGE INVESTING
Investing in private first, second or third mortgage loans can consistently earn between 8.75% and 15% depending on the degree of risk, with an estimated average return of 11% per annum. Using the 11% average if you re-invest the interest received at the same rate, you should double your initial investment every seven years.
WHAT IS THE SECURITY IN MORTGAGES
Unlike investments in stocks or bonds, mortgage investments are secured by hard assets that you can "touch and feel". Typical mortgages are based on a percentage of the appraised value of the real estate security, or the Loan to Value Ratio (LTV). By combining this with short mortgage terms (the length of time of the loan is outstanding) the likelihood of the value of the real estate dropping below the value of the mortgage is considered minimal. This is a great way to invest other than the stock market.
As an example, if you were to invest $100,000 in a mortgage investment today with real estate security worth $135,000. In two years time when the mortgage matures, and if it is repaid, the value of the real estate could drop 25%, and your initial investment should still be protected. Compare that security to a $100,000 investment in a mutual fund in which the value drops 25% to $75,000 after you purchase it!
PROFESSIONAL MANAGEMENT
I can manage all the details of the mortgage investment. I coordinate all the legal documentation, and mortgage renewal negotiations. I collect cheques due, and pass these cheques on to you, the lender.
WHAT IS THE RISK OF INVESTING IN REAL ESTATE?
Mortgages are generally safe investments in a stable or rising real estate market because they are backed by real property.
In a declining market, the value of the underlying real estate must drop to below the value of the mortgage registered against the property before the mortgage investment is at risk. Based on the expected changes in the market the Loan to Value Ratio (LTV) ,at the time of the initial loan, is adjusted accordingly to reduce risk of loss.
MORTGAGE INVESTING THAT IS RIGHT FOR YOU
Before you invest with any borrower you should review the details of the proposed loan, including investment term, interest rate, minimum investment required, and payment terms together with a description of the project or property used as security for the loan. Based on this information, and any additional details required, you make the decision to invest or not.
The types of First and Second Mortgage investments available can include the following:
- Residential Single Family
- Multifamily
- Purchase
- Development
- Commercial
- Raw Land
HOW DO I INVEST IN MORTGAGES?
DIRECTLY
I will find, qualify, and negotiate a mortgage investment on your behalf directly with a borrower. I take care of all the work for you.
THROUGH YOUR RRSP's & RRIF's
Funds invested in individual RRSP and RRIF plans qualify for arm's length mortgages on real estate situated in Canada. (With certain limitations). The mortgage funds must first be held as a Self-directed Plan by a Trustee that will accept mortgage investments.
Give me a call and I will be happy to meet with you, or you and your investment advisor, to discuss what mortgage investment is right for you.
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