Private Mortgages Conserve Capital
“Private Mortgages Help Conserve Investor Capital”
I’d like to spend some time today talking about how investors use private mortgage lending to conserve their capital.
One of the best ways to bring this point across is to compare investing in the stock market with private mortgage lending.
So lets get into an example to better understand what I’m specially referring to when I talk about capital conservation.
When you invest in the stock market, you enter into a investment position that is going to vary with market trading activity.
When you invest in a private mortgage, you are effectively investing in more of fixed capital position with a fixed rate of return.
Let me explain further.
With private lending, the value of the mortgage and the property is not likely to change appreciably over the term of the mortgage. In fact, most private mortgages are for a term of one year or less, so the probability of your capital position eroding in that small period of time is minimal.
And the risk of capital deterioration is further managed with the opportunity for financing is first assessed, both in terms of the property assessment and the borrower assessment.
Certainly an investment in the stock market can afford you the opportunity to make a substantial return while a private mortgage can only offer a fixed rate of return.
But the return generated by a private mortgage is fair rate of return and the risk is very manageable.
Managing Your Exit Strategy
With the stock market, not only are you exposed to the fluctuations in the market, but also the liquidity options that may exist.
Private mortgage investors will be getting all of their capital back at the end of a one year term for the most part and if there are any issues inhibiting their ability to get their capital back on schedule, they have legal recourse afforded by the real estate security they hold.
Private lenders are also provided with choices in that they can get their capital back at the end of a lending term, or extend the term if they so choose.
The primary goal of private lending on real estate is really two fold…get a fixed rate of return while conserving capital in the process through strong risk management.
This is also why more and more investors are diversifying larger parts of their overall portfolios into privates mortgages.
The bottom line is that private mortgage lending is one of the best investment vehicles in the market today for providing a solid return while conserving capital at the the same time.
If you’d like to know more about private mortgage investing and how it can be used to better protect your available investment capital, I suggest that you give me a call and I’ll make sure you get all your questions answered right away.
Click Here To Speak Directly To Toronto Private Mortgage Broker Joe Walsh