Category Archives for Private Mortgage Investing

Benefits Of Private Mortgage Investing

“Here Are The Key Benefits Of Private Mortgage Investing”

benefits of private mortgage investmentPrivate mortgage investing is one of the fastest growing investment vehicles in the market today for a few very good reasons.

First, a private mortgage loan agreement is going to outline what you are going to get as a return at the beginning of the investment.  There is no speculation as to what the return will be nor is the return any way dependent on market forces.

The return is also a very fair return when you compare it against things like T-Bills, GIC, Term Deposits, CD’s and the like.

And all private loans are made with the end in mind meaning that an exit strategy to repay the funds is typically required by a private lender or investor before a deal is approved and funded.

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Another major benefit that has led to private real estate loan investing growth is the fact that your investment is secured by real estate.  Provided that you’re lending considerably less than 100% of the fair market value of a piece of real estate, there is very little risk of investment loss due to the legal rights an investor has to realize against their registered real estate security in the event of a loan or mortgage default.

Compare this to just about any other type of investment that yields a similar return and you’ll be hard pressed to make a better cash for investor dollars than that provided through a private mortgage.

Most private mortgages are also for a period of one year, so investors also have the ability to stay relatively liquid, or through diversifying part of their portfolio with private mortgages, become more fluid.

Even when the money is coming due, you as the investor have the option to extend the mortgage if its working for you and you don’t have another immediate avenue or need for the money.

So What Is A Private Mortgage Compared
To A Bank Mortgage?

This is a very common common questions with a very simple answer.

A private mortgage is no different than a bank mortgage. A loan agreement is registered against a real estate property in first or second position and the investor or lender retains the same legal rights to enforce their security as a bank would have.

Private lending is actually quite straight forward with most of the process managed by the investor through a mortgage broker and a real estate lawyer.

There are times when individual investors will shy away from private lending against real estate property, or take their time getting into it, due to a fear of the unknown.

Compared to most investing options, it is very easy to get into and the risk protection afford those investing considerable.

Preservation of Capital

The number one goal for any investor placing money into private mortgages, or any investment for that matter, is the preservation of capital. Profitable returns are based on a continuous flow of positive earnings without any erosion of the principal.

We manage this with our investors by making sure the loan to value ratio on a given mortgage provides for manageable risk.

Getting into higher ratio mortgages can provide attractive returns, but eventually they can lead to capital erosion as well through loan losses.

By placing mortgage funds that make sense from a real estate security point of view, capital is preserved through out the investing process. This doesn’t mean that you’ll never have a default or problem with privately funded mortgages. But it does mean that when you do have a problem, there is a security buffer to protect you from losing any money.

Another way to make sure you’re investing in deals that make sense for you is to invest locally.

In most cases, private investors will lend in their local geography because of their own knowledge of the local real estate market, and the access that local deal provide in term of going to look at the property and meeting with the borrower if required.

This doesn’t mean you can’t or shouldn’t do deals farther away. If that makes sense and you’re comfortable with the deal, there is no reason not to.

But when you’re starting out, working locally can provide you with more knowledge and comfort related to any deals you may consider investing in.

Potential Rates Of Return

For the 1st and 2nd mortgages we place, the average rate of return would fall in the 7% to 12% range.

Higher rates of return are certainly possible, but they also come with higher risk.

If you’re lending in the 50% to 60% loan to value range, then rates in the 7% to 8% range are going to be most common.

For deals at 80% loan to value, the rate will be more in the 10% to 11% range.

If want to learn more about private mortgage investing or need some help placing money into private mortgages, then I suggest that you give me a call to and we’ll get all your questions answered right away.

Click Here To Speak With Private Mortgage Broker Joe Walsh

Strategies For Private Mortgage Investing

“Here Is Main Investing Strategy Adopted By Private Mortgage Investors”

investing in private mortgages
One of the barriers investors have to get started with private mortgage investing is which type of investing strategy to take.

This dilemma exists because there are so may slices to the private mortgage market.

For instance, at the highest level of market segmentation, your strategy for investing can involve residential versus commercial and industrial property. Then there is lone size to consider, application of funds such as for debt consolidation, construction, and development, then there is geography, exit strategy, loan to value and mortgage position…

The list of potential areas to focus on is almost endless, which can make it difficult for some investors to get started.

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When I get calls from investors that want to discuss potential private lending through our brokerage, the strategy to consider many times becomes the focus of the conversation.

Unless the investor has some predetermined investment criteria that would dictate what type of financing strategy should be considered, I tend to suggest the following approach.

Focus On What You Know

By focusing your attention on what you know, have experience with, and are comfortable assessing, you can form a basic investment strategy for getting started with private mortgage lending.

Too often potential lenders and investors make the whole process too complicated and talk themselves out of putting money out in the market.

But getting started can be as simple as just focusing on what you know.

I had an investor call me wanting to invest in private mortgage, who had made quite a bit of money successfully completing land development projects.

The obvious starting point was getting him involved in some development financing deals.

Sometimes when investors start with what they know they never even consider other parts of the market which can work just fine.

The key here is that there a multitude of potential mortgage investment strategies out there and utilizing any of them is related to your personal comfort with the knowledge required to make a good investment decision.

What If I Don’t Have Any
Relate-able Knowledge To Apply?

In the fairly rare situation where someone with money to invest does not have a professional knowledge or expertise to draw from when assessing private mortgage opportunities, we suggest that they start small with residential property mortgages.

All investors have experience owning a home and/or rental property. And being that residential is the largest segment of the market, its still possible to draw from what you know and focus in on the most straight forward and lowest risk residential mortgage opportunities available.

If you want to discuss private mortgage lending strategies, give me a call and we’ll go over what is the most relevant to your investing criteria and knowledge base.

Click Here To Speak Directly To Toronto Private Mortgage Broker Joe Walsh

Why Investors Fear Private Mortgages

“Private Mortgage Investing Tends To Raise These Three Investor Concerns”

private mortgage investor

Even though private mortgage investing in on the rise, there are still many investors out there that do not diversify their portfolios with private real estate loans due to a number of fears.

Today I want to talk about the three most common concerns/fears I hear from investors on a regular basis and why I don’t believe these issues should be a road block to taking advantage of all the great opportunity available in private mortgage financing.

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While there are other areas of concern that I hear from investors regarding getting involved with private mortgages, these three are by far the most common.

So let’s get into each one separately.

How Do I Manage Risk Of Capital Loss?

When speaking with a potential mortgage investor the first area of concern tends to be risk management. This starts with the lender or investor trying to understand how any type of private mortgage can be considered a strong investment when potential borrowers are inevitably individuals who can’t get mortgage financing from a bank or institutional lender for some reason.

Investors considering private mortgages can have a hard time believing that private lending risk can be managed when you’re dealing with someone with credit and/or cash flow flaws already.

Risk management starts with risk assessment in which you’re making sure you clearly understand the financial and credit background of the borrower as well as the back story that has led him or her to seek out a private mortgage.

Successful private lenders focus on make sense lending and capital conservation which all starts with the risk assessment that needs to be performed before money is ever advanced.

How Do I Administer And Look After My Private Mortgage Portfolio?

Many times investors have this vision of paper work and administration staff associated with banks that they think will transcend to their own mortgage lending activities. Most private lenders are individuals and the thought have having to take on a lot of administrative related work is not appealing to most.

The reality is that private mortgages, for the most part, are extremely easy to administrate. Most private real estate loans are for a period of one year and the borrower provides 12 months of post dated cheques to cover off the monthly loan payments. At the end of the loan term, the funds need to be repaid. There is not really any complexity or significant work volume involved.

What Do I Do If Things Go Bad?

When I say things have gone bad, I’m speaking of a borrower default where the lender now has to turn to their legal recourse options and a power of sale action.

If a borrower defaults, the process for capital recovery is turned over to a lawyer for the most part.

And regardless of how long a power of sale action takes, if the initial risk assessment was done properly, all capital will be recovered and accrued interest paid.

The risk of loss and capital erosion are mitigated up front which is why real estate backed lending is becoming more and more popular as compared to other forms of investing that provide similar levels of return.

If you’d like to know more about private mortgage investing, then I recommend that you give me a call so we can discuss not only your concerns but your lending requirements as well.

 

Click Here To Speak To Toronto Private Mortgage Broker Joe Walsh

 

Private Mortgage Support

“Private Mortgage Investing And Lending Success Driven In Part By Mortgage Broker Support”

private mortgage lender

If you’re going to be a private mortgager lender or investor, then you need to strongly consider developing a working relationship with a strong mortgage broker that works with private mortgages in your area.

There are a number of reasons why I think this is important, but let me boil this down to what I would consider to be the top three reasons.

So let’s get into the first reason which comes right at the start of the lending process, and that’s deal flow or lead flow.

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If you’re a private lender, when you have money to invest in mortgages, you want to be able to find a mortgage that meets your criteria rather quickly and get your money back out into the market earning a return. A lack of deal flow will cause you to have to sit on funds for longer periods of time that you would like, earning no more than bank interest in many cases.

The second aspect of good deal flow is that you want to be able to find deals that best fit your criteria versus settling for deals that you’re not completely comfortable with because deal flow is rather scarce. A good broker relationship should afford you with the deal volume to not only place your money quickly, but also place funds into deals that properly fit your lending criteria.

Proper Deal and Risk Assessment

After deal flow, the next big reason for working with an experienced broker is deal and risk assessment. And experienced broker has learned over time what to look for and how to unearth all the warts and blemishes related to a private mortgage deal. He or she also knows and understands the importance of full disclosure to the lender and works hard to make sure that you have all the relevant information in hand to properly understand the deal and assess the risk of funding it.

Brokers who do not work regularly on private deals are less likely to provide the deal assessment support you are looking for which will in turn end up providing limited value to your own assessment process.

And in the cases where a private lender looses money on a mortgage, you can point back to flaws in the assessment process that were not uncovered or properly scrutinized.

Private Mortgage Closing Skills

The last key reason for utilizing the skill set of a private mortgage broker is to increase the closing rate on deals you provide funding offers for.

Once you assess a deal and provide funding terms, there is no guarantee that the deal will close. In fact, many times deals will fall apart by a lack of proper coordination of all the closing elements such as appraisals, legal, insurance, accounting, etc.

A competent mortgage broker will be well versed in the closing process and have the skill set necessary to get everything completed in the time required by both borrower and lender.

Getting this additional help can certainly lead to more profitable private mortgage portfolios and should really be a strong consideration by any private mortgage investor or lender.

 

Click Here To Speak Directly To Toronto Private Mortgage Broker Joe Walsh

Private Mortgages Conserve Capital

“Private Mortgages Help Conserve Investor Capital”

private mortgages conserve 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.

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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

 

Investing In Private Seconds

“Investing In Private Seconds Over First Mortgages Is Preferred By Many Investors”

private mortgage solutions
When an investor chooses to put money into private mortgages, they have certain criteria choices they need to make to qualify potential deals of interest.

This would include things like type of property, location, financial and credit profiles of the borrower, lending amount required, loan to value, and so on.

One of the biggest single points of differentiation among private lending sources is whether they are interested in funding first mortgages or seconds mortgages.

In terms of total private lenders, there are more strictly focused on private seconds over firsts, or a combination of first and seconds for a number of key reasons.

“Why Are Private Second Mortgages
So Attractive To Investors”

The following reasons for investing in seconds are going to vary in their priority and importance from one investor to another, but virtually all will be important to any investor.

The first one I want to mention is profit opportunity.

A mortgage in second position is more risky than a mortgage in first position when there are two different lenders involved.

Therefore, there is a premium attached to this risk that is added into the cost of financing.

So private seconds provider a greater level of return. And with higher loan to value ratios offered, the rate charged can be still higher.

The second key reason is deal size.

The amount of financing required to fund a deal is typically significantly smaller than the average first mortgage.

This allows a private investor to spread their risk over a number of different second mortgage positions versus perhaps having all their mortgage money in one or two 1st positions.

This also makes it easier to get started in equity investing as subordinate debt mortgage financing can start at really any amount with private seconds typically being made in the $20,000 to $50,000 range.

The third reason is customer demand and deal flow.

With the growing overall level of consumer debt in the market, there is continually a need for individuals to access the equity in their homes to consolidate debts and get their cash flow and credit back on track.

This creates a continuous deal flow available, especially if you’re working with a mortgage broker that has a focus on these types of financing requests.

So when you have money available to invest, there is always good potential to get funds into the market in short order and earning a return.

The last key reason I’ll mention here is liquidity.

Almost all private seconds are issued for a term of one year. Because the funds may be used for bridging some transaction or event, the repayment can even be less than a year, providing short term repayment of funds advanced and liquidity to the lender in the process.

Compared to investing in longer term debt instruments that pay considerably less or investing in the stock market, the liquidity offered by private lending can certainly be preferred.

Click Here To Speak Directly To Toronto Private Mortgage Broker Joe Walsh

Private Lending Home

Investing In Private Mortgages

“Why Invest In A Private Mortgage?”


Perhaps the question is not why to invest in a private mortgage, but why not?

From an investor point of view, private mortgages provide the answer to a number of different challenges you might be facing with your portfolio.

Let’s go over some of the more common reasons for getting into real estate financing investments.

Portfolio Diversification

You may be heavy into equities and want to level out your investments with more interest bearing debt instruments.

And while that always sounds good and logical to say, you may not actually take the step towards diversifying because the low returns from GIC’s, T bills, CD’s, and bonds don’t provide any real excitement.

With a private mortgage investment, the returns can rival at times what you might be even getting in the equity markets without the same level of risk.

This can be an excellent way to get the degree of balance you’re looking for in your investment mix to better manage risk.

Investment Liquidity

To get any type of decent rate out of most interest bearing instruments, you have to be locked in for several years, reducing your flexibility in moving money around to take advantage of opportunities as they arise.

And you may not want to liquidate a stock position especially when with a buy and hold strategy.

Private mortgages, for the most part, are for a period of one year.

At the end of the loan term, the funds are repaid to the lender to do with as they please.

This can include reinvestment in additional private mortgages, or it can provide cash flow for other needs.

Either way, placing part of an investment portfolio into private lending opportunities can create greater liquidity for the investor for whatever their needs may be.

Investment Risk Reduction and Capital Conservation

Whether due to retirement, or lackluster performance, older investors are looking to reduce their stock market holdings and reduce the risk of capital losses in the process.

From a security and return perspective, private lending can be best choice for individuals in retirement mode who want to protect what they have been able to accumulate while still being able to generate a respectable return.

It can’t be stated enough that private mortgages secured by equity in real estate in solid markets are as or more secure from loss than any type of investment vehicle that provides a comparable return.

There are certainly risks to private lending like there are with any form of investing.

But done right, private mortgage lending can be an investment vehicle of choice.

Great results relate to having a strong team of professionals helping qualify, place, and manage your deal flow.

You can also invest as an individual lender, be part of a syndicate, or partake in a mortgage investment corp.

The keys to success lie in making sure the private mortgages you consider funding are congruent with your lending criteria.

One of the best ways to get access to opportunities that match you requirements is to work with an experienced mortgage broker that has a focus in private lending.

Me and my team work directly with a number of private lenders, each with their own areas of interest and lending/funding criteria.

If this is something you would like to know more about, I recommend that you give me a call and I’ll make sure you get all your questions answered.

Click Here To Speak With Private Mortgage Broker Joe Walsh

Private Lending Home

Private Money Investment Opportunities

“We Have Private Money Investment Opportunities For Backed By Residential And Commercial Property”

private mortgage broker contact
Good Private money investment opportunities can be hard to come by at times, especially private money investors and lenders are not set up to source their own deals to any large extent.

The private mortgage investing opportunities will then largely fall to what the mortgage broker net work at large will provide to you at any given period of time.

But when getting your deals from the broader mortgage broker network, it can also be fair bit of work to sift through all the applications you may be provided in order to find the ones that actually fit your lending and funding criteria.

And even when you have a deal that you’d like to fund, the skill of the broker to manage the client relationship can also contribute to a private mortgage actually getting put into place and being funded.

Then there are the private mortgage administration issues that arise from time to time which may or may not be a dealt with by the broker responsible for bringing you the deal.

The answer to not only having sufficient private money investment opportunities to deal with, but also the support to handle administrative issues when they arise, is for private money investors to work with an experienced mortgage broker that knows how to properly qualify deals to the investors requirements and is committed to assisting the private mortgage investor or lender in any reasonable fashion.

This is exactly what we offer the private mortgage lenders and investors that we work with.

In fact, its not uncommon that I invest in a private deal with one of my private lenders, sharing the risk of the private mortgage in the process.

As both a private mortgage investor and mortgage broker, I have a great understanding of both sides of the equation and I treat the funds for each deal like they are my own because in some cases they are.

There are lots of private money investment opportunities out there to be sure, but it certainly can be difficult at times to find the ones you feel most confident in.

My focus as a private mortgage broker is find quality deals for my private money investors where there is good equity in the subject property and a good exit strategy or ability to repay the private mortgage when it comes due.

We are not interested in and don’t promote high risk private money investment deals, primarily because these types of deals are of limited interest to the private mortgage investors that we maintain working relationships with, and if I’m not prepared to put my own money into the deal after qualifying it, I certainly won’t be trying to push it on to any private investors I work with.

If you’re seeking private money investment opportunities and want to forge a working relationship with an experienced private mortgage broker, I suggest you give me a call so we can book a time where we can discuss how we may be able to work together for each others mutual benefit.

Click Here To Speak Directly To Private Mortgage Broker Joe Walsh

How To Invest In Private Mortgages

“The Process For How To Invest In Private Mortgages Can Be Very Straight Forward”

private mortgage broker contact
If you are looking to invest in private mortgages, the process for doing so can be very straight forward and fairly easy to get into.

That being said, I am not a lawyer, and I am not providing any legal advise here in any way shape or form. Please consult with your own investment advisers and legal counsel before deciding on any particular investment strategy.

That being said, here is a very basic overview of the process to invest in private mortgages.

Off the top, investment may not be the best term to be using as that conjures up images of securities regulations and legal disclosure requirements.

There are some forms of mortgage investing, such as mortgage investment corporations, that do have regulatory guidelines to follow.

But for an individual that wants to put their own money into a mortgage, there likely aren’t going to be any regulations specific to securities law that you’re going to have to worry about, regardless of the jurisdiction you are in.

Not to over simplify things, but most private mortgages are loans from one person to another, where real estate is offered for security to which a mortgage is registered to protect the interests of the borrower.

In order to invest in private mortgages, you basically are going to need a source of funds to advance to a borrower and a lawyer to prepare a mortgage commitment, register the mortgage commitment, and disburse the funds.

You can source your own deals or you can work through a private mortgage broker who has the ability to qualify their own deal flow against whatever lending/funding criteria you establish. You may even want to utilize a mortgage broker to take care of all your administration related to your outstanding mortgages as well.

If you are the only person funding a particular loan request where a mortgage is being issued as security, you can have complete control over the decision making process and the mortgage registration process, and if you so choose, you can get the borrower to pay for your legal costs as well, provided the borrower is prepared to accept all the costs associated with putting the mortgage in place.

Once again, as an investment vehicle, private mortgages are fairly straight forward to get into place.

If the mortgage goes into default, then you have the same rights as any mortgage holder to act on your security in order to reclaim both the funds advanced and the interest cost outstanding.

As a private mortgage broker, I work with a number of different private mortgage lenders to locate private mortgage investment opportunities for them.

If you would like to learn more about how to invest in private mortgages, or would like to see how we can work together, please give me a call and we can set up a time that works for both of us.

Click Here To Speak To Private Mortgage Broker Joe Walsh

Private Mortgage Investment

“What Exactly Is A
Private Mortgage Investment?”

private mortgage broker contact
A private mortgage investment takes place when an individual or group of individual investors together, advance funds in return for a private mortgage registration connected to a mortgage commitment signed by both the borrower and the lender.

Effectively, a private mortgage lender is an investor, so any private mortgage funding they put out would be considered an investment vehicle to them where they are getting a stated level of return for a fixed period of time.

Private mortgage investors are on the rise, especially within the baby boomer group, as more and more individual investors reaching the retirement are looking at shorter term investments that are more secure in nature.

While the stock market can primarily a by and hold strategy for many, the private mortgage investing world is limited mostly to one to two year periods of time, after which the money is returned to the investor to use as he or she pleases, making a private mortgage a highly liquid and predictable investment vehicle.

Private mortgage investors may also be active stock market investors that are just looking to diversify their investment portfolio through mortgage financing. This will tend to lower their over all level of risk due to the strength of real estate security as well as provide greater liquidity.

One of the great aspects of a private mortgage investment is that any one can become an investor. There are really no barriers to entry compared to much of the regulatory rules associated with different forms of equity investments in private and public companies.

The other great advantage of private mortgage investing is that the investor makes all the decisions related to the investment and can also utilize their own lawyer to make sure the closing process is done properly, with the borrower paying for all related legal costs.

The biggest challenge for investors that want to fund private mortgages is finding qualified deals that they are comfortable with.

Typically this is solved by the private mortgage investor developing a working relationship with an experienced private mortgage broker who is capable of prequalifying potential deals to the investors lending criteria.

The private mortgage broker tends to also have a key role in administering the mortgage over time and managing much of the borrower communication requirements.

If you’d like to develop a private mortgage investment portfolio and want to work with an experienced private mortgage broker, I suggest that you give me a call and we can discuss a potential working relationship.

Click Here To Speak With Private Mortgage Broker Joe Walsh