Commercial mortgage investing via private mortgages can be an excellent way to build a new investment portfolio or diversify an existing one.
Investment opportunities can include income producing properties, owner occupied properties, and different forms of land development and construction.
Compared to investing in residential mortgages, commercial property loans are typically for a higher lending amount on average and can require a higher degree of investor or lender knowledge to properly qualify each deal.
Within the commercial property market, there are all sorts of niches that can be targeted by a lender to gain a better understanding of the market and to develop more robust lending and funding criteria.
For the private commercial mortgage market as a whole, 90% of individual private lending doesn’t exceed $2,000,000. For larger deal amounts, mortgage investors can choose to syndicate with one or more other investors to cover off the size of the deal and further mitigate the lending risk.
Because of the time it can take to arrange a bank or institutional mortgage, its not uncommon that commercial deals get funded with private funds when there is any type of time pressure involved. This then provides a long period of time for the borrower to arrange long term funding with a bank at rates and terms that meet their requirements.
This form of two step financing can result in a very solid and low risk return on investment to the lender due to the fact that a take out mortgage would likely have been provided in the first place if enough time was available to the borrower.
Similar to residential mortgages, there is definitely a market for fast commercial mortgage approvals and funding which can lend to higher rates of return as most private lenders do not provide a fast enough process for some of the short term bridge financing requests that are regularly out in the market.
So solid commercial deals in Toronto or the Greater Toronto Area are going to be more competitive among private investors as compared to mortgage investment opportunities that are outside the GTA.
On the flip side, higher rates can be obtained outside of the GTA as well not only for higher potential market risk, but also due to a lot less competition for individual deals, with competition being very regionally specific.
The main keys to getting into commercial mortgage investing are 1) to develop a solid understanding of the types of deals you want to consider as well as your lending criteria; and 2) develop a regular deal flow source so that you always have access to potential deals when you have money to invest.
One of the best ways to get access to deals when you want them is to work with an experienced private mortgage broker that works on commercial property financing requests.
If you want to know more about commercial property investment opportunities in Ontario, I suggest that you give me a call and we can discuss further at time that works for both of us.
Click Here To Speak Directly To Private Mortgage Broker Joe Walsh