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.