Private Mortgage Investors
“Private Mortgage Investors Enjoy Healthier Returns And Lower Levels Of Risk Compared With Some Other Forms Of Investment”
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In the last number of years, the trend to private lending is on the up swing as many investors have grown weary of their stock market returns (or lack of returns) over the last ten plus years.
Somehow stock market investors seem to be ‘schooled’ in accepting losses as a form of ‘market correction’ or ‘something that will balance out in the long term.
Because our business is about placing private mortgages on residential, commercial, and industrial real estate, we are always interested in taking on new private mortgage lenders or private mortgage investors to add to our growing list of private money sources.
Making The Case For Private Mortgage Financing
Regardless of your age, private mortgage financing has a lot of benefits to consider both in terms of financial return and investment security.
And if you happen to fall into the Baby Boomer age category, there is even more potential appeal as you’re more likely to be focusing on short term opportunities versus long range ones.
Lets take a quick look at some of the major reasons why private mortgage investing in Canada has become so appealing.
- Stock Market Unpredictability. Its becoming more and more apparent that investing in the stock market is akin to gambling where luck and chance can have as much to do with stock price gains and losses as the underlying business fundamentals.
- Near Zero Return From Debt Investments. With interests rates staying at near record lows, the corresponding returns on debt instruments may not even cover the cost of inflation. The coupon rate on a private mortgage right now far exceeds anything available on the bond market.
- Global Banking System Mess. With parts of Europe and the U.S. on the verge of not being able to service their debts, and the nature to which the global banking system is all tied together, its not all that appealing to have you’re money invested in the banking system.
- War On Terror. Moving your money around these days into different global investment opportunities can be difficult to coordinate with all the new safeguards in place to check whether money coming in and out of any given country is clean from criminal and/or terrorist related organizations. Large blocks of money can be held up in these screening procedures for indefinite periods of time creating a lost opportunity cost in the process.
- Demand On Time. If you have any type of active investment strategy, you’re going to have to be keeping your eye on it to some degree, even if its being handled by a broker. Better results are typically tied to lots of time spent managing the portfolio, but that’s also time taken away from other things.
I could go on and on with this, but there are a lot of very good reasons to either become or consider becoming a private mortgage investor either as a means to diversify your portfolio, or to get out of the stock market all together.
Benefits To Consider From Private Mortgage Investing
In recent years, private mortgage lending has been a true growth industry as more and more investors choose to put their money into mortgages over other investment alternatives for many of the following reasons:
- Solid Rates Of Return. Private mortgages can have a good solid return even with staying at the low end of the risk curve, from high single digit yields on 1st mortgages to double digit returns for 2nd Mortgages. This is a return that is paid monthly which can allow for further re-investment.
- Real Estate Security. Compared to any other type of investment that generates similar returns, its hard to complete against hard security where you have a registered lien and a legal system that provides you with considerable rights to protect your investment. Couple that with the strength of the real estate market in Canada which has experienced market growth during a time when the U.S. market has seen a wide spread collapse, and the strength of the Canadian Economy, and you have an unmatched level of investment protection.
- Liquid Investment. Most private mortgage placements are for no more than one year. While longer periods can be arranged, this can only be provided if a longer period of time fits the investing requirements of the lender. So there is tremendous flexibility to manage your liquidity on a year to year basis without having to worry about buy/sell timing.
- Passive Investment. Once your funds are advanced in the form of a private mortgage, the terms and conditions of use for the money are well defined and can easily be managed directly or through an outsourced administrator. This can provide an excellent rate of return with a minimum level of risk and portfolio maintenance.
- Full Decision Making Control. As a mortgage broker, part of my role is to provide my private mortgage investors with potential private mortgage financing deals to consider investing in. The private mortgage investor has full control over whether they choose to fund a particular deal or not, can dictate the terms they are prepared to accept, identify the types of deals and returns that meet their investment criteria, and decide whether or not they even want to have any direct contact with the borrowing party. Lenders are also able to have their own solicitor act for them, at the borrower’s expense
Our Private Lender Financing Stats
While there is some variation among the different deals we place due primarily to the level of risk chosen by individual private lenders, our average private mortgage placement statistics are as follows:
- First mortgage advance average of 65% loan to value with the lending range from 50% to 75%.
- Second mortgage advance average of 80% loan to value with the lending range from 60% to 90%.
- 95% of mortgage placements are for a one year term.
- Average rate of annualized return of 10%
- Funding Placement ranging from $20,000 to deals in excess of $2,000,000.
The real key to our services is that you are in total control in terms of what deals you want to fund, what you are prepared to offer, and your participation in any mortgage. We do not pool funding for private mortgage placement in anyway unless private investors want to consider some form of syndication or joint venture to finance a larger deal they are all interested in.
All deals are handled through the lawyer you choose to assign.
What You Can Expect From Me And My Team
Our mandate is to provide a high yielding investment opportunity that is secured by real estate in a professional manner that is respectful of the requirements of both the borrower and the lending/funding party.
We are interested in building a long term professional relationship with you to in order to provide you with access to the areas of the private mortgage market place you would like to invest in.
As mortgage brokers, we are providing lending opportunities to you that meet your stated requirements and we are not providing any form of investment vehicle that would need to be regulated by the securities and exchange commission of Ontario or any other locale we serve.
As previously mentioned, you maintain all decision making authority related to mortgage opportunities we present to you and you also have complete control over the legal representation for any given mortgage you are funding.
Once a mortgage is in place, we continually monitor the file and communicate with you and your team to make sure any issues that may occur are quickly resolved.
If you would like to find out more about how we can help you with your private mortgage financing needs, please give me a call at your earliest convenience and we can set up a time to discuss the possibilities of working together.