Quite often real estate investors prefer to skip traditional mortgages and borrow money from private lenders. Skipping the government controlled and regulated lending options gives a borrower much more flexibility, they typically receive their funding much faster and there is little to no red tape to jump through. Perhaps best of all, the loan doesn’t affect their credit score.
Why would you want to invest in private mortgages?
Private mortgages are a great way to receive a high return on investment, typically much higher than what you’d receive in a standard mutual fund. They also provide significantly less risk than investing in the stock market – we’ve all read the headlines and hands shaking checked the status of our retirement account only to find that it has bottomed out. No matter what age you are this is a terrible experience, to lose all of that hard earned month. However as you approach retirement those pains are felt much more intensely. All the while you’re still paying the investment bankers their fees even though you’ve lost your money.
Private mortgages offer less risk because you’re secure in both the borrower and the value of the property. Typically the lending to value ratio is 50-70%. That means you only lend 50-70% of the value of the house.
Each monthly payment is like a fixed income payment. Each month you receive a check, or two or three depending on how many investments you make.
Finally, investing in private mortgages with your RRSP funds means when you withdraw the money upon retirement you’ll be paying significantly fewer taxes. Think about what you’ll do with all that extra cash in your pocket. If you’re making monthly payments into your RRSP you can now keep that money for your monthly spending needs and use the income from your investments to fund your retirement.
Using your self directed RRSP portfolio to invest in private mortgages will be the best financial decision you ever make. Instead of assuming the risk, fees, and less than desirable return on investment that mutual funds, stocks and bonds offer you will receive a secure monthly fee at a much higher return on investment. All it takes is a little understanding about how to analyze opportunities and draft agreements which benefit your pocket book and help others achieve their real estate dreams.
For more information about how to use your self directed RRSP portfolio to invest in private mortgages visit http://www.rrspmortgageinvestor.com
Real Estate Sales Representative and Mortgage Agent.
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