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Real Estate Investing Article

Real Estate Investing Article

A lot of people look at real estate as a great way to start socking away a reliable investment and either have tenants pay their mortgages for them, or “flip” the house and turn a profit. As with any type of investment, there are advantages and drawbacks. If you are considering making the move into real estate investment, here are some tips to help you find your way.

Tips for New Real Estate Investors

1. Establish a relationship with a local experienced realtor who invests in real estate personally. While all realtors might claim to be experts on investing in real estate, those who have put their own money into the game know the good, the bad and the ugly factors on a more detailed level. Having that type of experience in your corner is a real bonus.

2. Never purchase an investment home without having a professional, licensed home inspector take a look at it first. You might be tempted to take on a property at a rock-bottom price, but in the final analysis, you can end up spending a fortune getting a property up to code or making repairs that your tenants (or buyers in a “flip”) demand. Paying a couple hundred dollars for a quality inspection can make the difference between profit and significant losses.

3. Focus on properties that will bring in a positive cash flow. When setting rent, you should get enough to pay the utilities, mortgage, property taxes, and insurance, as well as a 10 percent cushion to set aside for repairs which will come up. This is difficult to find in many metropolitan areas, but outside the major cities this is easier to come by, so be flexible with your search criteria when it comes to location.

4. Sit down with your banker or with a reputable mortgage broker and take a look at your finances, including your current budget. Get a reasoned perspective on the amount that you can reasonably afford to take on through a mortgage to fund your investment.

5. Even if you’re going in with your best friend from high school to buy an investment property, complete a formal agreement to cement your partnership or joint venture. Sometimes friendships are ruined when these sorts of ventures do not end up like either partner had planned. Include specific provisions for cases like the death of one partner, the decision by one partner to sell even though the other partner does not want to, or if one partner fails to pay his proper share of the expenses. Having those items in writing keeps the relationship professional and does not threaten your personal connection.

6. Remember that, while time is often money, do not sign on the dotted line on an investment that does not end up making sense. There’s no reason to stick with a deal if you don’t think it works for you any more. Don’t let the fact that you spent hours on it force you to execute a transaction that you know will be a loser.

7. Unless you are a professional handyman, hire a firm with property management expertise if you plan on investing as a landlord. Let this company screen your potential tenants and handle repairs, maintenance and any other issues that the tenants might bring up. This way, if a pipe bursts in the middle of the night, you won’t be the one getting that angry telephone call. Plan to spend about $100 per property each month for this level of service.

8. Remember that when you buy and sell real estate quickly, the Canada Revenue Agency views your profits as business business income, which means that those profits will be taxed. If you have the “flip” deal of a lifetime lined up, that’s fine, but remember that purchasing properties for the long haul is preferable, as long as they are properties that you can reasonably rent out as the tenants end up funding your mortgage, allowing you to develop equity. If you sell a house that you have owned for several years at a profit, you’ll have an easier time classifying the profit income as capital gains, which has half the tax rate as business income.

9. Finally, keep accurate records of all expenses and income for the investment property. Keep this separate from your personal financial statements and bank account, as this will muddy the waters when it is time to file taxes at the end of the year.

Useful Tips Real Estate Investments

Tips to Help You Make Money in Real Estate Investing

Investing in real estate is a great way to add a moderately high degree of reward to your portfolio without taking on a significant amount of extra risk. Even though you can get a higher rate of interest as a private investor in real estate through mortgages, the risk of default is much smaller than you might think after reading all of those horror stories about defaults in the wake of the crisis of 2008 and 2009. While some people did go into foreclosure, the rate in Canada was much smaller than the rate in the United States. So the risk you take by entering the real estate market is almost negligible — the last bill that people will overlook is their mortgage, because they do not want to go into foreclosure. Plus, a reputable broker will not connect you to real credit risks. Many analysts recommend including hard assets and/or housing in a portfolio, because these types of assets resemble the performance of blue chip stock investments. You won’t see huge jumps in value, but you should see slow, steady growth as time goes by.

For most people, the biggest investment they have made in the real estate market is their primary residence. A significant amount of resources go into owning and maintaining that home, but there are also other opportunities for making money out of this part of the economy, including investing in a real estate income trust, real estate limited partnerships and purchasing secondary properties.

What is important when making your decision is the research you put in to the transaction. If you are looking at purchasing rental properties or properties to “flip,” you need to look closely at the area where you have interest and pay attention to trends. Obviously, current real estate prices and values are an important consideration, but so are some other issues that require a little more research. Job growth (or stagnation) in the area, economic development and growth in the regional gross domestic product are also important metrics if you are trying to predict an increase in real estate. A house that is available at a very low price is listed at that value for a reason. Instead of going for the cheapest property, look at places that will have demand over the long haul. places where jobs are coming in are more likely to show that demand.

If you are considering buying a property to rent out to vacationers, think about expenses as well as values. It is true that values of vacation homes are on the rise, but upkeep costs are usually a lot higher than rental residences where the tenants live there full time. A lot of vacationers basically treat the home as a glorified hotel room, and so they are careless with appliances, fixtures and decorative items. This means that you may have some significant upkeep costs each month — or even each week. You can recoup some of these costs out of your vacationers’ deposits, but you also have the hassle of bringing in maintenance crews each week or paying a management company a hefty fee to do it for you. Over time, a vacation home can cause more headaches than it is worth.

If you are interested in a real estate income trust, that is a place to get the returns that you want in a safer environment. However, there is also some connection between these trusts and the volatile price changes that are a part of the stock market. When interest rates started to tick upward in May 2013, a lot of these trusts suffered as a result. While interest rates have dropped since then, most analysts predict that interest rates will start to climb again in the short term, making these trusts a little more risky.

If you think that investing in the real estate market is the right move for you, there are many options, ranging from funding private loans to joining a mortgage investment company that funds a variety of loans to minimize your global risk. That way, when an individual defaults on a loan, the income you receive from the other loans mitigates the loss. People are seeing profits come from their real estate investments each year, and you can become one of them.

Reverse Mortgage Investment Property

Tapping into a Property with a Reverse Mortgage for Investment

Most of the time, when people talk about reverse mortgages, they have senior citizens in mind who have a considerable amount of equity in their homes but do not have a lot of liquidity, and they require access to that cash for their monthly income needs. Normally, here’s how the process works: seniors sign a reverse mortgage, and they receive monthly payments. They will never have to make payments for principal or interest, and the mortgage is not due until the homeowner dies, sells the house or moves out. A conventional mortgage shrinks over time, but a reverse mortgage grows. You take out a set amount in principal, or agree to receive a set amount each month, quarter or year, and the interest accrues as long as the homeowner stays alive and in the house.

Even though interest rates for reverse mortgages are generally higher than they are for conventional ones, the fact that interest rates remain at historic lows mean that this is actually a fairly cheap form of financing. So what else could you use that money for? Why keep all of your equity tied up in a house when you could get the money out, invest it in something more lucrative, and then use those proceeds to pay yourself back when the reverse mortgage comes due?

Here’s one example that sets you up for profits. Let’s say that you have a home worth $800,000 that is paid off. If you took out a reverse mortgage for $400,000 at 4 or 5 percent and then invested it in a diverse series of strategies that averaged an income of 9 percent? It’s not as good as having $400,000 free and clear to invest, but if you’re not looking to sell your house, you could be putting the equity to work for you in a more aggressive way. You could use that money to fund a private mortgage for a borrower, you could put it into the stocks or commodities market, or you could use a combination of approaches to diversify your risk. Let’s say you ran this operation for ten years. If you took out a simple interest reverse mortgage at 4 percent, you would owe a total of $560,000. But if you were able to bring in 9 percent annually, compounded once a year, you would make $946,945.47, for a profit that is just under $400,000 — in other words, you would make what you had taken out of the house as profit — after you paid yourself back. So if you’re looking to make some money out of your house, a reverse mortgage might just be the ticket to your ideal investment property.

Managed Mortgage Investment Fund

Profiting from a Managed Mortgage Investment Fund

One of the consequences of the housing slowdown of 2008 and 2009 is that the Canadian government has tightened the rules governing the approval of mortgages. This has pushed applications and approvals down, leaving banks hurting for mortgage revenue, and it has also made financing more difficult for many people to secure, because issues with their credit scores or income histories are keeping them from getting loans they could pay off on the basis of their existing assets.

This is where the opportunity of private lending steps in. For people who can put down as little as 15 percent down for the purchase of a home, access to private lenders is a possibility. The interest rates are higher than what the banks charge, because people who are taking out private mortgages are getting turned down by the banks. It is this market that managed mortgage investment funds are looking to fill, and this is an investment niche that can be very profitable.

The mortgage investment corporation (MIC) is a business that has been set up to provide mortgage loans to people in Canada. The vast majority of these mortgages are residential, although some are construction, development, industrial and commercial. A whole group of mortgages gets placed in one pool, and that pool is pieced out in shares to investors. Pooling the mortgages together hedges against the risk that will come if an individual borrower defaults on a mortgage. In the meantime, investors can still rake in between 7 and 12 percent on an annual basis. Even if a borrower or two ends up in foreclosure, there are so many loans in the pool that the effect on profitability is negligible.

Investing in a managed mortgage investment fund is a lot like investing in any other mutual fund. You purchase shares as an investor, realizing that your purchase does not come with the same sort of government backing as a savings account, but that your reward should be higher as a result. As long as you keep your shares, you get the interest income from the mortgages (less administrative fees for the management company). If investment returns ranging from 7 to 12 percent sound like a good deal, then this might be the right investment opportunity for you. There are many MICs operating in Canada looking for an investor or two, and you can make your retirement secure by locking in this sort of profit over the long haul.

Buy Real Estate Investments

Preparing to Buy Real Estate Investments

Real estate investing has long been a way to turn profits, and if you have an interest to buy real estate investment, plenty of opportunities are out there. However, if you are like most investors and plan to rely on mortgage financing to execute your purchase, then it is important to prepare yourself adequately for the parts of the process that take place between pre-approval and final approval of your loan.

How To Buy Real Estate For Investment

1. Stay abreast of mortgage program changes.

As lenders try to walk the fine line between maintaining enough regulations to manage risk while offering enough flexibility to bring in enough mortgage revenue, programs go through changes quite frequently. This means that a pre-approval letter from three or six months ago may not reflect the current situation with your lender. Make sure that you have your T1 General forms ready, because some lenders are starting to ask for those in addition to the Notice of Assessments so that they have access to all of your income information.

2. Make sure that your tax affairs are in order.

If you have any late filings with income tax, make sure that you catch up on those. A broker might secure you pre-approval on the basis of a letter proving employment, but the documents you must go through at closing have fairly stringent rules about such matters as bank statements, tax bills and proof that you have satisfied old debts.

3. Line up a solid income history.

Mortgage lenders are particularly interested in your income history, as that serves as documentation that you will be able to stay current with your payments. If you have been in the same position or with the same company for several years, that should satisfy the bank, as long as your debt to income ratio falls within lending guidelines. If you are self-employed, though, things can be a little more complicated. Many self-employed people make more than enough money to fund the mortgage they want, but they do not receive the same amount from one month or quarter to the next, and there are verification issues as well for those who want to establish that they actually make what they say they do. This is not insurmountable, but showing a track record of assets is important.

4. Keep looking for the latest information about mortgage information programs.

Buying Real Estate Good Investment

As an investor, you do not have access to the premium rates that are available to people who are buying their principal residence. However, the Canadian government has a vested interest in encouraging investment activity within the real estate sector in order to bring that part of the economy back to life. The CMHC website (http://www.cmhc-schl.gc.ca) regularly updates information about new and existing programs designed to help encourage investment. Based on your current situation, one of these programs might enable you to buy that “flip” property you have your eyes on.

The real estate market represents a strong opportunity for investors. With interest rates at historically low levels, and with prices just starting to perk up, there is no time like the present for entering the market.

Buying Real Estate Investment Property

Buying Real Estate Investment Property

The vast majority of people looking for real estate loans, whether for their own dwelling or for investment purposes, think about private lending as a last minute source if they cannot find bank financing. However, because banks are still showing a great deal of caution with regard to lending, in the wake of the housing crisis of 2008 and 2009, and because the Canadian government has set up so many rules with regard to mortgage financing, private lenders are becoming more and more popular.

Buy Real Estate Investments

To be sure, private lenders do not offer rates that are as low as the banks, and the terms are shorter (one to two years in most cases), but for the investor, this should not represent a hurdle, as people who are looking to “flip” the property will be able to pay back the loan in a very short time — as soon as they make improvements and turn the house around for the next buyer. Investors who are looking for rental properties simply set their rent levels to pay for the cost of the added interest expense.

One of the major rule changes influencing bank financing of mortgages that affect investors has to do with the down payment requirement. For investors who do not plan to occupy one of the units at the investment property, a minimum down payment is 20 percent. Also, the CMHC (Canadian Mortgage and Housing Corporation) has also made a change to its policy for underwriting when providing mortgage insurance coverage for investors. In the past, 80 percent of the rental offset could be counted on the income side, but now that cap sits at 50 percent.

Because of these new rules, the search for private financing has become more common among real estate investors. That 20 percent down payment threshold is a major hurdle for many investors, who often fail to keep that much liquidity on hand. With private lenders, it is possible to find financing with as little as 15 percent down, and that difference opens up many more opportunities.

Another rule influencing investors has to do with income verification for self-employed persons looking for a mortgage. Borrowers that have been a part of the same business — even if they own it — for longer than three years have to supply third party validation to get approval for a loan. This also applies to people who work for companies but are paid on straight commission rather than salary. People who lack this validation generally face a minimum down payment of 10 percent on primary residence mortgages, and the qualification for investors is even more stringent.

So what is a private lender, exactly? It could be an individual, it could be a company, and it could be a mutual fund seeking to add more loans to its pool and keep on diversifying the risk for its members. Brokers such as Amansad Financial maintain relationships with these entities to connect potential borrowers and lenders. If you are looking to invest in real estate and think that bank financing may not be within reach, this is another way to get that investment property and start realizing profits.

Best Mortgage Investment Property

Tips for Finding the Best Mortgage Investment Property

If you are looking for a mortgage investment property, it’s not enough to comb the listings if you want to find the best deal. Getting the wrong property can eat away at your profits, making the time that you spend managing the property much less worthwhile. The tips in this article are designed to help you look for the best mortgage investment property for your needs.

1. Look for people who are desperate to dump a property.

This might sound like a no-brainer, but it can be harder to get this information than you think. Privacy laws in Canada protect much of the information you need, so you’re going to have to rely on your network. Mortgage brokers will know about sellers who are ready to sell; one example would be a person with two mortgages on the same house, one from a bank and one (at a premium interest rate) from a private lender. Another person who is likely to be motivated would own two homes and only live in one; the likelihood is that he is paying two mortgages at once and would love to get rid of one.

2. Build quality relationships with the right mortgage brokers.

You’ll find that a small number of brokers are doing the lion’s share of the mortgage business. You want these brokers to think of you when motivated sellers pop up. Instead of doing an email blast, though, you have to research local brokers to find out the market leaders. Then, send them a small package that has a gift with your business card, as well as a brief letter introducing yourself and showing how you have the resources to move quickly if they come across a seller who is motivated. That sort of introduction will help you stand out from your competition.

3. Look for properties that have been on the market longer than the average.

If someone listed a house last week, or even last month, they may not have gotten to the point where they are ready to sell to you at a discount. Build a relationship with a real estate broker so that you can find out the average number of days that homes are spending on the market, and break that down by the specific area and type of home. For example, if you want to find a four-bedroom house in Victoria, use your relationship with your real estate broker to find out the average price for that floor plan in Victoria, as well as the number of days that the average four-bedroom home in Victoria is on the market before going to sale. If that number is 37 days, then start by looking for homes that have been on the market longer. Those sellers are much more likely to move at a discount. Also, the realtor on the listing will also be much more motivated, as they tend to refer to these types of homes as “stale” and want to move them and book the commission.

These tips are just the beginning when it comes to entering the real estate market as a mortgage investor. If you are ready to buy a house that is under pressure from an existing mortgage, you can make a tidy sum by flipping it.

Investment Mortgage Financing

Investment Mortgage Financing

Many Canadians use investments in real estate to diversify their portfolio, and many of them use mortgages to provide the initial financing for the project. There are some differences between securing a mortgage for an investment property as opposed to your primary residence. Two of the factors that will influence your mortgage are your plans to occupy (or not to occupy) one of the units on the property and the number of rental units that are in the building.

If you are starting to look for some investment properties, take a look at the number of units that the building you want to buy has in it. The majority of properties that have four units are fewer have residential zoning. This makes securing a mortgage easier, as residential zoning puts only a little bit more difficulty into the qualification process than what you would encounter when getting a mortgage for your primary residence. However, buildings that have at least five units generally have commercial zoning, which means that you would have to secure a commercial mortgage to purchase it. The qualification requirements are significantly more difficult for a commercial mortgage, and you face interest rates that are a lot higher as well.

If you are looking at purchasing a property with multiple units, it is also important to decide whether or not you plan to live in one of the units. If you don’t plan to live there, you’ll have a required 20 percent down payment. If you plan to live there, it is consider an owner-occupied property, so you can get away with putting down as little as 5 percent if the property has one or two units, and as little as 10 percent if there are three or four units. Putting less down will make your mortgage a high-ratio loan, meaning that you will have to pay mortgage insurance in addition to interest and principal, but you can still make your investment and start bringing in profits.

Before you start signing paperwork, though, ask the lender about their interest rates. Smaller lenders may add a premium to the rate, even if it’s a property you plan to occupy as well, once they find out it’s an investment property. The larger lenders should give you a rate that is the same (or close to the same) as what you would get for a principal residence after you qualify. There’s nothing wrong with shopping around, and even a slight difference in interest rate can save you a lot of money over time.

Investment Property Mortgage Loan

Investment Property Mortgage Loans

If you are looking to buy a property as an investment but do not have the cash on hand to make an immediate purchase, you will need to take out a mortgage to buy it, much like you would if you were buying a house for yourself to live in. However, mortgages for investment properties work in a slightly different way than mortgages for primary residences do.

The Ins and Outs of Investment Property Mortgages
First of all, the number of units determines the zoning for your property. If your property has four units or fewer, then it will likely be in an area zoned residential. This is good because the residential mortgage qualifications are less stringent than those for a commercial property, and you can generally find an interest rate that is close to the rock bottom rates that primary residence mortgages are going for. If there are five or more units, the property will have commercial zoning, which means you have to get a commercial mortgage — with higher interest rates and a tougher approval process.

Also, if you plan to live on site, then the mortgage is treated as an owner-occupied property. You can get away with a down payment as little as 5 percent this way. If you don’t plan to live there, though, that down payment requirement goes up 20 percent.

Investment Property Mortgage Loans

But what if you can’t get bank approval? Private lenders are also available to help you finance your purchase. In this case, you will likely have to put down at least 15 percent if you plan to occupy, and as high as 30 to 40 percent if you don’t, but you also don’t have to go through the credit approval process. Instead of using your financial background, private lenders use the value of the property to determine whether the loan is a sound investment or not. The reason for the higher down payment is to ensure that, in case of default, the lender can get his money out of the sale through the foreclosure process.

Amansad Financial has relationships with a number of different private lenders who are looking to invest in the real estate market. If you think that this would be a helpful process for you, give one of our investment mortgage specialists a call today. We will discuss your present situation and decide if your credit profile merits a call to a private lender. We have helped multiple clients in western Canada and look forward to working with you.

Commercial Mortgage Rates Canada

Commercial Mortgage Rates Canada

If you are new to real estate investing, you might be wondering just what the difference is between a residential and a commercial mortgage. A residential mortgage is designed for a property that you plan to live in, either as a primary residence or as a vacation or second home. Residential mortgages are also available for properties that you plan to rent out. A commercial mortgage is tailored to investors and businesses that want to buy or refinance properties that are commercial and generate income. If you take out a commercial income, you can receive funding for more than $1,000,000 for financing of properties that will generate income for you over time. However, there are several criteria that a property must meet for you to take out a commercial mortgage on it.

Canadian Commercial Mortgage Rates

First, the mortgage can only have a term for up to five years, except when the property is insured by CMHC, in which case the maximum is ten years.

Next, you may only amortize multi-residential properties for 25 years, except for CMHC-insured properties, which allow amortization over as many as 35 years. For other types of property, the amortization period is 20 years.

You also have the choice between fixed and variable interest rates, just as with a residential mortgage. It is possible to convert a variable rate option loan, which is tied to the prime interest rate, to a fixed rate option. Given the fact that interest rates are so low, though, fixed rate loans are much more popular than the variable variety at the present time.

The property also must be situated within a market that is active in rentals and resale, and there must be a viable current market for properties that are comparable. It must also be easy to market the property without having to make major improvements.

Commercial mortgages will require a current appraisal. If you are looking for a CMHC-insured mortgage, CMHC guidelines are in force. If not, you must have an appraiser whom the bank approves and who is AACI qualified. The building also needs a passing phase 1 ESA environmental report. Also, you may need to have a report done on the condition of the building.

Finally, you can’t get a commercial mortgage unless the property is multipurpose, office, retail, commercial, industrial or multi-residential with more than five units.

Currently, commercial mortgage rates in Canada are available between 4.5 percent and 6 percent, depending on the term of the loan and whether you are willing to take a variable or fixed rate on your mortgage.

The amount of a property’s value that you can mortgage depends on how much of the property you own. If you occupy 50 percent or more of the above ground area within a property, you can finance as much as 75 percent of the value of the property. If you occupy less than 50 percent, then you are capped at 60 percent of the property’s value for your loan.

Some lenders will extend you a commercial line of credit instead of tying you to a specific mortgage amount that you have to pay back. The specifics of each deal will vary somewhat, depending on the bank that you use.

Another option, particularly if you think that bank financing will be difficult for you to qualify for, is a private loan. In this sort of situation, you borrow money directly from an individual or company that has money to lend and is looking for a higher rate of return than government secured accounts, but does not want the risk of market investing. You will have to put down a higher down payment with a private lender, and your interest rate is going to be higher, but this is due to the fact that you represent a higher risk because you had a hard time qualifying for traditional financing.

If you are looking to invest in the commercial real estate market, now is the time, with these historically low interest rates. You will find that prices are also still in the low range historically, as the market is still gradually waking up from the collapse of 2008 and 2009. If you can find investors to join with you, you can put together a deal that will prove to be lucrative for your group over time.

To be an Investor or a Lender? That is the Question written.

To be an Investor or a Lender? That is the Question written.

Investing in land is one of the oldest forms of moneymaking that there is. It dates all the way back to ancient times, when those who had the wherewithal snapped up parcels of land and then either sold them at a profit or charged people for the privilege of living on that land. In modern times, investing in real estate is one of the more secure ways to bring in a healthy return on your money. It is true that such dramatic downturns as the explosion of the real estate bubble in 2008 and 2009 was not a time when investors could turn a profit in property or land, but no one was making money in any other investment sector either. Now that the economy is beginning to sputter its way back to life, property values are beginning to creep upward again. While you are not likely to make the same returns that you would if a dream stock just happened to vault up in price at the right time, real estate is much more stable than stocks or commodities, but it provides much higher returns than such investment vehicles as savings accounts and certificates of deposit.Investor vs lender

If you are going to invest in real estate, there are several different ways to get involved, but the central question to ask is whether or not you want to be an investor or a lender. People who want to invest in real estate do so in one of three ways: acting as a landlord, flipping properties, and acting as the seller in lease option purchases.

Acting as a landlord is one of the oldest forms of real estate investment. Basically, you buy a house and then rent it out to a tenant. If you haven’t already paid off the house, you use the rent to fund the mortgage payments, the insurance, property taxes, as well as to funnel a profit to you each month. Part of this profit, though, has to go into savings in case you need to make some repairs to the property. Also, you have to save some of the profits in case your tenant moves out at the end of the lease and you have to go a few months before you find another one. Also, if the tenant turns out to be chronically late (or simply stops paying rent), you have to deal with the eviction process. So if you have the right tenant, this can be easy money. If you don’t, though, it can be a real hassle.

Flipping properties can be a way to bring in quick profits. You buy a house at a certain price, hoping to sell it at a higher price later. Of course, you often have to sink money into repairs and improvements on the property, thinking that those changes that you make will improve the appearance and condition of the property enough to bring in the price that you plan to ask. There is a certain amount of risk to this, but in a time period of rising home prices (such as the current one), you can bring in some quick profits this way.

If you are selling a house and agree to a lease option purchase contract with the buyer/tenant, you have basically agreed to sell the house at a particular price at a set date in the future. Between now and then, the buyer/tenant pays you rent, some of which will act as a credit toward the purchase price of the house. If he can’t complete the purchase at that point in time, all of the money you have received turns into pure rent in your pocket, and you can decide whether or not to extend a lease to that person or to sign another lease option purchase agreement. With a lease purchase option, he handles the repair bills, making this a more attractive option.

But what if you could be a lender? You might think that it’s just the big banks who are raking in interest by lending money to people in the form of mortgages. However, there are many individuals in Canada who are using their registered or non-registered retirement funds in order to provide mortgages to people who cannot qualify through traditional sources. Maybe they have a checkered credit history, or maybe they don’t have a verifiable income history because they started their own business. It’s doing well, which is why they have 30 percent saved up as a down payment, but they can’t verify regular income because monthly revenues are still up and down.

Amansad Financial has connected many individuals with money to invest with potential borrowers who are looking for a mortgage. You’ll get a higher rate of return than the banks do, because these borrowers represent a greater level of risk. You’ll get all your money back within two or three years, because private loans don’t go any further than that with their terms. You don’t have to pay for repairs. The only risk is default, but if a borrower can put away 30 percent to put down, it’s likely that he’s making enough to pay for his mortgage.

If you are interested, call one of our private lending specialists at Amansad Financial. We have brought many individual lenders together with borrowers, and we can do the same for you.

Converting Your Registered Funds to Mortgages

Converting Your Registered Funds to Mortgages

Funding Real Estate Investors

Registered funds, or registered retirement income funds (RRIF) consist of arrangements between you and a particular character, which is generally a trust company, bank or insurance company that has registered with the Canadian Revenue Agency. You can transfer money in from an RPP, RRSP, SPP or from another RRIF. You draw a minimum amount from the carrier each year, starting in the tax year after you enter into the RRIF agreement. The earnings that the fund earns are tax free, but the amounts that you take out (minimum or larger) are all taxable upon receipt.Key to successful mortgage investing

There is no limit to the number of RRIFs that you can have, and you can set up self-directed RRIFs as well; in that case, the rules that apply are similar to those of RRSPs.

When you turn 71, you have to liquidate your RRSP by the end of that tax year, according to Canadian law. You can accept it all in cash, which will then be taxable, or you can roll the money over into an RRIF. There are several reasons why these are a popular choice, listed below:

Real Estate Investment Funding

1. An RRIF provides for tax sheltered growth; you only pay tax on the amount of your RRSP that you take out. The rest of your investment will continue to grow in a tax shelter as long as you keep your rollover funds in that account.

2. You have control over your income. Instead of having to take the payout all at once, you can determine how often you take out money and how much you take out, so long as you meet the requirement for the minimum withdrawals.

3. When you pass away, you have the option of passing your RRIF assets to your spouse without any tax penalty upon your death.

4. If you feel like your RRIF portfolio is taking on too much risk, you can move the funds over to a more secure form of income at any time. Simply contact your advisor at the registered carrier.

There are several different types of RRIF accounts. A level income RRIF provides a set amount of income over a determined period of time. Let’s say you want to receive consistent amounts of money through age 90 or 95; you set up the RRIF to distribute that amount. You can set this up by time frame or age.

A capital preservation RRIF both preserves your existing capital while paying out fixed income levels on an annual basis. If you are putting mutual funds to use, a target like 8 percent in order to keep your capital level consistent is a reasonable one.

A minimum income RRIF gives you the least amount of money that you can withdraw each year. People who select this option generally do not have a need for the money and want to put off paying taxes on income for as much time as possible. Base the RRIF on the younger spouse’s age, and remember to use the value of the fund on December 31 of the prior tax year.

If you are interested in maximizing your investment returns from your retirement savings but are past the point where you can keep an RRSP, there is an alternative to rolling into the RRIF account choices. If you put your RRIF funds into stocks and mutual funds, you can receive a higher rate of return than what is possible from secure investment options. However, the risk for those investment vehicles is also higher.

Another option involves taking the cashout from your RRSP when you turn 71 and putting it into the real estate market. While your tax burden is larger at age 71, your potential rate of return, when risk is factored in, is often higher if you put your money into real estate.

Here’s how the process works. At Amansad Financial, we have many clients who are looking for private lenders to fund their mortgages. They have 20 or even as much as 30 percent to put down, meaning that the LTV risk on the loan is not as significant. However, they do not have the credit scores that the banks want to see, or they cannot verify income to the satisfaction of the banks. This doesn’t mean that they are insolvent; many people have had financial setbacks that take almost a decade to work their way off their credit reports. Also, other people are self-employed and do quite well, but their income is not the same every month or quarter, and they have no security from an employer, so the banks won’t extend them a loan.

This is a tremendous opportunity for you to make a higher rate of return with the minimal risk of having a borrower go into default. If someone has saved up 20 or 30 percent to put down on a house, it is likely that he has the fiscal discipline to make house payments, even if his credit score is still in repair.

If you looking to invest your registered or non-registered funds in real estate, contact Amansad Financial Services and allow us to find the right mortgage investment opportunity for you.

How to Invest in Real Estate in Canada

How to Invest in Real Estate in Canada

The Ins and Outs of Investing in Canadian Real Estate
It is possible to fare quite well financially through investing in Canadian real estate, but it is vital that you understand the tax laws that are applicable to this type of investment.

First of all, it is worth pointing out that Canada has no citizenship or residency requirement for purchasing and owning real property. You are allowed to dwell in your property temporarily, but if you want to change your status to permanent residency or stay for an extended period of time, there are immigration requirements for you to follow as well. You can even own rental property within Canada without residing in the country, but you will have to file yearly tax returns with the CRA (Canada Revenue Agency).profitable real estate investing

Investing in Real Estate in Canada

Buying real estate makes you liable for a provincial transfer tax for the property. Each province sets its own rates, but a typical levy is 1 percent on the first $200,000 in value, with a 2 percent levy on the rest. There are some exemptions (again, these vary by province), especially on your first real estate purchase. Some cities also levy property taxes on a yearly basis, coming from the assessed value of the property, which is a reflection of the existing market value. This city property tax funds schools and provides for other services as well. When you start looking at a particular listing, your realtor should be able to give you the information about the existing provincial transfer taxes and the municipal taxes.

When you buy a new home, the national Goods and Services Tax (GST) applies, but you can generally get a partial tax rebate for a home that is new or has extensive builder renovations, if you’re going to live in that home. This tax is not applicable within the resale market.

If you are investing in the property as a rental, the Canadian Income Tax Act mandates that 25 percent of the gross rental income go to the government. If you do not live in Canada, though, you can fill out an NR6 form and only pay 25 percent of the net income. You can deduct capital expenses and current operating expenses. You will get more long term benefit out of deducting capital expenses, because you can amortize those costs over a number of years and the renovations and other expenditures dwindle in value. If your property is an investment — either as a rental or as a property you plan to sell for a profit — you can deduct line of credit interest, mortgage interest, bank loan interest and property taxes.

Investment Real Estate Canada

When you sell the property, if you are a Canadian resident and use the property as your primary residence, there is no capital gains tax. However, if you are not a resident, the Canadian federal government withholds 50 percent for withholding, and you have to provide your buyer with a CRA-provided certificate of clearance. This means that all the taxes have been paid, and you’re not leaving the buyer holding the bag on any of it. If you are a resident but did not always use this particular property as your primary residence, you have to prorate the capital gain over the years when the property was not your primary residence. If you change the use of the property, such as moving it from being a primary residence to using it as a rental, you can end up on the wrong end of a “deemed disposition,” in which capital gains become taxable.

The best source for legal and tax advice is your own attorney and accountant or financial advisor. Amansad Financial is not qualified to provide advice at that level. We do have strong relationships with real estate professionals throughout Western Canada, and once you have determined the best strategy for your own investments, the realtors to whom we recommend you can help you find the perfect property for your situation. Our expertise does not include the tax laws of Canada, and so you are best served by seeking the counsel of a professional in that field before making an investment decision. Once you decide that real estate investing in Canada is right for you, though, we look forward to helping you so that you get the property you want — and the income you’re looking for.

Real Estate Investment Proposal

Amansad Financial Services and Your Real Estate Investment Proposal

Making an investment is an important step, whether it involves choosing your first savings account or deciding what to do with the funds inside your retirement account. Blending a portfolio effectively is important, in terms of the amount and proportion of risk that you are willing to accept. Naturally, the farther you are away from retirement, the more risk you are willing to take, and as the years go by, and you get closer to needing the income you are building, you will naturally increase liquidity and the conservative bent of your investment portfolio.

Real estate represents an intriguing opportunity for investors. Mortgages have taken on a bad name in the past few years, as their management by banks shows an apparent fear of future defaults. As a result, the Canadian government is just one that has increased the regulatory red tape that borrowers must go through in order to gain financing from traditional sources, such as credit unions and banks. This has automatically reduced the likelihood that further ruin would come to the banking industry, but a couple of disturbing trends have emerged.

First, people who were in a financial position to pay off their mortgages were not able to find the funds they needed to buy the homes they wanted. The income verification requirement became a particularly nasty hurdle, particularly for the self employed. Successful lawyers, physicians, dentists and leaders in other professions became unable to gain financing because they could not prove a regular stream of income from an employer. Even though these professionals had both money in the bank for a down payment and a historical trend of income that would cover ongoing payments, the lack of a monthly regular stream was alarming to lenders.

Second, the people who caused the housing collapse in the first place were not the ones who faced the penalty. The banks that were dragged under by the crushing burden of bad loans were the ones who came up with such notorious tools as the “auto sign” protocol that led buyers to rush through mountains of paperwork in order to get as many loans completed as possible. It was these tactics that led loan originators to create financial burdens that too many homebuyers were in no position to accept. While some of these banks did go under, and others had to let go of much of their staff, it was the borrowing public that suffered, as credit became much more difficult to come by.

Amansad Financial Services is one of the companies that saw an opportunity in this crisis of credit. Private lending has become one of the more popular ways for homebuyers to get the funding they need while bringing high rates of return to the investors who are willing to underwrite mortgages for them. This is a win-win situation for all involved. First, potential buyers who have a down payment set aside of 30 percent or even higher get access to credit from lenders who are not interested in their credit scores or the regularity of their income. Then, the investors receive interest rates that are higher than what the banks get in traditional loans, because they are lending to a group of people who cannot gain approval from the banks.

There are several different ways that you can gain entry to the real estate market. You can invest in first, second or third mortgages in a residential or commercial property. Amansad Financial Services also has clients that are looking for blanket (or inter alia) mortgages to purchase multiple properties at the same time.

The first step involves a discussion with one of our investment professionals. We will go over your existing portfolio, as well as your liquidity and your willingness to take on additional risk. Then we put together a secure real estate investment proposal, based on the needs of our borrowing clients. Based on your criteria, we recommend a particular borrower, or pool of borrowers, that would be compatible with your investment profile. We will end up matching one borrower and one lender, and we provide all of the information that you need to make an informed choice as to how to invest your money. Our goal is to match borrowers and lenders with the goal of securing the best outcomes for both parties.

Refinancing rental property mortgage

Refinancing rental property mortgage

A lot of people take out mortgages on properties that they then use as rental investments because they do not have the liquidity to buy investment properties for cash. In that situation, the rent that comes in each month covers the cost of the mortgage payment, insurance, other fees, as well as providing a small reserve for maintenance and some profit as well. If you are a landlord in a situation like this, even though you are bringing in a monthly profit, there are times when you may need to access the equity in the home through a cash out refinance. You might need to make major repairs on the rental property (or your own primary residence). You might lose your job, or you might receive a diagnosis that means you can no longer work (or will be disabled for a period of time). In instances like this, taking out the equity in your rental home can be a real lifesaver.

Refinancing Your Rental Property Mortgage

Here’s how a cash out mortgage works in that situation. If the original purchase price of your investment property was $400,000, but you have $300,000 in equity, your remaining mortgage balance is $100,000. Let’s say you decide to take $100,000 of equity out in a loan. You might be wondering how much you can take out. LTV (loan to value) requirements are somewhat stricter with investment properties than they are with primary residences, so your limit might be 70 to 75 percent of LTV. So that $400,000 house would only yield $300,000 in loans at most, including your existing mortgage balance, so bear that in mind before making your application.

Because your balance will increase, you generally face one of two options: higher monthly payments going forward or a longer term for the loan. This is an important consideration, because if you are taking the loan to help with financial straits and agree to a higher monthly payments, make sure that you can handle the higher monthly obligation within your budget.

People pull cash from their equity for a variety of reasons. Some of these reasons are based on financial emergencies, but others are based on one time expenses that arise. Examples include taking the opportunity buy additional investment property, pay college tuition for one or more of their children, to purchase a vacation home or to take a luxurious cruise. Also, items like high levels of credit card debt, existing car loans that are at a higher rate of interest than the equity loan, and the chance to make other types of investments also motivate refinancing loans on rental properties.

If you currently own a rental property and have a great deal of equity in it, the cash that the equity could provide can make a significant difference in a number of areas. This isn’t something that you want to use as an ongoing source of funding, as taking out multiple equity loans makes closing costs add up and can place your ownership of the home at risk, if you can’t keep up with the larger payments.

However, if you think that a cash out refinance of your rental property makes sense, give one of our mortgage specialists at Amansad Financial a call today. We will go through your existing situation and arrive at a solution that is suited to your needs.

How to Invest in Mortgages

How to Invest in Mortgages

If you are interested in diversifying your investment portfolio, understanding how to invest in mortgages can significantly increase your return without ticking up your exposure to risk as much as some other investment vehicles. Because of the low interest rates that banks are offering for products like savings accounts and certificates of deposit, making these conservative items a major part of your portfolio is a mistake. You’ll see your accounts slowly creep upward in value, but you’re also likely to see your future spending power dwindle, as inflation moves more quickly than your investments.

The Basics on How to Invest in Mortgages

Placing your money into mortgages as a private investor makes a considerable amount of sense. First of all, as a private investor, you can ask for (and receive) a higher rate of return than the banks are making from their traditional mortgage clients. The banks are offering mortgages at historically low rates, but their requirements for borrowers are historically tight. Borrowers have to be able to prove verifiable income and maintain a high credit score, in addition to having 20 percent of the home’s value to put as a down payment. The credit score and income verification requirements have come into play since the housing collapse five years ago, and they are keeping many potential home buyers out of the real estate market. Even people with 30 or 40 percent of the home price in savings as a potential down payment often cannot provide the income verification that the banks want because they are self employed. Because these borrowers are arguable greater risks, though, you can charge a higher interest rate.

Second, with a private mortgage you do not have to wait as long as banks do to collect their money. Generally, home mortgages are issued with a 15 or 30 year term through banks, renewable after 10 years. Most private mortgages have a term between six months and two or three years, though, which means you have your money back much sooner than the banks do. Amansad Financial Services has many clients who are looking for funding for their real estate purchases because they cannot qualify through a traditional bank. However, the fact that they have such a high down payment set aside often means that they have changed their financial situation for the better, but they are waiting for negative items to age to the point where they fall off their credit history.

To sum up, investing in mortgages as a private lender means that you can get a higher rate of return than the banks do while getting your money back much sooner than they do. Another positive element in this process is that you can choose the nature of the mortgage in which you invest. One popular option is a first mortgage. This investment gives you the senior lien on a property, assuming that the title is clear at the sale. Given the number of mortgage defaults that have happened over the past few years, some people think that mortgages are risky. However, Amansad Financial Services helps you with the vetting of your potential borrowers. While it is impossible to eliminate the risk of default completely (without risk, there wouldn’t be much reward at all), the fact remains that people do not want to go through foreclosure, and they will generally take any steps possible to meet the requirements of their mortgage. If a borrower has saved up 30 or 40 percent to put down — typically a requirement for a private mortgage — then you can generally rest assured that he has also figured out how to make reliable payments.

Here’s how the process works. First, you contact one of our mortgage investment specialists here at Amansad Financial Services. We will go through your current investment situation and come up with a list of potential borrowers with whom to connect you. We will help you through the due diligence process so that you end up with the right level of risk (and reward) for your investment needs.

If you are willing to accept a higher level of risk (with a higher rate of return), take a look at a second or third mortgage. You won’t have the senior position on the loan in terms of default, but you do get a higher interest rate for your money. People often take out additional mortgages for everything from buying a vacation home to sending a child to college. Open mortgages, in which the borrower has the right to request additional principal, also increase your potential rate of return in comparison to closed mortgages, which have set principal amounts. Contact us today at Amansad Financial Services when you are ready to consider adding mortgage investment to your portfolio.

Investment Mortgage Options

Investment Mortgage Options

A Look at Mortgage Investment Options

When the American prime rate was closer to double digits than zero, investing in bank secured vehicles made a lot of sense. Having a certificate of deposit or three at the back of your portfolio wasn’t just sensible — it was vital. Today, though, those same types of investments don’t even keep up with the cost of inflation in many cases. If your portfolio is centered on these types of investments, you’re going to keep falling behind as the cost of living keeps going upward. Investment Mortgage Options

Mortgage Investment Options for Real Estate Investors

With this in mind, Amansad Financial Services stands ready to help real estate investors who are willing to look at mortgage investment options. At first, some people think that this is a risky way to invest your money because there were so many instances of default in the years since 2008. However, many of these instances came about as a result of poor lending practices by banks. The use of such practices as auto signing and rushing home buyers through the loan approval process led to many loans that were simply unsustainable. People took out loans that they had no business being approved for on the basis of their lack of savings for a down payment, their lack of verifiable income at the levels needed to maintain payments, or both. (Real Estate Investors)

The increased level of regulation governing the mortgage industry is designed to keep this sort of thing from happening again. This is why banks are so tight with their money right now; they have to look at credit scores at a particular level, meet income verification requirements and require a particular down payment. This leaves a number of investment mortgage options for private individuals with greater than $25,000 put into an investment. If you sink it into bank secured investments or government debt, though, your returns will barely rival that of inflation. If you put the money into the stock market, you risk losing everything if the business heads south. Even though stock markets are showing increases in their returns, you want to diversify your levels of risk. One reason why mortgage investment options are becoming popular is that there are many potential home buyers who have 25% or greater of purchase price to put down but lack the credit score to qualify with a bank, or are perhaps self employed and do not have the right income verification to meet the bank requirements. Or perhaps you have a existing homeowner that has excellent equity yet has been orphaned by their bank, or simply needs to refinance. These borrowers also do not meet bank qualification requirements and need a short term private mortgage to make the necessary corrections to qualify again with a traditional bank lender.

Investment property mortgage options

This is where you, as the investor, can step in and make a level of profit higher than what the banks make from mortgages but with a lot less risk than you face from mutual funds or the stock market. One of the most secure mortgage investment options is the first mortgage. As a private lender, if you have a buyer who can put 30 or 40 percent down, you can invest the rest secure that, if you have to foreclose, you can sell the property at a profit over your investment. However, someone who has put together a down payment that large likely has the financial acumen (and the income) to satisfy the loan, even though his credit mistakes from the past have not yet expired from his credit report. You can decide whether you want to set a fairly short term for the loan (six months to a year or so), to give the buyer time to qualify for refinancing from a traditional lender, or to go with a long term loan, which gives you a secure income for a longer period of time. No one wants to go through foreclosure, and so people will bend over backwards to ensure that their mortgage payments are made. In the event of such a unfortunate circumstance, interest would still accumulate and the property owner would be responsible for legal fees associated with a foreclosure, further protecting your investment. More protection is provided as a first mortgage lender due to the order of priority.

Looking for the Best Investment Options?

A second or third mortgage has a little less security than a first mortgage, but the upside is that you can ask for a higher interest rate. You also want to perform due diligence on the buyer, a process with which Amansad Financial Services can help you. Some people take out a second or third mortgage to put a child through law school, to buy a boat or to pay for a necessary operation. They have the means to pay for the cost over time but need the lump sum at the present time.

Different Investment Options

One type of mortgage that is becoming more popular is the blanket or inter alia loan, which covers multiple properties at once. This is attractive for you, because you have multiple properties as collateral. Some blanket loans cover several residential or several commercial properties, while others cover a blend. The limit on insured mortgages in Canada is one of the more popular reasons why buyers look for a blanket mortgage, because they don’t want to have too many mortgages in their portfolio. Whether you are looking for rural, urban, residential or commercial properties in which to make a mortgage investment, Amansad Financial Services has clients to match with you.

Another option worth looking at involves the choice between an open or closed mortgage. With a closed mortgage, the amount of principal is set at the signing of the agreement and cannot change. A buyer could take out other mortgages later if he needed additional funding, but they would be separate loans. An open mortgage allows the buyer to come back later and ask to add to the principal of the loan. You can charge a higher interest rate for this option, and based on the terms of the agreement, you have the right to use payment history and credit at that point in time in your consideration of the request. If you have a significant amount of liquidity, though, this can be a lucrative option. Whether you want to offer an open or closed mortgage, in any of the scenarios described above,  Amansad Financial Services have people who are looking for your money — and to give you solid returns as a result. We have connected many satisfied investors with buyers who would not otherwise have had the chance to buy the home of our dreams. Give Amansad Financial Services a call today to start a discussion of the best way to fit mortgage investment options into your portfolio.

New Investors Real Estate

New Investors Real Estate

With financial advisors urging increased diversification in investment portfolios, the idea of personal investors placing their capital in mortgages to fund purchases for others is one that is becoming more and more popular. The number of clients who are looking for different sorts of funding to finance their property purchases continues to grow, and there are also more secure ways to invest in the mortgage market than placing your funds in an account that could suffer if one particular borrower happened to go into default on a loan. New investors real estate

New Investors Real Estate Loans

Many of our clients have the cash on hand to afford a 30 percent — or even higher — down payment on a mortgage. However, for a variety of reasons, they lack the other metrics that banks and other traditional lending institutions are looking for when approving loans. Many of them are self employed and have an income that is somewhat variable. This can be unnerving to lenders at banks who are looking for a track record of a consistent, verifiable income to justify the approval of a loan. Others have had difficulties in the past meeting their financial obligations, for one reason or another, and so their credit scores have fallen below what the institutional lenders are looking for. Either way, they have the means to start paying a mortgage now but do not match the profile of what the lenders want, and so they are looking for other ways to get the funding they need.

Property Investing for Beginners

Learn Real Estate Investing

There are many properties on the Canadian real estate market that are undervalued, for a variety of reasons. Commercial and residential properties are being snapped up right and left by investors, which is an attractive prospect. If you are among the many new investors real estate is an option that can pay dividends. You either buy a property yourself outright, or you take out a mortgage to buy it. Then, you look for a tenant (or multiple tenants) to move in and start using rent to pay off the property over time. After you make some improvements, you flip the property to another investor for a profit, leaving him with the tenants to provide income to the new owner. If you want to provide the financing for that new owner, you run all the risk if the buyer happens to default and go into foreclosure. If you own the property outright before selling, this is not as significant a risk, as long as you have not committed those funds elsewhere, but if you need the funds, there are more secure ways to invest those funds in the real estate market.

First time real estate investors

Become Real Estate Investor – Another choice that is available to Real Estate Investment Beginners‘ real estate holdings is the arm’s length mortgage. This is a mechanism that allows first time real estate investors to put RRSP funds toward someone else’s mortgage. The term “arm’s length” means that you do not have any personal or familial relationship with the borrower but are simply using your money to help them purchase a property. A non-arm’s length mortgage is one that you provide for a family member or someone whom you know, contributing the funds as a combination of a personal favor and the possibility to make money from the loan.

Mortgage Investment Corporations

A final way to invest your money in the real estate market is to place the funds within a Mortgage Investment Corp. This way, your funds are not attached to one loan, but rather to all of the loans that the corporation takes on. This insulates you from the risk that would take place if your borrower happened to default on the note. If you were the private lender, you would have to undertake foreclosure yourself and deal with the lack of those payments over the course of several months. In this instance, the corporation takes on the risk; because your money is tied up in potentially hundreds or thousands of mortgages, your returns are more secure. You get less of an interest rate on your money, because Mortgage Investment Corporations absorb the majority of the risk, but the returns are often more reliable than those in the stock market while remaining higher than government backed securities.

Talk to one of our professionals at Amansad Financial to find ways to put your investment funds to work in the Canadian real estate market. You have a wide variety of choices with regard to risk and return. Follow the link below for the new investors real estate signup:

Investment Property Mortgage

Investment Property Mortgage

Mortgage Investment Properties – The economy has gradually started improving from its near collapse in 2008 and 2009, and as a result, quite a few investors are thinking about using the residential real estate market as a way to make some money. The fact that residential prices remain low, as does the cost of financing, means that it is time to start moving if you have the means. An investment property mortgage can help you start making money on a residential purchase sooner, even if you don’t have the cash on hand to buy the properties outright. (Investment Property Mortgage)

Funding an Investment Property Mortgage

When it comes to securing that mortgage, though, borrowers are running into a lot of obstacles that simply weren’t there in 2008 and 2009. Getting the financing that you needed was much easier then, as lenders were trying to get as many agreements signed and dated as possible. While the real estate bubble was still inflating, and people still saw their portfolios increasing, it made sense to get the financing that you could.

Mortgage Investment Property Requirements

Investment Property Mortgage RequirementsYou know what happened next, of course. Whether you were looking for a Investment Property Mortgage Loan for your own dwelling for an investment property mortgage, the rules changed — almost overnight. Income verification, which really was more of a lick and a promise before 2008, became very important to lenders. People who were self employed suddenly became a major problem, because their businesses did not yield them a check that was the same amount twice a month, once a month or once a quarter. Successful business owners, including physicians who owned their own practices, had a hard time finding financing because of these new rules. Also, credit score requirements became much more burdensome. After seeing their competition (and themselves) almost go under water because of the sheer number of bad loans that they had issued, lenders were not going to be nearly as liberal with their lending.

However, the number of people looking to invest in real estate never really went down. Because of the instability in prices, it became difficult to justify that sort of investment. After all, potential investors did not know how low housing prices were going to fall, so people with money to invest started to take their dollars elsewhere.

Investment property mortgages

Now, though, there are several reasons to invest your money by funding investment property mortgages for other borrowers. First is the reduced level of risk in comparison to other investment vehicles. If a borrower is going to purchase an investment home, it is likely that he has already squared away his own personal financial situation, as far as maintaining the payments on his own dwelling. His credit may be a little below what the bank wants, because of financial indiscretions in years past, such as falling behind on a car note or running up some high credit card debt, but people who are looking into investment properties are, by and large, more solid bets than those who are scratching and clawing just to put together that 20.1 percent down payment and praying that the bank will take them.

Investment property mortgage interest rates

Mortgage Rates Investment Properties – Another reason is that your interest rate of return will be significantly higher than if you go with investments that are completely secure, such as government backed securities or certificates of deposit. Because the mortgage is for an investment home, you can ask slightly higher interest than you would for a first home. After all, the risk is slightly higher to you than it would be for a first home — given the choice, the borrower would default on your note as opposed to the one that is guaranteed by his primary residence — and you can also ask for a shorter term. Most private loans only are set for a year or two, rather than the ten-year period that is standard for many mortgages from conventional banks in Canada.

It’s important to understand the difference between the arm’s length and the non arm’s length mortgages in Canada, though, before you start. You can put RRSP funds into either, but an arm’s length mortgage goes to someone whom you don’t know and with whom you have no connection. A non arm’s length mortgage is something you invest to help a friend or family member by that investment property, while making a profit yourself.

Amansad Financial stands ready to help connect you with potential borrowers, and we can also give you a detailed proposal based on your current financial situation. Consider adding investment property mortgage holdings to your portfolio, and give us a call!

Investing in Second Mortgages

Investing in Second Mortgages

If you are considering putting your money in the real estate market, investing in second mortgages is a vehicle that can yield higher returns than first mortgage private lending, so if you have some funds to risk, a second mortgage investment can be quite lucrative. With this possible reward, of course, comes a higher level of risk as well. As you consider whether or not to put your money into a second mortgage, take a look at some of the potential downfalls — and some of the potential rewards. Investing in Second Mortgages

Second mortgage investment risks

The primary risk that you take when investing in second mortgages is the position of your lien. When a home is sold, the first liability to be satisfied is any outstanding taxes. Then come mortgages, in the order of filing. So the first mortgage, which is generally the largest, must be paid first before the second, third and so on. In the event of a short sale, this can leave you in the lurch — consider the example of a house with $5,000 outstanding in taxes, $75,000 outstanding on the first lien and $50,000 outstanding on the second note (yours). The owner of the house is underwater and requests a short sale, which only brings in $60,000. $5,000 goes to the government, and $55,000 goes to the holder of the first mortgage, leaving $20,000 due on that one. You still haven’t gotten a dime on yours, and you don’t have an interest in the house, because you’re behind the first mortgage holder. (Second Mortgage Information – Investing in Second Mortgages)

Second mortgage investing

A creative solution to this is contacting that first mortgage holder and offering to bring that first loan current and then take it over. While the mortgage holder is not required to accept this, it is a more attractive option than foreclosure. If you have the funds on hand to bring that loan current and start making payments, you can take over the note and then either rent the house to the original owner or take it over yourself. Then you have a property of your own. This might not be as great of an outcome as getting the money back from your loan (plus interest), but it is an option when default happens.

Second Mortgage investing 101 – cont’

But what if the borrower is current on the first mortgage but is going into default on yours? It can be frustrating, because you may not be able to force a foreclosure on the basis of your own loan. These types of situations are known as “upside down liens.” If you granted a second mortgage for $25,000, but the borrower has only built up $5,000 in equity, you can’t foreclose and sell the whole Second Mortgage Investment Property for that full remaining balance.

This is usually happening for one of two reasons. If the borrower is actually current (not 30 days or 60 days in arrears) on that first loan, that means that he wants to stay in his home and has a source of money. If not, he wouldn’t be paying his mortgage payments each month. While you can eventually force your way to a short sale, it is often worth dealing with the borrower here. The likelihood is that he wants to bring your payment current as well, and he should be willing to put together an alternate payment plan. If you are willing to be a little flexible here with reporting to the credit bureaus, then you may be able to get back to current status on this loan more quickly than you think.

Another situation may be in play here, though, which is a fairly common experience for people investing in second mortgages. In this case, the borrower is working out a plan for loan modification with the first mortgage holder. At this point, you can step in and make things work out in your favor. If you think that the loan modification is a good idea because you can see that the borrower has improved his financial position (perhaps finding a new job or recovering from medical problems), you can step in and take on more of the debt. This does increase your risk, but it also increases your payoff when things turn around for the best.

If you are thinking about investing in second mortgages, give one of our experts at Amansad Financial a call or email. We will discuss your current situation and go over potential borrowers with you, tailoring a deal that will benefit you both. Follow the link below to get started Investing in Second Mortgages:

Daniel K. Akowuah | Mortgage Professional / DLG Underwriter
Toll Free: 1(877)756-1119 | PH:1(780)756-1119 | FX:1(877)238-7794
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