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 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.
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: