So you’re wondering what to do with those funds you have sitting in minimum risk investments in your RRSP portfolio. Retirement is getting closer with each passing year, but the low interest rates are keeping your return from government backed investments from even keeping up with the rate of inflation. Consider Becoming a Real Estate Investor. There are so many investors needed for real estate, you can find an option for your money that sits between government backed investments and the stock market in terms of risk and rate of return. There are thousands of people in western Canada who need mortgage funding but cannot get it from their banks for a number of reasons. If you are ready to step in with your own funds, there are Private Real Estate Investors Wanted to help out someone who deserves a loan for a home or commercial property and make some money for yourself in the process.
We see clients every week who have enough cash in the bank to make a hefty down payment — 30 or even 35 or 40 percent — but the banks are turning them down for mortgage financing. Even though the usual down payment amount that banks require is 20 percent, there are other rules that they use to limit access to mortgage loans, which is why so there are so many investors needed for real estate. A lot of the clients we see who have that much money in the bank have businesses of their own that have done amazingly well, and as a result they now have a chunk of change in the bank that they didn’t have a few years ago. When the bank wants to see their income history, they are going to see a huge spike in recent income but may see that the income does not come in on a regular basis. This makes lenders nervous, because they want to receive a mortgage payment every month. As a result, someone with a huge down payment and a huge salary from his own business last year may not be able to get a mortgage from any traditional lender. A second factor in this has to do with credit scores. If a borrower has been able to save up a large amount of money in the past year but historically has shown a poor track record of paying car payments and other obligations, then his credit score may not quite be what the bank would like, and so that potential borrower walks away without any financing.
There are three different ways for the many investors needed for real estate to turn a profit. The first is the most secure — the mortgage corporation. If you invest in this corporation, you get a tiny piece of hundreds of mortgages, if not thousands. the corporation absorbs the risk that happens when a borrower defaults on a loan, leaving the corporation high and dry for that month. You get a higher rate of return than you would from those government securities, but your risk is still fairly low. The corporation itself keeps some of the returns to help deal with that risk on its end.
Real estate investors wanted
If you want to make a little more than what a mortgage corporation will pay out, there are investors needed for real estate on the private lending end as well. In Canada, you can put your RRSP funds into a mortgage for someone else. If you choose to lend money to a family member or a friend to help him purchase a home, you are issuing what is called a non arm’s length mortgage. This term means that you have a personal connection with the borrower, which can often be reflected by the payment term and interest rate as well as the term. If you want to be a private lender but are leery about lending to someone you know, Amansad Financial can connect you with a borrower who needs an arm’s length mortgage. This term means that you have no personal connection with the lender. You do assume some risk with either of these private mortgages, because if the borrower does not make payments, you do not get any money. However, the fact that people want to stay in their homes, rather than go through foreclosure, makes this less of a risk, especially since you are dealing with borrowers with 30 or 40 percent down.
Talk to one of our investment specialists at Amansad Financial today. We can help you turn up the profits on your RRSP funds or other available investment capital.