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Investor's Guide![]()
Investing In MortgagesBecome InvolvedInvestors in private mortgages must be willing to take risks. For example:
Unfamiliar With Mortgage FinancingInvestors must choose what sort of real estate they are willing to finance because this real estate will be the security of their investment. For those unfamiliar with mortgage financing, it would be prudent to invest only in residential or recreational properties. Making an investment in a commercial transaction, can be much more complicated and much riskier. A good rule of thumb is to:
Determined By RiskYields on mortgage investments will be determined by risk. The higher the risk, the higher the yield. In todays market you can expect a yield of 10% to 13% for a moderate level of risk. Minimum investments of $10,000 are required for private mortgages. Private FundsThe typical borrower who needs private financing:
Cottages, are another area where private funds are used. The banks shy away from properties that are not inhabitable year round, but if you are familiar with the area you may not have a problem making such an investment. Earn Interest IncomePrivate mortgages can also be held in a self directed RRSP. Mortgages are an ideal RRSP investment because they earn interest income that can be sheltered within the RRSP. If you were to invest in a mortgage outside of your RRSP, your interest income would be taxed at your full marginal tax rate, thus lessening the benefit of your investment. Rewarding Form of InvestmentIn summary, private mortgages can be a very rewarding form of investment, but they are very much a hands on investment. You must be willing to take the responsibility, to choose the investment that meets your needs and your tolerance to risk.
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