# Private Lending



## can_84 (Jul 2, 2011)

I was wondering if anyone has done private lending for mortgages or have you invested in private mortgages? Is this profitable?


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## birdman (Feb 12, 2013)

Yes I have done it and I wish I didn't. Spent a lifetime in the financial service industry and was a seasoned commercial lender at high levels. Bought into a couple of MIC's and both ran into trouble due, of course, to poor management. Was okay until one of the principles of the MIC took ill and the other one retired and moved. Unfortunately, just before this happened some bad loans were put on the books. Returns were about 6-7% but they wrote off 20% of one MIC and I only received 2% interest for a couple of years. Also did a no, no and lent a friend (not a real close friend) about sizeable 5 figure amount at 10% and things were fine for a few years and then all went to hec. Long story but got the loan down to by about 30% and hopefully???? a payout in about month providing the house sells. Loan was unsecured (long story). I have always said never lend money to friends or family or get greedy so what did I do -both! i'm pretty conservative by nature so at the end of the day its not that much. Both of the MIC's I was in had a long history of good results and management but things changed. Don't think I would do it again but, I am also getting older. Some work out fine but some don't. If you do decide to proceed I suggest you did what I did and restrict the amount invested to a certain % of your fixed income portfolio.


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## drnetworth (Jan 6, 2018)

I have been and am currently invested in private mortgage loans, and I have been very happy with the returns

For 1st mortgages, you can expect 8-10% annualized return, while 2nd mortgages you can expect 12-14% annualized return

Try to find mortgage brokers who have experience in offering private mortgage loans, especially ones that have knowledge lending to real estate investors who need private mortgage loans for their purchases during renovation period. These loans are usually short 6-12 months and very safe. Exit the loan, then enter a new loan. Rinse. Repeat.

Ideally you want to invest your TFSA or RRSP funds in these loans, as you can tax shelter the interest income that you receive. To do this, you will have to set-up accounts at Olympia Trust. However, you can also invest cash, but interest income is taxed high.

You can check at Profunds and sign up for the member portal for free to see what kind of private loans are offered. For them, you would have to set up accounts with Community Trust. I don't use Profunds personally since I have my own mortgage broker, but Profunds would be my back-up if my broker couldn't find me deals.

It takes a bit of education and time to learn about private mortgage loans and to set things up propery, but definitely worth the effort in the long term. 

Hope this helps


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## Newby1983 (Apr 9, 2015)

Recent article at the Star. https://www.thestar.com/business/re...wers-turn-to-unregulated-mortgage-market.html


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## 30goodies (Jan 10, 2018)

I invested in two MICs a year ago. So far they are doing well, paying me 7% to 10% annually. Some MICs have different class for its shares. 

If they can take you in as an accredited investor, you may be able to purchase the class with higher interests. 

I also registered a company for private lending deals - for tax planning and protect from liabilities. I used my trust brokers to find me deals. You need to understand your own appetite for risk. What is your max LTV, exit plan, etc.


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## Emjay85 (Nov 9, 2014)

30goodies said:


> I also registered a company for private lending deals - for tax planning and protect from liabilities.


Could you explain the advantages of doing lending under a corporation? I'm not really sure how that works but sounds like it could be advantageous.


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## 30goodies (Jan 10, 2018)

Emjay85 said:


> Could you explain the advantages of doing lending under a corporation? I'm not really sure how that works but sounds like it could be advantageous.


Frist, I lend through my corp mainly to protect my privacy. My mortgage brokers and lawyers deal with the borrowers. 

Second, it sheltered my personal assets from potential liabilities. 

Third, I can have family members to be non-voting shareholders of the corp and I can choose to pay them a dividend/salary to lower over tax payable. 

of course, there are some business expenses I can write off too such as travels, meetings, office supplies, etc. 

Setting up a corp is costly and time-consuming, but i am doing this for the long term so it is worthwhile for me.


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## can_84 (Jul 2, 2011)

what is the rate of return do you get on average? Also how do you find your borrowers?


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## 30goodies (Jan 10, 2018)

I use mortgage brokers. they find me deals - potential borrowers. 

If I like the business case, then I propose the terms.


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## grayemma (Jan 23, 2018)

Investing in mortgages is a lot like investing in real estate, except without the headaches and capital required to actually purchase a property.


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## craiggsmith (Mar 23, 2018)

A Loan that Benefits Everybody. A private mortgage is an made by an individual or a business that isn't a conventional home loan bank. Regardless of whether you're considering acquiring for a home or of loaning cash, private mortgage can be helpful for everyone on the off chance that they're done effectively.


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## Just a Guy (Mar 27, 2012)

grayemma said:


> Investing in mortgages is a lot like investing in real estate, except without the headaches and capital required to actually purchase a property.


Except for the lack of leverage, no capital gains, less deductions and all the things that really make you money in real estate investing...


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## Rusty O'Toole (Feb 1, 2012)

Have done private loans and have sold houses with vendor take back financing. The returns are good, 8% - 10% on first mortgages, and the risks are low. No other investment can compare. I have had one loan go sour and sold the property under power of sale. It took some time but I got my money. I deal with a good mortgage broker but verify everything. They are not all trustworthy.

The main thing is the property and the equity, the lender's ability to pay is important but not as much of a safety factor.

With the recent changes in lending rules interest rates are going up and it gets harder to qualify for a loan, this means private lenders will be more important in the future. You will find better borrowers and higher interest rates.


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## james4beach (Nov 15, 2012)

Some of these small mortgage investment companies are being exposed as money laundering vehicles (BC).

https://www.citynews1130.com/wp-con.../05/09/Combatting_Money_Laundering_Report.pdf


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## sags (May 15, 2010)

A lot of money laundering in BC apparently. It is estimated that 10% of the prices are due to illegal money washing.

Interesting, I think I saw a story on the BC casinos going into bankruptcy. If I recall it wasn't long ago they discovered casinos were doing a lot of money laundering as well.

The police crackdown and the casino goes bankrupt........hmm.


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