Evolution Of Private Money
“Private Money Sources Are Growing And Changing All The Time”
I’ve written previously that private mortgage lending has become a very popular and growing target for investors to place their money these days. There are too many people with the same sad story about how they gave a stock broker a big pile of money and he turned it into a smaller pile over the last ten years. While the stock market will always be a highly lucrative investment vehicle, it comes with considerable risk of loss.
Many investors, especially those that have lost a few or more dollars, see mortgage financing, where hard security in the form of real estate is involved, a welcome opportunity to invest money.
And just because someone is investing in mortgages doesn’t mean they can’t make very good money. High returns are going to be connected to higher risk, but when you compare risk levels between the stock market and mortgage market there appears to be quite a disparity going on these days. Obviously there will be opinions on both sides of this one, but for many, hard security, even at higher risk is a better approach than buying stocks.
Regardless of the point of view or motivation, more private lenders are coming into the market.
Types of Private Lenders
There are basically three types of private lenders in the market place. The first type or category is the traditional private lender who is an individual investor, placing their money through their lawyer or a combination of mortgage broker and lawyer.
The second category are small groups of individual private lenders that either operate as small self managed investor group or syndicate deals whereby each private lender will take on part of a larger mortgage.
The third category is mortgage investment corporations or MIC’s. These are larger organizations that attract investor funds strictly for the purposes of investing in real estate mortgages. The investors are paid a return on their investment once the MIC’s management fee has been paid out.
How Has Private Lender Growth Impacted The Market?
There are a number of positive benefits to borrowers from the rise in private lending.
First, more private funds are available at a time when bank financing can be hard to secure, providing higher quality deals for privates to consider. For the more conservative private lenders, the rates offered can be very close to bank or institutional rates, providing some interesting short term options for those that may qualify or just fall short of conventional bank financing.
Second, in the past private lenders tended to be very regionally focused around areas where they were situated and had a good working knowledge of the market. Now some of the mortgage investment corps provide regional, provincial, and even national coverage in some cases. And even though individual private lenders are still pretty localized in terms of the opportunities they will consider, there’s a lot more of them out there in total, so more local areas now have access to private funds.
Which Is The Best Type Of Private Lender To Work With?
There is no real answer to this. Its all about choice and the more choice you have the better. At the same time, there can be large disparities from one private lender to another, so its also easy to secure a less than optimal deal for you situation without knowing any better.
The best way to approach securing a private mortgage is to work through an experienced Toronto mortgage broker who can quickly assess your situation and provide you with options for your immediate consideration.
I work with a large number of private lenders and would welcome the opportunity to discuss a private mortgage financing need you may have.
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About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel