This month I want to discuss about the benefits of investing passively in mortgages.  A new client of mine recently came up to me to ask about investing in real estate without having to take on the responsibility of “taking care” of it.  He’s new to the real estate game, so I suggested the strategy of investing passively would most suit his needs and interests.  I have come across many investors who claim they have passive investments, but what I realize is they only invest in stocks and mutual funds that were advices given by their financial advisers and bankers.  Investing passively in real estate is an entirely different process and that has intrigued my interest in writing this month’s blog.

Many of my clients have enjoyed the stable cash flow that comes with this type of investment for over 8 years.  How can we secure this type of cash flow?  First of all, this type of investment is secured against real tangible properties and it can start as little as $10k.  The return ranges from 5% to 10% depending on how much loan-to-value (LTV) that we decide to invest on.  However, we have seen returns of 20% and higher as well, depending on your risk tolerance!  CE Properties is very conservative about the LTV so we typically go as high as 80% and we lend out from typically 3 months to approximately one year term, sometimes with an opportunity for renewal. Because of these varying time frames, whether short or long term, the investor gets to decide how long they would like to invest for.   

The main benefit with mortgage investing is that it’s passive and once it’s set up, there really isn’t much involvement on the part of the investor, except collect their interest!  Many pension funds use mortgages as a tool to generate monthly cash flow for their members.  We are actually doing the same at a smaller scale.  We can get a very nice monthly income from this type of investing.  For those who have RRSP funds, this may be a smarter way to invest than the typical stocks and mutual funds!  

Do note, however, as with any other investments, there is always a certain level of risk that you will need to be prepared for and you are advised to seek a professional who knows exactly what he/she is doing to guide you.  Hope this has been helpful!  At CE Properties, we have been helping our clients in this area for more than 8 years and if you’d like more information or if you are interested in passively investing in mortgages, please feel free to contact us!