Tuesday, June 27, 2006

Private Mortgage Investing - Real Estate Investment with a safety belt!

- by Ozzie Jurock

Although investing in private mortgages is a minor part of the total investment market those investors who brave the waters are quickly hooked on a relatively safe way of investing in real estate at one remove. Whilst it is not a totally risk free way of earning a return on your capital, it is a risk controlled way.

Private mortgages occur when a borrower cannot qualify under the large number of requirements that the conventional lending sources need to be satisfied before they are able to lend. As banks become bigger so their requirements for cookie cutter deals increases and deals that do not fit the mold are either cut back or summarily declined. Private mortgages fill the gap left when the small trust companies left the scene in the early and mid nineties.

Yields on private mortgages range between 10% for first mortgages to 15%+ for second and subsequent mortgages and to help you make an informed decision, as part of the investment package from any reputable broker you should receive an up to date appraisal as well as details confirming the credit history and earning power of the prospective borrower.

As a real estate investor you should first like the real estate being offered as security because in a worst case situation you will end up owning it. However you will own it at a discount from the appraised value and on this basis it is a less risky way of investing than ownership. In the majority of cases the interest cheques keep coming and you make a return that would make your Banker cry!

To learn more, buy Private Mortgage Investing by Teri Clark and Matthew Tabacchi


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