What is Private Lending? What does Money Lender mean?
Private mortgages allow investors to participate in the same lending space as the big banks, while benefiting from far better returns on their money than what the banks would traditionally offer through their investment vehicles listed above.
Private mortgages provide a regular income stream, tangible security and a real return to the investor that is superior to bank deposits, bonds, and GICs. The big, chartered banks in Canada have often been criticized for charging exorbitant service charges, however service charges at best, only cover a bank’s overhead costs incurred by operations. The bank’s favourite money-making venture is undoubtedly the mortgage-lending business.
There are many reasons why Private Mortgage investments are so highly sought after, these include the following:
- Very low administrative costs
- Cash-flow for the lender/investor
- Protected Capital (secured by the underlying physical asset/property)
- Flexibility – one to five year terms
The Private Lending/Investing Concept is of appeal to both the seasoned, hands-on real estate investor (we will call him the “funds seeker’), and the investor/Money lender who prefers hands-off transactions (we will call him the “Silent Private Lender or Money Partner”). The funds seeker has an opportunity to make a high percentage rate of return on a real estate deal but either does not have enough money to pay for the whole property or does not have all the funds for the repair or rehabilitation. The silent lender/Money Partner just wants to make money and not do any physical work. It’s a Win-win situation for both parties.