Investment Secured by Property
For people with ample net worth, private money lending is a great way to earn big payouts. You get to earn a great rate of return at favourable terms while making a private investment that’s secured by property.
If you understand the essentials and carry out the necessary due diligence, you could earn hefty returns while minimizing your risk in your private investment.
The returns could be sweet in private lending. However, it requires the right partner, a little bit of work and some patience (as compared to stock market investing).
Private Investment – A Quick Example of What is Involved
Let’s say you have $100,000 sitting idle in your bank account and earning you a paltry 1% interest. That’s not the best use of your money, is it?
If you are looking to earn a better interest rate, you find someone who is looking for a short-term bridge loan.
As your mortgage broker, we can connect you with the right borrowers looking at private lenders for help. You can expect to earn an interest of anywhere between 10% to 12%, which is a huge leap over the 1% that banks offer.
Why Private Investment is in Demand?
So why would borrowers be interested in borrowing money at a high interest rate backed by private investment rather than secure a mortgage from banks?
The Canadian government introduced the Mortgage Stress Test in 2018, a financial bar than anyone looking for a mortgage must pass before the loan is approved.
Someone who could get a loan approval of $600,000, based on their income, for example, would now be eligible for a loan of no more than $450,000.
Now imagine you booked a pre-construction house in 2017 for $600,000 of which you paid $100,000 deposit and were hoping to take a loan of 500,000 from the bank. The builder completes construction this year and now, in light of the stress test, the bank says you are now eligible for no more than $300,000.
So, all of a sudden, you are short of $200,000.
That’s where Banyan Venture Partners can help. We will help you borrow the bridge fund ($200,00 in this case) from private lenders. It’s a win-win.
The borrower gets to close his deal on time without any penalty or a possible lawsuit from the builder.
And you, as the private investor, get to make a handsome earning.
For more information, get in touch with us today.