Date Posted: April 15, 2016
Michael Hapke begins this week’s Mortgage Minute by discussing how real estate investment has always been an appealing way for individuals to increase income and preserve capital. However as the market becomes more saturated with investors looking for real estate deals, traditional real estate investors have seen their business plan undergoing a forced evolution.
In recent years, a real estate investor's First step: buy a single family home, rent it out, hope for a surplus at the end of the month after all expenses are paid. This property type is increasingly hard to find so investors have to find a new business plan. This is often the first step that a real estate investor will take.
From that step, can't find properties that service the debt (cover the costs) on a monthly basis so instead they will look for a property to renovate and flip. Purchase it at a low price, put some money and labour into it, and sell it for a higher price. Costs are more because investors need to pay for the renovations. These types of situations have created a lot of DIY shows and do-it-yourselfers. Those properties have become harder to find.
So what can an individual investor do now to grow their portfolio and preserve capital?
Investing in mortgages is the natural next step in the evolution of mortgage investment. I can invest in real estate and attract a passive return -- very little involvement -- and get a nice rate of return without having to risk the funds to renovate or purchase a property.
Most mortgages are one year terms. We typically look for funds that want to stay in the marketplace for several years, but most mortgage contracts we write are for one-year terms (the same as a typical rental lease).
If you are interested in more information about investing in mortgages please contact us at www.advancedalternativelending.com