Mortgage investing can be an excellent way to enter the real estate market and create a fixed-income investment.

Similar to other investment options, mortgage investing does have some risks. Overall, though, because it relies on real estate as collateral, it is a relatively stable way for people to invest their money. However, before you get started, there are a few things you should know.

Mortgage Investment Strategies

There are three methods you can use when it comes to mortgage investment. These include:

  1. Professional mortgage fund/Mortgage Investment Corporation. This a pool of money from various investors such as yourself. A professional manages the fund and invests the money into opportunities such as real estate equity, mortgages, or both. In this scenario, you simply find a fund that fits your requirements and risk level, and let a professional manage your investment’s day-to-day business.
  2. Brokerage. Mortgage investors can also work with a mortgage investment specialist or brokerage to find opportunities. This real estate investing style requires the investor to have a significant amount of money, as you will be the sole provider of the mortgage loan. Yet, for those who can afford this type of mortgage investment, you’ll have the privilege of working with someone with lots of knowledge who can offer some great advice. As an investor, a brokerage can also connect you with a wide variety of potential borrowers.
  3. Solo investing. You may also opt to locate investment opportunities without the help or assistance of professionals. However, this option also requires the most amount of work. You will be responsible for uncovering investment opportunities, completing the paperwork, and staying compliant with government regulations. Investors will also have to handle it alone if a borrower defaults on their loan.

Challenges of Mortgage Investing in Canada

Canada’s mortgage industry differs quite a bit from that in the U.S., and it is vital to understand how it works to know whether mortgage investing is right for you. For example, in the U.S., if a borrower defaults on their mortgage, it may get sold to a hedge fund or individual. Yet, in Canada, banks simply foreclose on the property. Thus, it can be challenging to find opportunities for mortgage investing in Canada.

Solo mortgage investors need to spend a significant amount of time and energy into locating and attracting borrowers. While many simply lend to friends and family, this can lead to tricky situations and broken relationships. There may even be some legal repercussions.

For these reasons, we advise individuals to look for mortgage investment opportunities through a mortgage professional who can help guide them through the process, provide advice, and connect them to various borrowers.

If you are interested in learning more about mortgage investment services in Toronto, call Northwood Mortgage at 888-492-3690 or contact us here.