Real Estate Investment – 5 Advantages Of Syndicated Mortgages

There are a ton of different ways to invest your money in real estate. One of the more secure and lucrative ways is through participating in a Syndicated Mortgage Investment. This is where a group of many investors comes together to fund one high quality real estate development project with a defined exit date. Although not all companies that facilitate this are equal – the ones that do it well will provide you with a number of advantages over other real estate investment vehicles.

The Advantage Of A Fixed Return

As the Canadian population ages – the appetite for higher risk – fluctuating return type of investment vehicles is diminishing. While no one wants the the negative real return GIC’s take after inflation – a surprising amount of us are not aware that there are alternatives that can facilitate those with fixed income needs. Syndicated Mortgages provide the retail investor an 8% fixed annual return paid out in a monthly or quarterly distribution. As this is the foundation of the investment return – there is commonly an interest reserve fund set aside to assure that investors are paid in a timely and consistent fashion.

Maximum Due Diligence Advantage

In all of my years educating investors of the different vehicles available – rarely have I come across a legal and disclosure process that was so thorough and enlightening. The framework of understanding the suitability of the investment to the selection of the project, the research and due diligence that has been completed before you ever have the chance to invest is astounding. Working with top-tier, blue chip development companies with 20 plus years of successful track records in exiting projects in a timely manner brings a level of comfort knowing that this is old hat. The bottom line here is that by the time you are feeling comfortable moving ahead with your investment – you will be as well versed in the project as anyone from the engineers to the municipal planners to the developers themselves. And on top of this there is the process of being provided Independent Legal Advice in order to ensure that all of your questions are answered in an unbiased manner.

Minimum Investment Advantage

With so many excellent investment vehicles in Ontario – they fall under the Accredited Investor rules which are restrictive to say the least. This leaves 90% of us in the cold or having to settle for the sanitized and watered down investments your local bank offers. Another major advantage of investing in a Syndicated Mortgage is that this falls under the rules regulated by the Financial Services Commission of Ontario. As such there are much less restrictive regulations on who can invest and how much. The minimum investment for a Syndicated Mortgage is 25K and in some cases a little less by exception. This opens a door wide for the rest of us! Who do you know that doesn’t have 25K sitting in their RSP gathering dust as the markets keep chugging sideways. Wait did I say RSP? This leads us to the next one.

Fund Eligibility Advantage

This one is huge! The vast majority of Canadians don’t have a ton of cash sitting around that is not being deployed for good use (home, business, family). But there is a monetary equivalent that we all forget about that we should be kicking into high gear for our financial future. The RSP is eligible for investment into Syndicated Mortgages as well as liquid cash and non registered investment funds. This is so exciting to hear as it provides an option to start to build wealth toward your retirement. As you do not have to cash out the RSP – there is no tax event and the returns you receive have to be deposited back into the RSP. Can you see how this is going to begin to open a whole new world for folks?

DLF – Potential Profit Sharing Advantage

One of the unique features of the Syndicated Mortgage investment structure is what is called the Deferred Lender Fee. This basically provides the investor an opportunity to effectively share in the profits from a successful exit on the sale of the project to the end user. I was just in attendance at what was coined an “Exit Party” where investors were receiving the projected deferred lender fee in full. It was amazing to see the cycle come full circle first hand. Based on the performance of pre selling units or a successful sale of the whole project to a builder – there is anywhere from 6-18% additional bonus paid out based on your initial capital invested. Of course it does need to be said that this is wholly based on performance so there is no guarantee that this will happen on every project. This is just one more way that the Syndicated Mortgage investment vehicle provides an advantage over other investment vehicles.

Well as you can see – there is so much more than I can fit in this post. I encourage you to take it upon yourself to learn more. The reward will be more than worth your effort. The world of real estate investing is truly vast and can be intimidating to those who don’t take the time to educate themselves. The opportunity that Syndicated Mortgages provide are a breath of fresh air in a stale market environment. I am here as a guide to get you to the next step in the learning process. Give me your question below and I will answer you in prompt fashion.