As mortgage qualification rules in Canada become more stringent, and home prices and interest rates continue to rise, an increasing number of Canadians and corporations that do not qualify for bank loans for commercial, development, or residential properties are turning to private lenders. Many are gaining ground with contractors and developers who are looking for multi-million-dollar mortgages to support new construction projects.

For investors, the increasing demand for private mortgage lending presents an exciting opportunity. With markets in disarray, private investors are seeking alternatives to traditional investment tools such as stocks and bonds, where their principal is regularly affected by the market. Many are working with lenders who help borrowers finance their mortgages. Investing in a mortgage with a private lender presents an opportunity to invest a large amount of capital with a fairly low risk that is secured by property, while receiving steady monthly cash flow.

Healthy returns

“I know exactly the amount I’m going to receive each and every month,” says one investor who uses TriLend, a private mortgage funding company. “I feel like I have more control over my income.”

While private lending doesn’t come with a guarantee on returns, it’s considered a safer bet than traditional investment vehicles, where the principal invested is often reduced or lost entirely. This is especially true in markets like the GTA, where there’s a large, growing population and high demand for housing.

“I feel more secure with this type of investment than I do with any other,” says another investor. “I don’t know what’s going to happen in the markets, but with a mortgage investment, I know I’ll get my fees each and every month.” The returns can vary from lender to lender, but with TriLend investors can expect a minimum seven percent return on their investment.

Many investors are seeking short-term returns, citing market instability as a cause for concern when considering long-term investments. For those investors, private mortgages can be a good option. “As far as I’m concerned, the current market and the overall economy is risky, and changes can happen from one day to the next,” says one investor. “That’s why I prefer short-term investments.”

Investors with TriLend can expect a healthier-than-average monthly return in a short period: anywhere from six to 24 months — but typically 12 months — with a fixed interest rate. All mortgages are registered in the investor’s name for added confidence.

Transparency and education, guaranteed

Working with a private mortgage investment company is also a much safer bet than attempting private investing on your own, or with a mortgage brokerage or lawyer, explains another investor. TriLend doesn’t just vet the deals they administer, they also adjudicate and remit monthly payments, at no expense to the investor.

“We’ve waded into private mortgage investing on our own, and it was confusing and, frankly, a bit scary,” the investor comments. “I didn’t know the steps we could take to safeguard our investment before working with TriLend. We feel very secure about our investments now.”

A good lending firm will educate you on your investment, provide details, and be transparent about the process. “They explain everything diligently,” one investor says. “They go the extra step to ensure you understand the details of your particular investment and provide a 360-degree customer service experience.”

Private lenders are going to play an increasingly important role to keep capital flowing in the real estate market as banks tighten the reins and as interest rates continue to rise. “I would usually be hesitant to recommend an investment opportunity to my friends and family,” one investor adds, “but I would definitely direct them to TriLend.”

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