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Mortgage Investing – How and Why To Invest In 2nd Mortgages To Reap 12% – 14% Return

Don’t Let Your Home Equity “Rust” Away! Use Your Home Equity To Invest In Real Estate! Equity Wasted & Unused Is Leaving Money At The Table! One mistake many make is that because they don’t have cash to invest, in real estate or any other investment, they won’t be able to invest properly in their future.

By Sean Martin

Many Canadians who have owned a home for a number of years have seen the value of their home rise at the same time that they have been chipping away at their mortgage. The result of this is many Canadians who may be cash poor, but equity rich. One mistake many make is that because they don’t have cash to invest (in real estate, especially after recent changes in Canada upping the minimum down payment for a rental to 20%), they won’t be able to purchase a property. However, if you own a home and have equity in it you may be pleased to find out that you can access funds to invest.

You just need to utilize the power of leverage better. So how do you do that? You already have!

When you purchased your home, you more than likely had a deposit of 5%-10% and had a mortgage for the balance. You used “OPM”, Other People’s Money, and started to build value in that investment. Keep in mind, your investment did not appreciate based on just what was borrowed, but on the value of your home (i.e.: $ 5000.00 down on a $ 100 000.00 home you are going to realize roughly 5% appreciation on that $ 100 000.00, not just the down payment.) That’s leverage. And you get to live there.

Realize the gains which you are being kept from realizing in your present situation.

Access the Equity In Your Property…

This is the first step to use your home equity to invest in. If you own your own home and owe less than 80% of the value on your current mortgage, you have access to additional funds by refinancing. Although you can get a regular mortgage, many investors opt for a HELOC mortgage which allows them to re-borrow and principal they pay down on their mortgage. This is an important feature for investors, especially as they grow their portfolio, as eventually with 5 or 10 rentals, they are able to pay down their mortgage very aggressively using the positive cash flow from their properties. It’s a snowball effect: the more cash flow, the more you can pay down your mortgage, the more you can pull out of the equity, the more property you can buy, earning more cash flow… and so on.

Once you have a mortgage or HELOC, here are some of the ways you can use it to invest in:

Use it to Borrow / Leverage 100% of the Value of Any Rental Purchase

- Using your HELOC, you can borrow the 20 – 25% down payment for the rental, and get 75% – 80% financing (if qualified) for a standard mortgage on the rental property itself. There are some properties that when financed strategically (rate is no longer the most important variable) properly will give positive cash flow even when you borrow the entire value. Those properties you may want to leap on!
Stay liquid for the unforeseen:

- As you grow your portfolio, liquidity becomes more and more important. The more property you own, the more risk you are at for a number of issues to come up at once (i.e. vacancies for 2 properties, new roof needed for another, renovations needed on another). Having a HELOC with available equity will ensure that if you do have a “cash call”, you will be better equipped to handle it.

But I Don’t Want To Be A Landlord but I Still Want to Invest in Real Estate…

You can use your funds that you have borrowed inexpensively ( HELOC 3.25%-4% or a variable rate at 2.10%) and lend the funds to others through second mortgages. Yes, you can become the bank. Most people think of mortgage Brokers as someone to arrange a mortgage for a purchase. A mortgage Broker can also arrange for you to lend your funds to other individuals. Often this is facilitated through a second mortgage which you hold on a property. To do this alone can be intimidating and there is risk, but the reward is an interest rate of 12%-14%. Often a lawyer or accountant can also help find avenues to invest like this as well. To ensure the safety of your money, consider using an experienced Broker with access to an mortgage investment network specializing in 2nd mortgage loans. These Brokers will have their own underwriters and the proper tools in place to protect investors (you) should defaults occur. One channel I work with diversifies your funds into 3-4-5 different 2nd mortgages, syndicated with other investors like yourself. This offers protection from investing in 1 bad 2nd mortgage. Your exposure to risk is reduced in this manner. At the same time, should default occur they are in a position to pay the arrears on any 1st mortgage holder and purchase the property outright. This allows for sale to recoup what could have been potential losses. Should this type of action occur, your interest payments continue until the matter is resolved and your funds made available again for investing once again.

TFSA / SELF DIRECTED RSP…

If you are in a position where you have a self-directed RSP with your bank or financial institution can you use these funds to invest in mortgages?

Most institutions will still not allow you to use the funds in your “Self-Directed” RSP to invest as your wish. Again, an experienced mortgage Broker can offer advice and show you how to continue to shelter your profits within a RSP, but invest in these products. There are financial institutions that will allow these profitable investments and a mortgage Broker can show you the options.

A TFSA again has limiting rules with most banks and financial institutions. An experienced mortgage Broker will be able to guide you to help

Things to think about:

- When you borrow for investment purposes, you are able to write off the interest portion of the payments. Make sure you speak with an accountant to ensure this works for your situation.
- Investing the funds from a TFSA, RRSP or RESP protect you from paying taxes on the income.

- Even if you have a self-directed RRSP you financial institution will have policies prohibiting you from investing in second mortgage products. Ask me where to relocate your funds to maximize profits.

- Release the equity in your house to invest, but divert it through your RRSP or TFSA 1st, especially if you have unused allocations from previous years available. Again, this should be done with the assistance of your accountant to ensure that it is done correctly for you and to keep the CRA happy. Always keep the CRA happy.

- Most HELOC’s offered right now are Prime +.5%, or 3.5% today. Fixed rate refinance mortgages are available for as low as 2.54% and variable rate mortgages as low as 2.05%.

- HELOC’s usually have interest only payments available to better your cash flow, while standard fixed rate/variable rate mortgages do not.

- Make sure your HELOC is re-advance able! Not all are.

Considerable Factors Involved in Product Creation & Marketing

The niche you have chosen should allow creation of more than one product or service. With the technological advancements in the hosting industry, from automated control panels and scripts that simplify creation of accounts, to complete turnkey solutions; there is no need to worry about spending time on the real products sold to the customer. The main ones are keyword selection, sales copy principles, graphics, affiliate programs, product creation, online payment processing, auto responders, and search engine optimization.

Once you’ve earned money from this type of information product business, you can invest in the creation of your own products if you want, or start offering more informational products that allow you to sell your knowledge. But the creation and production costs of a similar big ticket in sequence product, although higher, are still pretty low. A key by-product of this process will be the creation of 3-D, Computer Assisted Design art.

The Association for Financial Professionals permits the following activities for repatriating funds: Research and Development activities, advertising and marketing programs, hiring and training new recruits, acquiring patent and other rights to intangible property, improving transportation, funding capital investments with the purpose of job creation and job retention & funding product responsibility or environmental claims.

It prohibits certain activities like: Tax payments, Payment of executive recompense, Payment of dividends, Redemption of stocks, Debt investments and Portfolio investments. Therefore, before repatriating the money, you must consider whether it is worth or not.

Checklist on what artist and product development necessitate includes: Exceptional vocals, musicianship and/or songwriting skills, Continued education and enhancement of musical skills, Quality equipment, Performance ability, Image creation and maintenance, Plan of action, goal setting, excellent promotion materials including photographs, press releases and artwork, Business management skills, Marketing, Publicity and Promotion knowledge, Online and Offline Professional management, Basic knowledge of recording, producing, engineering, and mastering, Basic knowledge of manufacturing, distribution, and sales online, brick and mortar and air-play, Good choices in members, staff and advisors, Physical and mental preparedness, Basic knowledge of finances, accounting Law and legal issues etc.

The goals for doing so are for the product owner to: Communicate the whole, Determine and communicate when releases are needed, Determine what functionality is sufficient for each release & focus on business value derived from the releases. The delivery team on the other hand will see the whole, learn about the steps to realize the vision, learn the business priorities, provide technical input to the roadmap and provide estimates for the projected features. The salesperson must lead the prospect through the various decision criteria needed in order to secure a sale. Whether your idea is the development of a product, launch of a service business, or even the creation of an event or program for a non-profit, creativity is the root of all entrepreneurial efforts starting with the vision itself.

People quickly learn to spend their time on marketing and product creation, rather than repetitive tasks. Apart from empowering companies and individuals, there should be a particular focus on identifying labor intensive businesses that have the potential to make a significant and positive impact on employment creation as well as those businesses that have a product or service offering for export markets with the final objective of booming local economies.

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How To Succeed At Online Product Creation The Easy Way

Product creation could be a frightening subject for a lot of Internet marketers to face. Some folks who get in the game with the intention of making a full time income are completely ignorant as to how an online business operates. One of the most profitable ways to create online cash is by creating a product that others are happy to pay for.

Product creation is legitimate method of generating money through internet marketing but many entrepreneurs get it wrong. They start by imitating their Internet marketing gurus by creating information products on Internet marketing in hopes of getting rich the way their heroes did. The problem is that they usually don’t know what they are doing and enter a highly competitive niche with very little marketing experience or connections.

Here are a few tips for effective product creation that may help you get on the right track:
Start by finding a profitable niche with low to moderate competition. If you conduct some rudimentary market research and keyword research, you’ll find many opportunities in areas that will surprise you. Amazon and eBay are two great places to brainstorm for product ideas.

Developing Your Product does not have to be a difficult project. You can find experts in the right field for your niche and pay them to write the material while an artist designs the packaging and website or blog. You can outsource the entire product creation part of the project after you conduct the research and testing to ensure profitability.

Sales and marketing strategies should be created while developing the product and learning about the market. Some experienced marketers use pay per click to drive traffic to their offer page; some folks outsource the entire marketing campaign to affiliates through ClickBank or other affiliate programs.

Product creation does not need to be hard, particularly when the merchandise is electronic. E-books, videos, audio and multi-media products sell very well. They are distributed immediately to customers electronically. Once you have a good feel for a niche market, try to service your customers with associated products and upgrades. If you want to earn money online through product creation, you must understand supply and demand. The majority of new online marketers fail miserably because they go after highly competitive markets or forget to research their chosen niche properly. You have to create your products according to the needs, wants and desires of the prospective customers.

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