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Nov 29 2015

Investing In Syndicated Mortgages Vs. Rental Properties

Amina

Over the past few months I’ve penned a number of articles on this blog looking at the benefits of non-traditional ways to invest equity, namely syndicate mortgages. However, how do you really know when you should be investing equity in syndicate mortgage options, and when it might be best to invest in a more traditional buy and hold property?

Firstly then, any kind of investment needs to be accompanied by solid research. Syndicate mortgages for example, are shied away from sometimes due to perceptions of high risk and insecurity. However, in reality, 90% of people who invest in syndicate mortgages make stable 8-10% returns per annum. Often as well, they profit from 2-4% annual bonuses and 90% of syndicate mortgage investors actually decide to re-invest in syndicate mortgages in the future. The key quite simply, is to do your own research and make sure to have as knowledgeable as possible a mortgage agent on your side. Moreover, this is even more important for people who choose to invest in buy and hold property.

With buy and hold properties for example, risks initially brought to mind when thinking about investing, are associated primarily with property values being at the mercy of volatile financial markets. The ultimate nightmare scenario if you like, is that investment properties might depreciate in value. However, what investors often overlook is the fact that investment properties overall have an average annual vacancy rate of 5%. Likewise, regardless of whether an investment property is tenanted or not, investors are still looking at 8% annual property management and 8% additional maintenance costs.

The key of course is to secure investment properties in slightly under market areas, with low vacancy. Likewise, if you have a significant amount of equity available, why not diversify?

With minimum down payments on investment properties standing at just 20%, anyone with equity in their properties can potentially benefit from investing in a number of properties all at once, but also with the right deal, still being able to invest in various syndicate mortgage options.

In fact, what it comes down to in many cases when choosing between syndicate mortgages and investment properties, is how passive a return people are looking for on their respective investments. Where syndicate mortgages guarantee 8% annual returns for no actual labour, investment properties run 8% management costs which many people choose to offset by managing projects themselves.

As a professional mortgage agent, I don’t try to sell people financial products that are in my interest. I build my reputation on getting my clients the best possible deals suited to every one of them individually. If therefore, you presently have equity to invest, but aren’t sure of what might be best for your specific situation, give me a call today or contact me directly by clicking here and let’s start talking about what the best investment strategy for you might be.

To your Wealth!

Amina

Please “like” my facebook page here Please follow me on twitter here

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Written by Dwania Peele · Categorized: Amina Mohamed · Tagged: Amina Mohamed, business development, Business Woman, Canadian Small Business Women, entrepreneur, equity, financial markets, invest, investment property, mortgage, mortgage broker, property, property management, syndicate morgage

Jul 19 2015

Okay – What's Really The Best Way To Build Equity?

Amina

As a professional mortgage agent serving the Greater Toronto Area, it’s a question I get asked all the time, what is the best way to build equity?

Most of us already know that our home’s equity is the amount of our home which we own minus the outstanding balance and interest on our mortgages. However, traditionally people often appreciate there as being only three ways to actually build equity. First off, we pay our mortgage each month. With every mortgage payment we then own a little more of our home and add a little more to our home’s equity. Alternatively, we attempt to add equity to our home by increasing our home’s market value through physical alterations and renovations. This and by hoping that our home will appreciate in value as consequence of favorable market conditions.

However, as well as physical alterations and paying off as much of our mortgages as quickly as possible, there is fourth way to build equity. In fact, if you’re serious about building equity, you perhaps shouldn’t be thinking about taking out a mortgage on a property at all. Instead, you should perhaps be thinking about taking out a Home Equity Line of Credit, or as it is popularly abbreviated, a HELOC. 

What? What’s a HELOC?

Okay, it sounds new, a little bit intimidating and if there really was a viable way to build equity quicker than by attacking your mortgage with everything you’ve got, surely somebody would have told you about it by now? Wouldn’t they?

Well, actually no. You see, HELOCs have actually been around a long time. One of the key differences between a HELOC and a traditional mortgage, however, is that mortgage brokers get paid a lot more money to sell mortgages than they do HELOCs. In fact, many banks don’t actually provide any incentives at all for brokers to sell HELOCs.

Why? Three words: No Compound Interest. With a Home Equity Line of Credit, you only pay interest on the remaining balance of your mortgage. This alone can save people thousands, if not tens of thousands in interest and significantly shorten the length of people’s overall borrowing terms.

Sound to good to be true? It gets better. With a HELOC there are no early repayment penalties and you can pay as much or as little as you want each month. In fact, with a Home Equity Line of Credit, you even have the option to just pay the minimum outstanding interest on your balance each month. Compare that alongside a traditional mortgage with compound interest, early payment penalties and penalties on even so much as paying too much of your mortgage off per annum, and the HELOC is a hands down winner when it comes to people really looking to build equity.

Okay, so what’s the catch? Well, there is one, but not really. Qualifying for a Home Equity Line of Credit is essentially just the same as qualifying for a traditional mortgage. However, with a HELOC people aren’t able to borrow more than 80% of their home’s appraised value. Likewise, HELOC interest rates are open and fluctuate with the prime, often making them a little higher than traditional mortgage interest rates. However, for people who feel like they want to run for cover at just the mention of variable interest rates, the HELOC has another bonus. – If you ever feel that the prime rate is going too high, you can lock in the rate and turn a HELOC into a traditional mortgage. And let’s just remember, if times ever look like they are not going in your financial favor, a traditional mortgage doesn’t let you decide how much or how little you can afford to pay each month now does it?

To HELOC or not to HELOC?

If you’re serious about building equity, a HELOC is definitely something which you should therefore be thinking about. Remember though, if you do decide that a HELOC might be in your best interests, your bank is likely the last place where you should head for impartial advice on actually getting one.

To your Wealth!

Amina

Please “like” my facebook page here Please follow me on twitter here

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Written by Dwania Peele · Categorized: Amina Mohamed · Tagged: Amina, balance, business, Canadian Small Business Women, equity, Greater Toronto Area, GTA, HELOC, home, Home Equity Line of Credit, interest rate, mortgage, No Compound Interest, penalties

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