Article content
If you’re looking for an investment vehicle that generates solid short-term returns without the volatility of growth stocks, private lending may be for you.
Short-term loans to house flippers and builders can generate solid returns for investors
If you’re looking for an investment vehicle that generates solid short-term returns without the volatility of growth stocks, private lending may be for you.
Becoming a private lender is not as complex as it might seem. All you really need is a comfortable amount of underutilized capital, a risk tolerance higher than zero and access to a good real estate lawyer — because you’re going to be targeting real estate investors and funding their projects.
Experts say there are two reasons why private lenders tend to focus on real estate.
First, from flippers who need money for renos to commercial investors in search of bridge loans, there is reliable, consistent demand for cash from the real estate sector. While larger developers and builders generally have lines of credit set up to cover these costs, smaller operations will seek cash in the private market.
The short-term nature of these investors’ projects means you can charge comparable interest rates to what would likely be offered by mainstream lenders. In Canada, an interest rate of ten per cent or more on private deals isn’t unheard of, according to real estate experts, although seven-to-ten per cent is more common.
Second, because your loans will be secured with your borrowers’ real estate assets, the collateral involved will generally be worth far more than the amount you’ll be lending. That helps keep your risk in check.
As a private lender, your returns come in many forms. There’s the interest, of course, but some lenders also charge exit fees or “points” — fees that are paid by borrowers in exchange for lower interest rates. Some lenders opt for a profit split on the projects they help complete, but experts say those deals carry more risk because of the uncertainty involved with budgets, timelines and putting a finished project on the open market.
Finding borrowers can be a challenge for first-time private lenders. You’ll need to get your name out there, so putting some work into your social media feeds is a smart move. Joining a local real estate investment group or two will help you meet investors who are actively looking for cash. You can also strike up relationships with mortgage brokers who specialize in private lending.
But you won’t get far in the private lending business without an experienced, qualified real estate lawyer in your corner to negotiate your deals and review the contracts, experts say. A good real estate lawyer can also be a reliable source of leads.
As simple as private lending sounds — and it often results in surprisingly frictionless transactions — there are always risks involved. A good strategy for your first deal is to start small and keep it local. Meet with the builders and developers you’ll work with face to face and have them tell you about their projects.
Work closely with your lawyer to get a successful deal or two under your belt. Doing those things will give you a clearer idea of how much risk you’re comfortable with, and how much you might stand to gain.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
The Canadian Press. All rights reserved.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
The Canadian Press. All rights reserved.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
The Canadian Press. All rights reserved.
Freeland says she’s ready to deal with Trump |
NASA astronauts won’t say which one of them got sick after almost eight months in space
43 monkeys remain on the run from South Carolina lab. CEO thinks they’re having an adventure
Freeland rallies a united front ahead of Trump’s return to White House
Deputy minister appointed interim CEO of AIMCo after Alberta government fires board
Montreal says Quebec-Canada dispute stalling much-needed funding to help homeless
S&P/TSX composite index down Friday, Wall St. extends post-election gains
Mitch Marner powers Matthews-less Maple Leafs over Red Wings