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Invest in Private Lending
Private Mortgage
Private mortgage is broken into i) borrowing ii) lending. Like a bank, our brokerage acts as an intermediary between lenders and borrowers.
Secured Investments
- Avg return on first mortgage lending is high single-digit % per annum (subject to risk free rate) whereas second mortgage/construction project low to high double-digit % per annum (outperforming many fixed income products)
- To mitigate risk, we opt for low LTV and major metropolitans
- Short Tenure
- Funds to be placed in an escrow account
- Secured by subject properties as collaterals
Leverage and Arbitrage
Return on investment can be enhanced by leveraging and the source of funds can stem from, e.g.
- Mortgage refinancing
- HELOC
- Reverse mortgage
The interest expenses are fully tax deductible in this circumstance. Imagine an interest rate of 5% and marginal tax rate of 46%, the effective carrying cost is only 2.7%!
An arbitrage opportunity of 5% can be captured by locking in a one year 4% mortgage loans and a one year 9% secured investment