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Initial Investment Required, and Expected Returns, with Private Mortgage Investing

12 April 2013

When looking at any type of investment, there are two things you’re going to ask first: how much of an initial investment is required, and what will the returns on that investment be? Just like with any other investment vehicle, the more you invest the bigger your returns will be. However, there are a few generalities and guidelines you can follow to know what you’re getting into, and what you can expect.

Because you’re backing a mortgage with private mortgage investing, the amount of the initial investment will be the amount of a person’s mortgage, usually starting at around $100,000. You might invest in second mortgages, which can either require a little more or a little less of an initial investment, and can also earn higher returns. There really is no maximum initial investment required, as there really is no limit on the price of a home.

So what will get in exchange for that investment? What will your return be? First mortgages typically bring investors anywhere from an 8 to 12 per cent return, depending on the borrower’s risk levels and the interest rate. Second mortgages on the other hand, are known to be riskier investments and so, the interest rates can be higher, bringing returns anywhere from 10 to 15 per cent.

That interest of course, will be based on the purchase price of the property or rather, the amount borrowed in the form of the mortgage. An investment of a $1 million at 5 per cent is going to bring you a much higher return that you can expect to see on an investment of $300,000 at 7 per cent.

Private mortgage investing is one of the safest and most secure ways to add to your portfolio. But the fact that you can choose virtually any amount in the way of your initial investment, and that from that point on you can sit back and collect returns, and choosing the amount of those returns by way of choosing a package, also make private mortgage investing one of the most convenient and easiest forms of investing too.

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