Private Lending

Have you ever experienced lending your funds into mortgages secured on real estate? If you have not, you are missing a great investment vehicle that can provide significant returns with very little effort!

Get involved now as you can use those underperforming RRSPs and dead equity in your current real estate and make superior returns. We have been placing private funds into mortgages for over a decade and the overall consensus has been and still is extremely positive. Once you have experienced this type of investment, in particular the investment returns and the work and effort involved, you will not turn back. With today’s real estate prices, it is so hard to find a building or real estate investment that provides satisfying cash returns. Many investors are redirecting their funds from other investment vehicles into real estate and or real estate related investment products.

When you are placing private money, the location and property type plays such a critical role in your investment security. We all know that investment properties can be very good solid investments, as the revenue from your tenant base actually pays down your debt and pays your fixed expenses. If you are lending to this type of real estate, you have the same sense of security. Indeed, Pro Funds Mortgages has specialized in such investment lending for many years. Our experience has shown very low default ratios. The borrowing clients are typically higher net worth individuals with good credit. Failure to cover the mortgage payments is generally less of a concern.

Private Lending FAQ's

You can download an expanded PDF of these frequently asked questions here.

What types of mortgage investment offerings are there at Pro Funds?

At Pro Funds Mortgages, we offer two different types of mortgage investment offerings. i. Individual Lending is an investment opportunity where a single investor is looking for a 1st or 2nd mortgage. These mortgages are usually for residential or investment properties, duplexes, triplexes, or condominiums that are typically purchased as investment properties. The size of the mortgage amount requested is usually $25,000.00 and higher. This type of mortgage will not typically be administered (see below for definition). ii. Project Lending differs as these offerings are usually catered to investment, construction and development projects that are syndicated mortgages. The size of the mortgage amount requested by the borrower is usually in excess of $500,000.00. These investments typically yield a higher return, but are project specific, and will be administered.

What is mortgage administration?

Administration is when a FSCO (Financial Services Commission of Ontario) approved company will register the mortgage in trust for the lender, or registered funds, and handles the receipt of all payments. Payments are sent to the lender by the administrator through an automatic deposit to the bank account of choice. Mortgage administration is mainly used for syndicated mortgages, however, if you as a lender would like an Individual mortgage administered, there will be an associated fee. The mortgage administrator for Pro Funds is Valour Mortgage Services Inc. in Trust.

What is a syndicated mortgage?

A syndicated mortgage is a mortgage investment made by two or more individuals. Syndicated mortgages are used in investment and development projects. Due to the size of the mortgage amount requested, multiple investors pooling funds together is a much more efficient way to facilitate and fund. Each investor is registered on a charge through an administrator trust in proportion to their committed investment amount.

What are the benefits of a syndicated mortgage?

Syndicated mortgages are great if you are looking to diversify your portfolio as you can spread your funds over several projects to mitigate any potential risk. You will also be in a position to invest in the larger higher yielding projects and have a more passive type of investment based on the fact that syndicated mortgages are administered. Lenders are able to choose what investment amount they are comfortable with of the total mortgage being registered. Lenders are also eligible to invest with registered funds such as TSFA, RRSP, RESP, etc. Although some projects may have minimum investments, a benefit of syndicated mortgages is that you as a lender are able to use combination of cash and registered plans to fund one investment.

What is the minimum investment for mortgage investing?

Although there is no set minimum investment, the type of mortgage will determine how much we will be looking for. For individual lending, typical minimum investments start around $25,000.00; however there are cases where a lower investment will be acceptable. Cash as well as registered funds are eligible. For Project Lending, the typical minimum investment is $50,000.00 given that these mortgage requests are much larger in scope and the returns are a higher yield. There are also cases however, where we would accept lower investments. Please speak with us if you have inquiries regarding a specific project.

What are the typical ROI’s?

Anticipated returns for individual lending typically range from 7-14% annually, depending on if it is a first or second mortgage. Returns for project lending typically range from 10-16% annually.

How do I get started?

If you would like to get involved in mortgage lending then your first order of business is to establish how much you are comfortable using towards this type of investment vehicle. It is imperative to make sure the funds are liquid in either cash or your registered funds. If you commit to a mortgage, the individual or company borrowing these funds are relying on these funds for a specific closing date. It is also very important to make sure you are not using your life savings for these investments. You can contact Pro Funds Mortgages, and one of our investor relations specialists would be happy to meet with you or have a telephone discussion with you on specific inquiries. Once you have established an acceptable range you would be comfortable investing, you can contact Pro Funds for current opportunities or sign up to our Private Network. Through this network, contacts are sent exclusive e-mails on our latest investment offerings. CLICK HERE FOR A DIRECT LINK TO OUR PRIVATE SIGN UP.

How does the rest of the investment process work?

When you find an investment offering you are interested in, you can request further details and specifics on this investment. To proceed, you will then notify a member of the Pro Funds team of your commitment, and the paper work will be drafted. You the lender will receive the paper work and will need to sign the documents and provide identification. The documents will then be sent to the legal team representing you the lender and this specific mortgage. The lawyer will proceed with the closing. Please note that we do make our best efforts to close on the dates specified, however, the dates can be delayed based on the lawyers due diligence and timing. Also consider that if you decide to use registered funds, it will usually take an additional 2-3 weeks longer for the plan to release the funds as opposed to a cash investment. Once the funds are received and the mortgage is closed you will receive either postdated cheques on closing from the borrower, or if you are involved in a syndicated mortgage, the administrator will arrange for a pre authorized deposit to go into the bank account of your choice for your monthly payments.

Who pays the legal fees?

The borrower will pay for the legal fees to close the mortgage; if this is an individual mortgage the lawyer will be of your choice, however, their fees must be reasonable. If this is a syndicated/project mortgage, one lawyer will be chosen to represent the entire group of lenders. All fees with respect to the closing of the mortgage are the cost of the borrower. When the mortgage is discharged and paid back, the borrower will pay the discharge fee as well. If you are seeking a legal opinion on a mortgage investment, this is not the cost of the borrower.

What due diligence is performed?

Pro Funds will make our very best efforts to deliver all information provided by the borrower to the potential lenders. The protocol for an individual mortgage versus a project mortgage will differ. For an individual mortgage, the request is reviewed by a Pro Funds Mortgages originator. This entails an assessment of credit applications, confirmation of income (if available), and property details (appraisals, income and expenses, leases, insurance, taxes, photos, etc.). This information will be provided to the interested parties for review. If further information is requested by a lender, Pro Funds will make an effort to arrange for all the details requested. Pro Funds will be diligent in assessing each request, but ultimately you are the lender and you will need to make sure you are 100% comfortable with the mortgage investment before proceeding. The due diligence for syndicated/project mortgages is based on the specific project and its viability, rather than personal credit and income. These mortgages are analyzed by very seasoned third party experts, appraisers, environmentalists, engineers, planners, developers, builders and lawyers. Pro Funds Mortgages has aligned ourselves with Valour Capital Group,a development company that offers administration services and Mortgage Investment Offerings (MIO’s).A MIO is one comprehensive package on a specific investment offering that consists of all of the third party reports and mortgage details. Once again, you are the lender and you must be 100% comfortable with the mortgage investment before proceeding.

What are the risks?

Mortgage investments are not guaranteed by the government. There are no 100% guarantees that you will not lose your investment. The mortgage (your money) however, is registered on the property being pledged as security. This means that you have a registered charge on the real estate. The borrower cannot do anything with the asset without consent from the mortgagee. You are not lending to a company that is issuing shares, and you do not own the property,your funds are a mortgage investment that are secured on the real estate. This is beneficial because success of the borrower is NOT contingent on the success of your investment. If there is failure and the borrower goes bankrupt, you have the real estate to sell to realize on your investment. This is considered much more secure than lending to an Exempt Market Dealer (EMD).Finally, when you invest in mortgages it is very important to understand the value of the real estate and what your loan to value really is. This is your security. Location and property type is a very important factor.

How can registered funds be used to invest in mortgages?

If you have RRSP’S TFSA’S, or RESP’S and would like to use them in mortgage lending, you will have to have them in a trust company plan in order to commit to a mortgage investment. The process of transferring these funds may take 2-6 weeks. Pro Funds Mortgages has a relationship with Olympia Trust. They are one of the few left in the industry that will lend to mortgages. Pro Funds would be happy to provide contact information to Olympia Trust.