Landlords! Are You Missing Out On This Secret Monthly Cash Flow Too?

“Rents Are Still Down…Yet Taxes, Repair Costs, Operating Costs Are Up And Rising Higher…” 


You bought your rental property to make money. You have been taught how to be a good landlord. Find quality tenants—- collect rents. You have been told to accept a small monthly cashflow with a future goal in mind of having a paid off property in 20 years or so.

Knowing this you want to maximize every angle of your rental property. You can simply rent out the property to one family or you can break the into pieces and generate more income. 

Here is a short summary :
  • Main Floor Suite
  • ​Basement Suite
  • ​Separate garage storage tenant

But theres more...

  • Restructuring your underlying bank mortgage... turning around and  lending your available equity out at 8%-12% annual return in the business of asset based private mortgage lending on local real estate at a discount. 
  • ​Doing so you keep a spread. The difference between the lending rate and your borrowing rate…
  • ​Ultimately increasing your cashflow as though you were able to add a third or forth invisible tenant to your rental property...

In the end paying your home off faster and receiving more monthly income along the way!

Here is what it's all about :

You’re already in the rental business. The private lending business isn’t much different. 

You receive a predictable monthly payment while being secured against a local property that is generally owner occupied with significant equity in their home giving you a large safety cushion in the event of default. (Equity is the real key) 

The way I see it there are multiple levels of tenancy :

  • A traditional tenant and landlord
  • ​Home owner with a mortgage is really a tenant to the lender or bank
  • ​To get technical a Home owner with no mortgage - still a tenant to land taxes. 

If You Don't Pay...You Don't Stay

Lets quickly compare the income security from a rental property with  private mortgage lending

Tenanted Rental

  • One Month Rent as security
  • ​Repairs paid by landlord
  • ​Vacancy income loss falls on landlord
  • ​Market fluctuation risk falls on landlord

Private Mortgage

  • 20%+ equity security cushion ~ Tens of thousands of $$$...Borrowers Skin!
  • If borrowers don't pay on time...​You get paid regardless when theres equity on a forced sale with foreclosure  
  • ​Borrowers have the market conditions to worry about. Their equity is at risk being exposed at the top of the priority stack. 

As you will discover private lending can be very lucrative provided you lend right.  Primarily you need to lend against the equity in the property. 
No equity - - No approval. 

Introducing...

The Money Depot's Private Mortgage Lending Program

     “Where You…The Investor Remain In Full Control”

What is Private Mortgage Lending?

Q: What does it mean to become one of The Money Depot’s private lenders?

A: When a borrower needs funds and they have been turned down at a bank for one reason or another, they typically turn to private lenders for a loan. They offer their property as collateral and they give a private lender a secured mortgage position registered against the title just like they would to obtain the loan from a bank. But at a higher interest rate than offered by a bank. 

How is the Money Used?

Q: How do you put my money to use?

A: As a licensed Mortgage Brokerage we actively market for borrowers who need a mortgage. There are various types of borrowers and borrower needs. We simply match you with borrowers that have sufficient equity to protect the investment, the ability to make monthly mortgage payments and a planned exit.

Why?

Q: Why don’t the borrowers simply go to banks or other institutional like mortgage lenders?

A: 2018 marked a big change in the mortgage lending rules issued by the Government of Canada mainly towards a bank’s lending guidelines. The new rules have made it difficult for many to get mortgage approvals as they once could. The self-employed have been hit the hardest.

Now with COVID the bank lending stress tests have increased business in the alternative lending/private sector, passing along borrowers that have large amounts of equity in their property but may not have the stipulated credit score, debt ratios or provable income to meet a bank’s lending requirements. 

Rate and Term

Q: What interest rate do the borrowers pay?

A: That depends on the deal at hand. It will certainly be higher than a GIC or traditional investment or a bank lending rate for that matter. The interest rate depends on current market rates. Residential example: First mortgages are approximately 5%-8.5% and higher. Second Mortgages generally start at 8.5%-12% and higher. For commercial rates please contact The Money Depot directly. 

Q: How long will my investment funds be tied up?

A: Most of our private loans are set at 12 month terms. However, there are some with 3 month term and longer terms to 24 months. Rarely, do we recommend a term longer than 24 months upfront with any borrower. With that said we have loans that have been consistently paying on time for over 5 years. 

Q: What if I commit to a longer term (e.g. 12 or 24 months) and need my money back sooner?

A: It is the Money Depot’s policy to whenever possible, replace a private lender who requests an early payoff with another lender. Sometimes a partial early payoff meets the lender’s needs, allowing the rest of their money to continue to earn high rates. We only ask that we receive advance notice, preferably 45 days, so we can try to accommodate the request. By having one of our existing private lenders buy you out there will be an administrative fee generally equal to 3 months interest. 

Q: Will I earn interest the entire term of the loan investment?

A: Your interest is fixed and locked in for as long as the loan is out. However, the borrower may sell or refinance the property before the term is up. You will earn your interest until the loan is paid back in full. 

Q: What if the borrower pays the loan back only a month after I invest?

A: We understand that you might be liquidating investments or foregoing another investment program. Therefore, you will receive up to a 3 month interest bonus or a set, pre-negotiated minimum interest amount. 

Q: Will I receive monthly payments?

A: Absolutely. Just like the bank. Every private mortgage loan comes with a monthly interest payment. 

Minimum Investment 

Q: What is The Money Depot’s Minimum Investment?

A: Since The Money Depot does not pool mortgage funds, there is no set minimum. The mortgage investment size varies based on the mortgage position and the borrower’s request.

Generally, we have first mortgages starting in the $200,000’s but more commonly, in the range of $300,000 to $500,000. Our second mortgages typically start as low as $20,000 but are generally in the range of $50,000 to $85,000. We will not allow our private lenders to lend more than 75%-80% of the property’s value but this topic warrants a full discussion around Loan to Value (LTV).

Guarantee?

Q: Is there a personal guarantee signed by the borrower?

A: In Alberta, mortgages that are granted to individuals holding the real estate title in their personal name cannot be personally guaranteed and be effective. However, titles that are held in corporations or numbered companies can obtain mortgage security rights against the title as well as a personal guarantee on the loan. Now with that said we have had situations where professional corps for example guarantee the loan. 

Can I Invest in mortgages with my RRSP or TFSA?

Q: Has the CRA approved using retirement accounts for Private Mortgage Lending?

A: Yes! CRA has established guidelines that must be followed in order for your RRSP or TFSA to be used to invest in real estate mortgage loans. The income is tax deferred with your RRSP or Tax Free with your TFSA. You need services of a trustee approved by CRA to act as a custodian to invest your funds. Popular trustees here in Alberta are Olympia Trust and Canadian Western Bank. Ask us for a current pricing sheet. They aren't large fee's.

Loan to Value? 

Q: How do I know if there’s enough value or equity in the property to sufficiently protect my investment?

A: It is The Money Depot’s policy to not lend more than 75% to 80% of the “As Is” property value using private lender’s money. That leaves a 20% to 25% (or more…) equity cushion. You will receive a current up to date “As Is” appraisal ordered by The Money Depot, not the borrower. At all times the investor tells us what loan to value they are comfortable lending at. 

Closing Costs and Insurance 

Q: Do you provide title insurance?

A: Absolutely. We never fund a private mortgage without title insurance.

Q: Are there any up-front costs?

A: No, the borrowers cover all the costs associated with the mortgage loan including your own legal council at closing. 

Q: What happens if the property burns down or becomes otherwise damaged or destroyed?

A: A valid homeowner’s insurance policy is always in place. You will be named as a Mortgagee and a first mortgage or second mortgage loss payable. Insurance distributions would be used to rebuild or repair the property, or used to pay you off. As a loss payable you are also notified if insurance hasn't been paid. There are provisions set in the mortgage agreement where penalties in favour of the lender are in place. Our commitments stipulate that if the lender has to pay an insurance bill, the borrower will receive a $500.00 fee plus pay interest at the rate of the face value of the mortgage. This again is a reason for wanting equity. You can legally collect under these circumstances. 

Loan Positions 


Q: Will my money be pooled with other investors?

A: No. Your capital will fund one real estate loan secured by a caveat held in your name against the title of the property with sufficient equity as protection. Some of our investors will split a mortgage loan with a close friend or spouse. Its important to know who you partner with. Ask us for a checklist of items to consider and discuss around lending with a partner.  


Q: What is a first or a second mortgage?

A: Mortgage positions are based on the caveat position on the land title. A first mortgage holds the first position giving a priority position over and above a second mortgage charge on title. At times there are also third mortgage positions which are generally more risky. In the event of default you would be paid out after the first and second mortgages, etc

Documents and Paperwork 

Q: What documents will I receive?

A: Your closing package will include: Original promissory note, copy of mortgage, copy of property insurance binder naming you as Mortgagee, Title Insurance Policy insuring you against any title problems and the property appraisal. 

Common Question

Q: If the borrower defaults and doesn’t keep their promises, how am I protected?

A: In this event we simply engage the lawyer to foreclose on the property. When there is sufficient equity in the property the borrowers have a “what’s in it for them” (WIIFM) to get the home refinanced or sold. They quickly see that the legal costs and late interest keep rising and eroding their equity. 

This moves them to the position to deal with the problem at hand. It is in cases where there is no equity in the property that full legal foreclosure takes place. Please request additional Foreclosure information directly from The Money Depot. Your closing lawyer generally is the foreclosing lawyer if needed. 

Next Step

Q: How do I get started becoming one of The Money Depot’s Private Lenders?

A: Once we determine the amount you want to invest, the rate of return you are seeking, when your funds are available and the term you are willing to consider, we begin looking for a deal for you. When we select one that meets your goals and investment objectives, you will receive full details on the property and the applicant along with an executive summary of the loan request. 

Q: Would The Money Depot work with other people I know that might be interested in becoming a Private Lender?

A: Yes. Since we don’t pool funds we always welcome new investors. Our policy is to find investors stable and predictable mortgage investments that produce monthly income. With Canada’s 2018 mortgage rules we are not only busier but the clientele is stronger. In many cases we see good credit, good employment and well cared for properties. 

See For Yourself! How Much Faster Can You Pay Off Your Own Mortgage... Without Reaching Into Your Pocket And Having To Effect Your Daily Lifestyle!

The Money depot

INTEREST NEVER SLEEPS

403-804-3150 / loans@themoneydepot.ca

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