A Visit To Chapters

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The family and I headed out to do a regular stop at Costco to load up on this week’s groceries for our little family of 5 and my wife Karen suggested we stop at Chapters to pick up a book she’s been unsuccessfully attempting to get at the local library.

While Karen made her way to the “fiction” section of the store to seek out her book, I headed directly to my favorite section of the store which of course is the  “business and investments” section. I always enjoy glancing through the shelves looking at all the great and not so great books that are on the market these days and one book in particular caught my eye and so I grabbed it to flip through to see if I could cherry pick some ideass from it. The book I’m talking about was Gordon Pape’s “Sleep-Easy Investing”.

Now don’t get me wrong, I like Gordon Pape. From the material I’ve read, he offers good sound advice and from what I was able to read in the short time I was in the store, this book certainly seemed to contain nothing other than that.

At the end of the book their was a Q&A section in which subscribers I guess asked questions of Gordon which he answered quite eloquently. However their was one individual that asked asked Gordon where he could invest his $100,000 RRSP portfolio and expect  a return of approximately 10%. What was surprising to me was Gordon’s answer which was “nowhere”.  Gordon’s advice to this individual was to lower his expectations to around 4 or 5% and to just be happy with it.

Now of course I’m parphrasing like crazy here, but I have to say I was pretty surprised at the answer. I thought, “Come on Gordon!” This guy bought your book about investing. Give him something more than that!

So what would I answer if somebody asked me? I’d say in “private mortgages”. I know what you’re thinking. You’re probably thinking “come on Walter, investing in private mortgages is risky”.

There’s no question about it. Investing in private mortgages is risky, but so is investing in stocks, or mutual funds for that matter. But there are safe guards that you can implement that won’t eliminate the risk completely but can really lessen then consequences of a mortgage investment gone bad. What are they?

It’s a term called “loan to value”. Loan to value is what lenders refer to when measring the risk of a mortgage on a property. In a nut shell, it’s a percentage of the value of the property that an investor is not willing to go over when mortgaging a property for a borrower. So for example, if you were going to mortgage a property with a market value of $100,000, and you were only willing to risk no more than a 70% LTV, then that simply means you wouldn’t lend more than $70,000 on this property. This of course is prudent because if the loan ever goes into default, you could recoup your money through “power of sale” proceedings and when the property sells, even if it’s sold under market value, the chances of getting your money back are very good. Further more, I’m sure as a mortgage professional, you could get at least 10% on your money.

Most people don’t realise that you can use your RRSP’s to invest in mortgages. I would invite you to at least investigate the possibilities. It’s not for everybody, but maybe it’s right for you.

For more information on RRSP mortgage investing, check out my website http://www.rrspmortgageinvestor.com

Make it a great day!

Walter.

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