Today we want to tell you how we were introduced to the world of Private Lending.
Some time ago, our mortgage broker called to talk about Tom and Anna, two clients of his. Tom and Anna are a married couple with an excellent credit history. Their home was valued at $450,000 with a first mortgage of $245,000 with RBC, leaving plenty of equity.
Three years ago Tom and Anna sold one of their investment properties, and due to some bad advice from their accountant, they ended up not paying their capital gains tax. Next thing they knew, the CRA hit them with a collection of $50,000 and a lien on their house … Wham! … forcing RBC into second place on their home.
But it gets even stickier. When Tom and Anna went to refinance their home in order to pay CRA the $50,000… GUESS WHAT? RBC did not want to touch them with a ten foot pole … not until they cleared their debt with CRA.
It’s the chicken or the egg, right? Can’t get refinanced through RBC if they don’t clear their debt with CRA, and can’t clear their debt with CRA if they don’t get refinanced through RBC …
So we decided to help. With the guidance of my mortgage broker, we proceeded to help Tom and Anna with a private loan. Instead of giving a loan to Tom and Anna directly we instructed our notary (we have notaries in Quebec) to instead pay CRA directly, establishing our own exit strategy. Fulfilling our agreement, within 6 months, Tom and Anna went back to RBC to get a refinancing that allowed them to pay us back at a 14% interest rate.
The best part is that we used our credit line at 2.5%. So our net profit, without using our own capital, was $2,250. And how long do you think this transaction took us, from start to finish? We’re talking about an hour and a half of our time. How does it get any better than this to achieve passive income?
With mortgage rules and regulations increasing and changing non stop in Canada over the last few months, we are truly convinced that private lending is the ideal way for real estate investors to make great returns without nearly as much risk as other investment avenues, including the stock market.
After our personal experience and diligently studying the ins and outs of private lending, we knew we had to share this lucrative opportunity with our fellow Zen Investors. Simply put, more people need to take advantage of this investment model – one of the safest, if conducted properly – and one of the most profitable. It is our hope that you are as excited as we are to have discovered this incredibly secure investment avenue.