A different view at 2nd Mortgage
There are so many benefits to registering
a second mortgage on those deals as a way of protecting your investment [ your
own home or your real estate investment].
In placing that secondary lien – equal to their
investment amount – money investors place themselves second in any queue of
creditors resulting from a default. They also gain firsthand oversight of what
their expert partners are doing with the property.
“The second mortgage means that you have to be
notified before any other liens are placed or if there is any attempt to
refinance the property, for example,” said Loeffler, who usually takes on the
role of expert investor, although routinely places a second on deals where he
provides the primary funding. “It just protects you on the back-end.”
That manoeuvre is always done with the full consent of
all JV partners. Its use is expected to grow as an increasing number of
investors form those joint venture relationships as a way of overcoming more
rigid lending guidelines.
The continuing growth in property values across most
Canadian markets also means many individual investors are having to band
together to be able to afford even single-family properties.
“Filing a caveat will accomplish some of
the same things,” said Greg Head, co-author of The Canadian Investor's Guide to
Secrets of the Real Estate Cycle. “It will make sure you’re notified about any
refinance or attempted sale, because ‘trust me’ doesn’t work in real estate.”