If you want to lend money to people as an investment, the first step is finding the people who need the money.
One of the biggest advantages to being a private lender is the luxury of being picky about who your money gets lent to. For every 100 applications we see at Magnetic, we only fund 24 of them on average. That means we say no to 76 of them!
That should give you a lot of confidence, but there’s a risk in being that picky too.
If you invest in a private mortgage paying 10% interest per year, you only earn the full 10% if your money is invested for 365 days. The longer it takes to find a Borrower to lend to, the less money you make for that year. For this reason, it can be very tempting to be less picky when you don’t have a lot of Borrower applications to look at every day.
Private mortgage Investors often overlook it, but its imperative that you generate a consistent flow of new applications to look at in order to avoid making the mistake of taking more risk than necessary just to get your money lent out and start earning quickly. Without enough applications to choose from, you’re more likely to get anxious and compromise on your lending guidelines which could lead to all kinds of problems.
There are two ways to find borrowers. They’re looking for us too so neither path is difficult per se. We can market to borrowers directly, or we can market to the professionals they are most likely to approach for help when they need to access equity from their home and have been declined by their bank. We choose the latter.
Marketing directly to borrowers is very expensive and if we were to choose this path, we’d be competing with banks and their multi million-dollar marketing budgets for that customer. We don’t do it because every dollar we spend finding borrowers would reduce the amount of return that makes it into our investor’s pockets. The word “mortgage” ranks third on the list of Google’s most expensive keywords so you could imagine the net result if we went this route.
There’s a better way to do this that costs us very little and achieves the desired result.
When someone needs a mortgage, they go to the bank first. When the bank says no, they turn to a mortgage broker most often. At Magnetic we only fund mortgages where the subject property is in Ontario, so we have gone to great lengths to develop relationships with as many Ontario based licensed mortgage professionals as possible.
Our email list is well over 10,000 names long and we invest time and money every year keeping that list clean and current. We market to this list every week and when we receive an inquiry from anyone on the list, we reach out by phone with the intent to build a relationship. As a Magnetic Investor, you are the beneficiary of those relationships.
In the end, sourcing Borrowers is something we put a high emphasis on day to day and while it seems like a little thing, it results in a consistent flow of new, high-quality loans we can fund so we can fill your orders quickly with high quality Borrowers. It’s a big part of how we have established Magnetic as Canada’s premier private mortgage administration service so you can sit back and enjoy the benefits of PMI’s without having to find, vette, and manage Borrowers yourself.
Book your FREE consultation now and get your questions answered. There’s a good chance we can get you there sooner with less headaches.