REAL ESTATE EQUITY INVESTMENTS AND FINANCING

Transcription

1 REAL ESTATE EQUITY INVESTMENTS AND FINANCING Residential Commercial Industrial Multi-Family

2 I N B U S I N E S S T O D O B U S I N E S S There is a growing demand for alternative and flexible sources of Mortgage financing, and this trend is certain to grow as traditional Lenders concentrate more on fee-based activities, while proceeding to tighten their lending criteria. "Cedar Peaks Mortgage Services is quick to respond when circumstances required more than conventional thinking in order to meet our client's needs and the requirement of it's Investors." Garry Bidniak, Mortgage Broker, Performance Mortgage and Financial Services Ltd. Conversely, Investors are embracing the opportunity of including Mortgage Investments as part of their portfolio. This inclusion of equity based Mortgages is allowing them to realize a higher than average return secured by Real Property. These investments are also RRSP eligible. "Cedar Peaks Mortgage Services was recommended to me by my banking institution. The rate of success I have experienced with my investments has more than lived up to my expectations." Helen G., Investor

3 CEDAR PEAKS MORTGAGE SERVICES LTD. was established as a Mortgage Brokerage, specializing as a source for alternative and nonconventional Mortgage funding requirements. We are primarily a short-term, asset focused Lender operating in markets not well serviced by traditional Lenders. Cedar Peaks Mortgage Services is licensed by the Real Estate Council of Alberta, and is a member of the Alberta Mortgage Brokers Association and the Canadian Institute of Mortgage Brokers and Lenders. Capital Funds are provided to Cedar Peaks Mortgage Services from a large group of private Investors. Through the confidence of these Investors, Cedar Peaks facilitates the needs of Borrowers in a wide range of financing requirements that includes purchases, re-financing, equity take-outs and new construction. Residential, Commercial, Industrial, Raw land and Multi-family properties can all be accommodated under our lending criteria.

4 M A N A G E M E N T T E A M Dianne has been the building block of Cedar Peaks. Her vision of the industry created the concept of the company and what it would contribute to the Private Mortgage lending industry. For the past 30 years her perseverance for excellence and personal determination has lead her career through business ownership, Finance, Executive Management and the Real Estate and Mortgage industries. Dianne s accomplishments include VP of Finance for two large land developers, Director of a major downtown Calgary Hotel, DIANNE PULLIN Founder/Owner Mortgage Agent Mark s position with Cedar Peaks fulfills one of the most integral aspects of the company. He has been able to foster outstanding trust relations with Investors both new to the process through to seasoned Professionals. His acquired knowledge of the Private Lending industry enables Mark to ensure that all parties to each transaction achieve the best professional representation Mark brings to Cedar Peaks Mortgage Services almost 30 years of experience in the Banking, Finance, Real Estate and Mortgage industries. Throughout his continuing Real Estate career, he has been a recipient of numerous accolades and awards through to the International level. His previous Banking and Lending background includes the position of Manager for First Calgary Savings and Credit Union s largest loan and Mortgage portfolio as well as several Branch Manager appointments. Operations Analyst of a Hotel Management group and Chief Executive Officer of a premier California residential golf-course development. This diverse background of knowledge has complimented her ability to appropriately analyze large Mortgage funding requirements. Working directly with developers of all sizes has enabled her to quickly analyze the long term planning required to achieve their goals, and to determine an appropriate funding requirement to meet the same. Her vision, focus on direction and analytical skills have been the foundation of her success. Utilizing her factual objective approach, she has gained a high level of respect from her co-workers and the Professionals that she has been associated with. She recognizes the crucial importance of integrity in her dealings which is the fundamental requirement of any transaction that she has been part of. MARK PULLIN President Mortgage Broker This level of Real Estate and Lending expertise is an invaluable asset to any private Lender in today s market. He utilizes the philosophies garnered and then integrates them together with his personal criteria, I will not ask my Investor to place any funds in a Mortgage that I would not invest my own Capital in. Mark s integrity and honesty has created a faithful Client base. His no-nonsense, direct approach has enabled him to realize a high level of respect from all Professionals that he deals with in the industry.

5 MORTGAGES AS AN INVESTMENT WHEN THE WISE PERSON HAS OPPORTUNITY FOR GAIN, HIS CARE IS THAT HE MAY BE RIGHT CONFUCIUS Building wealth is not very complicated. Thankfully, some things never change. When it comes to building wealth and security, certain truths remain as genuine today as when your father and his father first taught them. If you work hard, do well at what you do to earn a buck, spend less than you make and save the difference, you will build wealth. That s the secret. Following Dad s example, you will win more often than you will lose. Period.

6 Most would agree that the hardest issue about building wealth is earning it in the first place. The second most difficult part is keeping it once you have it. Aye, there s the rub. Most wealthy people today are wealthy because they were very careful with their surplus at all points along the way. They still have it because they avoided throwing pearls to swine or risking hard-earned dollars indiscriminately. In Canada, the get-rich-slowly plan remains the ninth wonder. It is virtually linked to the eight wonder the miracle of compound interest. History has proven that the fastest and safest way to build wealth is to make steady consistent gains, reinvest profits and stay the course over the long term. This is the essence of a First and Second Mortgage investment and the foundation of our success. Cedar Peaks Mortgage Services Ltd. Investors not only outpace inflation, they also earn excellent income without taking inappropriate risks. We are very proud of our history and track record of success.one of the most attractive benefits of owning a Mortgage investment is the opportunity to participate directly in Real Estate without the headaches associated with actually owning the Real Estate. Your investment provides the comfort of an above average rate of return, a promise to pay from the Borrower, and the security of Real Property as the underlying asset. There are few, if any, other Investment vehicles that provide all these features. Are you looking for an alternative to low GIC rates right now? Or are you looking for a logical place to diversify from potentially volatile markets? Why not consider the Cedar Peaks advantage? THERE ARE FEW, IF ANY, OTHER INVESTMENT VEHICLES THAT PROVIDE ALL THESE FEATURES. WHY CHOOSE CEDAR PEAKS MORTGAGE SERVICES LTD. Today s low interest rate environment and consumers demand for higher returns, has resulted in an overload of information strategies and advice, creating more confusion than comfort for Investors. CEDAR PEAKS OFFERS AN ALTERNATIVE. Many people today are looking for higher rates of return than GIC s provide, but do not want the constant ups and downs of Mutual Funds, or the volatility and fees associated with the Equity markets. Our clients have found our investments to be more straightforward than many others while enjoying the consistent higher rates of return that we offer. SOME OF THE REASONS WHY MORE AND MORE CANADIANS ARE INVESTING WITH CEDAR PEAKS: Minimum 10% interest per annum Short-term mortgage security backed by Real Estate Interest income paid monthly or quarterly Low minimum investment ($25,000) 100% RRSP/RRIF eligible Relief from volatile stock markets Isn t it true that the very last thing you need right now is another under-performing investment? Information on investing with Cedar Peaks Mortgage Services Ltd. is attached.

7 F U N D I N G O U R M O R T G A G E S Capital funds are provided to Cedar Peaks from a group of Investors made up of individuals like yourself. The minimum capital that any one Investor may provide is $25,000., however there is no maximum limit. Mortgage investments are 100% RRSP/RRIF eligible, provided they are in accordance with the Government Regulations in this regard. Cedar Peaks funds its Mortgages in one of the two following manners: 1) INDIVIDUAL/PARTNERSHIP MORTGAGE Typically this format is used when an individual Investor or a small group (i.e. 2 or 3) of Investors are funding a Mortgage loan, and thus themselves are registered on title as the Mortgage holder. The rate of return to Investors will be the face rate of the Mortgage. This rate will vary typically between 10% and 16% depending on the Mortgage position, term, and the Borrower. 2) JOINT VENTURE MORTGAGE LENDING Typically, this form of Mortgage lending is utilized for larger amounts of Mortgage financing. A group of people (i.e. 4 or more) are needed to provide sufficient funds to advance one specific Mortgage. In order to simplify the Mortgage registration and administration process, each Investor would then sign a Joint Venture Agreement with the registered Mortgage holder, (i.e.) CEDAR PEAKS MORTGAGE INVESTMENTS INC. CEDAR PEAKS MORTGAGE INVESTMENTS INC., upon receiving payments from the Mortgagee, then disburses, on a pro-rata basis, directly to the Investors the return of interest and principal as outlined in the Joint Venture Agreement. As is the case with the Individual/Partnership Mortgage, the rate of return to Investors will be the face rate of the Mortgage, typically ranging between 10% and 16%, depending upon the Mortgage position, term, and Borrower. Further details of this structure are available upon request. It is important to note that in both of the above noted forms of Mortgage lending, Cedar Peaks Mortgage Services Ltd. will provide the initial due diligence, including but not limited to, review of the applicants, security, repayment ability, exit strategy and risk factor, prior *to making a recommendation to the individual Investors, who ultimately have the final decision in the approval process. FREQUENTLY ASKED QUESTIONS Why do Borrowers come to Cedar Peaks Mortgage Services Ltd. when the Big Banks charge less interest? Cedar Peaks is primarily a short-term, asset focused Lender operating in markets not well serviced by traditional Lenders. It is often the case that Investors funds are used to fill the gap bringing Real Estate projects to the point where they qualify for traditional Bank financing. Cedar Peaks provides timely funds to Borrowers on a short-term basis to fund activities such as development, construction and acquisition. There is a growing demand for alternative and flexible sources of Mortgage financing, and this trend is certain to grow as Banks concentrate more on fee-based activities while proceeding to tighten their lending criteria. What are my risks in a Mortgage investment? The ultimate security of a Mortgage lies in the value of the underlying Real Estate. Simply put, the greater the appraised value is above the loan, the more secure the loan is. Since the strength of any loan is greatly dependent upon the value of the security, great care is taken when assessing the true value of the asset. As part of our due-diligence process, we employ the services of independent appraisers to aid in the assessment of the security. Each Mortgage loan is granted on the basis that it will be repaid. In the event it is not, foreclosure action will commence, and ultimately the Investors may become the owners of the secured lands for resale at Market Value. Please refer to the general information foreclosure addendum included in this brochure.

8 FREQUENTLY ASKED QUESTIONS CONTINUED Is my money liquid when I invest in a Mortgage? No. When you invest in a Mortgage, you should expect to keep your investment until the scheduled terms ends. Cedar Peaks generally writes loans with terms ranging between 6 and 18 months, however, sometimes loans are repaid ahead of schedule, or occasionally the Borrower will request an extended term. This does not usually pose a great problem with Investors as your investment capital continues to earn the same initial rate of return for the entire duration of the Mortgage until repaid. We encourage Investors to treat their Mortgage investment like any traditional, locked in investment, and to only use the portion of their portfolio that is not required to be liquid. What are the fees associated with owning a Mortgage investment? There are no fees to the Investor when non-rrsp funds are placed in an Individual/Partnership Mortgage. Joint Venture Mortgages may be subject to a management fee of up to one percent annually of the investment amount. All fees such as application, Brokerage, administration, appraisal, legal and disbursements, and registration fees are for the Borrowers expense, and usually are deducted directly from the Mortgage advance, or when the Mortgage is paid in full. How do I use funds in my RRSP for a Mortgage investment? A Mortgage investment is fully eligible for your RRSP. If you choose to hold your Mortgage investment inside your RRSP, you require a self-directed RRSP set up with an institution friendly towards arm s length Mortgages. Financial institutions offering this service can have slightly different fee schedules for maintaining a self-directed account and administering Mortgages. The self-directed RRSP account fees, Mortgage set up fees, annual administration fees, totaling approximately $375.00, will be automatically deducted from your RRSP account. Cedar Peaks will prepare the paperwork required for your investment through your registered plan. It is our aim to make owning these investments easy and hands-free for you. How do I get started? Contact your Cedar Peaks Mortgage Services Ltd. Professional to express your interest. They will answer all your questions and provide you with all the necessary information so you can decide how Cedar Peaks can best work for you. Decide on the amount that you would like to invest, and if your investment will be from your cash or RRSP account. From there we will assist in placing your funds in a Mortgage, and provide you with a copy of all the related documents. If you have additional questions or concerns please contact Cedar Peaks Phone or (403) cedarpeaksmortgage.ca

9 MORTGAGE FORECLOSURES CEDAR PEAKS MORTGAGE SERVICES believes it is important that before investing in Mortgages you are familiar with this Investment vehicle and what steps would need to be taken if there was ever a default in a Mortgage you invested in. We have accumulated a number of common questions regarding Mortgage foreclosures and hope that our answers will be of assistance to you.

10 M O R T G A G E F O R E C L O S U R E S WHAT IS A MORTGAGE? A Mortgage is a contract between a Lender ( Lender ) and a Borrower ( Borrower ) the principle feature of which is that the Borrower pledges (Mortgages) land and the house or building on the land (the Lands ) that he owns, as security for repayment of monies he is borrowing. The Mortgage will also contain the other terms of the loan that have been agreed to between the Borrower and the Lender including the amount of money being borrowed, the interest rate the Borrower is to pay on the money being borrowed, the monthly payment amounts, and the term of the Mortgage (i.e. the date all the principle monies become due). WHAT HAPPENS AFTER A MORTGAGE HAS BEEN SIGNED? The Mortgage is registered with the Land Titles Office for the Province of Alberta. The Land Titles Office will make a notation on the title to the Lands that the Borrower has mortgaged the Lands to the Lender and retain a copy of the Mortgage for its records. The effect of the registration is that the Lender has determined his priority position with respect to the Lands and also serves as notice to all persons, including other Lenders, that wish to deal with the Lands that the Lender has a claim against the Lands that will rank prior to all later claims that may be made or registered against the Lands. It should be noted that property tax arrears, even if not registered against the title to lands, have priority over any Mortgage registered. WHEN IS THERE A DEFAULT UNDER THE MORTGAGE? Default usually occurs when the Borrower fails to make one of the monthly payments or is unable, at the end of the term of the Mortgage, to have the Lender agree to an extension of the term of the Mortgage and/or has been unable to obtain an agreement for refinancing with another Lender. WHAT STEPS DOES A LENDER TAKE WHEN THERE HAS BEEN A DEFAULT? The following is a summary of the legal steps that need to be taken. What type of legal action is required on default When there is default under a Mortgage, the Lender will usually hire a Lawyer to commence a lawsuit against the Borrower in which the Lender asks to be allowed to foreclose on the Lands that the Borrower mortgaged. Foreclose or foreclosure means the remedy of extinguishing another persons rights, in this case the rights of the Borrower, in the Lands the Borrower mortgaged to the Lender. Before the courts will grant foreclosure they will, except in certain extreme circumstances, require that the Lands be advertised for sale pursuant to a court order. If the advertising of the Lands does not result in any offers that are sufficient to payout the Lender s Mortgage or results in an offer that the Lender decides to accept, even if it does not satisfy the entire amount owed to him, then the court is entitled to order, if requested by the Lender, that the Lands be foreclosed. When a foreclosure action has been completed the court will order that the Land Titles Office delete the Borrowers name from their records as the owner of the Lands he mortgaged to the Lender and record the Lender now as the new owner of the Lands. Can the Lender Sue for the Money Instead of Foreclosing In Alberta there is legislation that provides that when the Lands being mortgaged are residential Lands that the Borrower resides on, the Lender s only remedy in enforcing its mortgage is to advertise the Lands through the courts and attempt to get paid from offers received, or to foreclose. The Lender is not entitled to sue the Borrower for a judgement with respect to the monies borrowed and then attempt to satisfy the judgement from other assets owned by the Borrower. If the Borrower is not living on the Lands being mortgaged, in some, but not all cases it may be possible to sue to get judgement for monies borrowed. If you are considering such loans further consultations with your Mortgage Broker and Lawyer should be carried out.

11 M O R T G A G E F O R E C L O S U R E S What are the Steps required and how long does it take to complete a Foreclosure 1. The Lender commences an action by having his Lawyer file a statement of claim at the Alberta Law Courts. At this time an appraisal of the Lands is usually ordered from a Certified Appraiser. 2. The Borrower has 15 days to respond to the Lender s Statement of Claim and file a Statement of Defence if he so chooses. Ordinarily, if there has been a default by the Borrower, there is no possible defence to the claim and the Borrower does not defend. If he does defend and there is no basis for the defence, the Lender s Lawyer can apply to have the defence removed. 3. The Lender then sets a date with the court to request an Order allowing the Lender to conduct a court ordered sale of the Lands. This application requires that the Lender, through his Lawyer, confirm by affidavit how much money he is owed, that there has been a default under the Mortgage and provide the courts with an appraisal describing the market value of the Lands. All of this information is filed first with the courts and then served on the Borrower and all persons shown on the records of the land titles office to have an interest in the Lands. At the application, the court listens to the Lenders evidence as to how much money he is owed and what the value of the Lands is and also to any submissions made by the Borrower, if he attends at the hearing, and any others having an interest in the Lands. The Judge will then determine how much time the Borrower is to be allowed to pay up the arrears or arrange re-financing of the Mortgage before the Lands are offered for sale (this is called the redemption period ). How long the redemption period is will depend on how much equity there is in the Lands (the difference between the value of the Lands and the amount owed to the Lender). If there is a large difference such that it is clear that the Lands are worth substantially more than what is owed to the Borrower, the Judge will order a six month redemption period. If it is clear that the Lands are worth less than what is owed on the Mortgage, the Judge should order that the Lands be put up for sale immediately. If it appears that the Lands are currently worth more than the balance owing to the Lender, but the difference is such that waiting six months could jeopardize the Lender s ability to recover all amounts owing, the court will set the redemption period somewhere between no redemption period and a 6 month redemption period. 4. After the redemption period set by the Judge has expired the Lands are automatically put up for sale. This can be done by advertising in a local major newspaper and requesting tenders or offers to purchase. This process usually takes at least 6 weeks. Alternatively, the Lender can choose to list the Lands with a Realtor. This usually would involve a longer listing period and Real Estate commissions are payable on any sale. 5. If the advertising results in an offer that would pay the Lender all of his principle, interest, property taxes and legal fees, the Lender must apply to have that offer accepted. If the offer exceeds the amount owed to the Lender, then the excess funds are paid into court for payment to any Lenders or creditors who have interests registered against the Lands, or if there are none, to the Borrower. If the advertising results in an offer that does not pay the Lender everything he is owed, the Lender has to make a decision as to whether he should accept the offer, and write off the balance of the monies owed to him, or apply to the court for a foreclosure order which will allow him to become the owner of the Lands free and clear of any Mortgages or Liens registered behind him on title to the Lands. He would choose the latter if he believes that he can later sell the Lands for a better price or wishes to hold on to the Lands as an Investment. 6. Whether the Lender decides to accept the offer or ask for a foreclosure order, it will be necessary to apply to the court for a final order in the legal action. In granting its order, if the Borrowers or Tenants are still living on the Lands, the court will ordinarily allow a minimum of 30 days for them to vacate the Lands. In summary a foreclosure will likely take anywhere a minimum of three months to complete if there is no equity in the Lands. If there is equity sufficient to require a 6 month redemption period it would ordinarily take at least 9 months to complete. As with any type of court proceedings these are estimates only. If a Borrower attempts to delay the process there are a number of procedural manoeuvres that are available to him that can increase these time periods.

12 M O R T G A G E F O R E C L O S U R E S DO SECOND MORTGAGES HAVE SPECIAL CONSIDERATIONS If an investor (Second Mortgage Lender ) invests in a Mortgage ( Second Mortgage ) where there is a prior Mortgage registered at Land Titles, there are a number of special considerations. As was mentioned earlier, the Land Titles Office records all Mortgages in order of priority based on the date of registration. If a Borrower borrowed money pursuant to an earlier Mortgage (the First Mortgage ) and enters into an agreement with a another Lender ( Second Mortgage Lender ) to borrow additional monies and mortgages the same Lands (the Second Mortgage ), then this Second Mortgage will rank behind the earlier, First Mortgage, in priority. So long as both Mortgages are in good standing each Lender will continue to receive its monthly payment from the Borrower. Once there is default under one of the Mortgages, foreclosure actions can be commenced. If either of the Lenders proceeds to advertise the Lands through a foreclosure action, and an offer is received, the First Mortgage Lender is entitled to be paid in priority to the Second Mortgage for all principle, interest and legal costs. The Second Mortgage Lender would receive any monies left over to the maximum of what is owed on the Second Mortgage including interest and legal costs. If no offers are received, then the First Mortgage Lender is entitled to ask the court for a foreclosure order with respect to the Lands; the effect of the granting of such an order is to extinguish the Second Mortgage and any right of Second Mortgage Lender to recover the monies owed to him by the Borrower. When a Second Mortgage Lender finds out that a First Mortgage Lender is entitled to, or has, commenced a foreclosure action, it is necessary to make some important decisions. If the Second Mortgage Lender wishes to, he can wait and see what type of offers are received when the First Mortgage Lender advertises the Lands in his foreclosure action. While this means that the Second Mortgage Lender is not required to immediately pay additional funds to save his investment, the risk to him is that he does not control the pace of the legal action and all of the legal costs being incurred will be added on to the amounts owed to the First Mortgage Lender. A second alternative is for the Second Mortgage Lender to commence his own foreclosure action, which will allow him to control the pace of the action but does not stop the First Mortgage Lender s legal fees from continuing to escalate. A third option is for the Second Mortgage Lender to commence his own action and pay up the arrears on the First Mortgage to stop the First Mortgage Lenders legal fees from increasing while the Second Mortgage Lender completes his foreclosure. The Second Mortgage Lender, if he chooses this latter action, may have to payout the full amount of the First Mortgage if its term has expired. In such cases the Second Lender is entitled to add all amounts paid on account of the First Mortgage to the amount owing on his Second Mortgage. In reaching a decision as to what course of action to take, the main consideration for the Second Mortgage Lender will be can this property be sold for sufficient money to pay out the First Mortgage and all or part of the Second Mortgage? LEGAL FEES Legal fees are charged by Lawyers on an hourly basis. Therefore the amount of legal fees will depend on how long the action takes, whether it is defended or delayed by the Borrowers and a number of other factors. On a foreclosure action from start to finish, that is not contested, one could expect at least $1,700 in legal fees plus disbursements of at least $700. These fees can quickly increase depending on the circumstances of any foreclosure action. The foregoing is intended as a general summary only and not as legal advice. It does not apply to foreclosures with respect to commercial property or farms, which have special considerations. We strongly advise all Lenders to discuss the implications of foreclosure actions with their Lawyer before investing in Mortgages. If you have additional questions or concerns please contact us. Phone or (403) cedarpeaksmortgage.ca

13 FOR FURTHER INFORMATION PLEASE CONTACT YOUR CEDAR PEAKS MORTGAGE SERVICES LTD. PROFESSIONAL. cedarpeaksmortgage.ca