Tweet
How it works?
You are lending money just like a bank would and your money is back by a tangible asset. Your borrowers are real estate investors who come across great deals for deeply discounted properties they need to fund fast or risk missing out. Right now single-family homes and investment properties are at an all time low in price. A couple years ago, you would have to invest thousands of dollars in rentals just to make them cash flow. Now though, an REO, short sale, and many a motivated seller are available for those smart enough to see the opportunities.
The hard part right now is being able to get a bank loan. Banks want to see at least 20% down and you have to have excellent credit, traditional employment, and no longer are there No Doc Loans for those people who are self-employed. Also if the property you want to purchase has any problems, like a torn carpet, FHA will not loan on it. You have to go conventional then the rates are higher, and more money is required down.
For those of us that usually invest our money into the stock market, this time also opens up a golden opportunity to instead invest in real estate by being a private moneylender.
Let me illustrate how one can enjoy bigger profits using an example of $10,000 invested for 36 months with compounding interest. First, a bank CD paying 2% will grow to $10,612 in 36 months for a gain of $612. Next, a real estate note paying 8% will grow to $12,597 after 36 months for a gain of $2,597. Now that's over 400% more money on the same amount invested! What a difference!
In another example, $50,000 in a CD that is earning 2% per year will give you $83.33 per month. But, a real estate note of $50,000 at 8% will give you $333.00 per month. Big difference!
Types of Private Lending Situations
Private real estate lending can be beneficial in a range of different situations. Each one offers a slightly different return and loan period. For instance, you could lend money to an investor that wishes to buy a rental property. You’ll receive paperwork defining the interest rate
and time fame of the loan. Returns for this kind of private lending are usually about 5 to 10 percent over the course of a few years.
You might also lend to investors who wish to set up a back to back closing for short sales. These investors buy the property from the original owner using the money you loan, then sell it again almost immediately, making a small but comfortable profit. In these cases,
you could get a return of several percent in just a few days. The loan could last just 24 hours in some cases.
Other real estate investors wish to refurbish properties with some damage and with prices well under market value. This kind of property is readily available in the aftermath of the 2008 real estate crash. Many can be sold for a profit after only a little bit of work. In these
cases, the investor accrues interest over the course of the loan, then pays back the full amount plus the interest as soon as the property sells.
These and many other private lending situations allow you and an investor to make a profit without having to deal with arduous rules and regulations. These loans are low risk, as long as you do your homework beforehand, and can allow you to make money much more safely and rapidly than your current investment options.
Stay Tuned for my next posting of How you can be the bank Part 2 As I will explain how one should do there homework beforehand.
Disclaimer: I Rory Boone am not a United States Securities Dealer, Broker or US Investment Advisor. This is not a solicitation to purchase any securities of any kind. This material is strictly for educational purposes.
You are lending money just like a bank would and your money is back by a tangible asset. Your borrowers are real estate investors who come across great deals for deeply discounted properties they need to fund fast or risk missing out. Right now single-family homes and investment properties are at an all time low in price. A couple years ago, you would have to invest thousands of dollars in rentals just to make them cash flow. Now though, an REO, short sale, and many a motivated seller are available for those smart enough to see the opportunities.
The hard part right now is being able to get a bank loan. Banks want to see at least 20% down and you have to have excellent credit, traditional employment, and no longer are there No Doc Loans for those people who are self-employed. Also if the property you want to purchase has any problems, like a torn carpet, FHA will not loan on it. You have to go conventional then the rates are higher, and more money is required down.
For those of us that usually invest our money into the stock market, this time also opens up a golden opportunity to instead invest in real estate by being a private moneylender.
Let me illustrate how one can enjoy bigger profits using an example of $10,000 invested for 36 months with compounding interest. First, a bank CD paying 2% will grow to $10,612 in 36 months for a gain of $612. Next, a real estate note paying 8% will grow to $12,597 after 36 months for a gain of $2,597. Now that's over 400% more money on the same amount invested! What a difference!
In another example, $50,000 in a CD that is earning 2% per year will give you $83.33 per month. But, a real estate note of $50,000 at 8% will give you $333.00 per month. Big difference!
Types of Private Lending Situations
Private real estate lending can be beneficial in a range of different situations. Each one offers a slightly different return and loan period. For instance, you could lend money to an investor that wishes to buy a rental property. You’ll receive paperwork defining the interest rate
and time fame of the loan. Returns for this kind of private lending are usually about 5 to 10 percent over the course of a few years.
You might also lend to investors who wish to set up a back to back closing for short sales. These investors buy the property from the original owner using the money you loan, then sell it again almost immediately, making a small but comfortable profit. In these cases,
you could get a return of several percent in just a few days. The loan could last just 24 hours in some cases.
Other real estate investors wish to refurbish properties with some damage and with prices well under market value. This kind of property is readily available in the aftermath of the 2008 real estate crash. Many can be sold for a profit after only a little bit of work. In these
cases, the investor accrues interest over the course of the loan, then pays back the full amount plus the interest as soon as the property sells.
These and many other private lending situations allow you and an investor to make a profit without having to deal with arduous rules and regulations. These loans are low risk, as long as you do your homework beforehand, and can allow you to make money much more safely and rapidly than your current investment options.
Stay Tuned for my next posting of How you can be the bank Part 2 As I will explain how one should do there homework beforehand.
Disclaimer: I Rory Boone am not a United States Securities Dealer, Broker or US Investment Advisor. This is not a solicitation to purchase any securities of any kind. This material is strictly for educational purposes.