Private Money Lending Secured by Real Estate

Posted on Sunday, June 08, 2014

Does the idea of managing a major home renovation project seem daunting?

Are you hesitant about taking on ownership of a distressed property directly?

Do you hate the idea of trying to manage tenants in a rental property?

Have you ever wanted to get a better return on your money by safely investing in real estate?

If you answered yes to the above questions, you may be a good candidate to become a private money lender to real estate investors.

Managing Risk with a Private Loan

Lending money to real estate investors doesn't have to be risky. You can, and should, secure your funds with a first deed of trust, similar to what a bank does with a mortgage loan.

Return on Investment with a Private Loan

Real estate investors often thrive by managing several transactions simultaneously.

For most investors, this requires gaining access to capital through bank loans or private investment loans. Even wealthy investors with large bank accounts like to leverage their investment dollars by financing their real estate purchases with loans.

But for most real estate investors, bank restrictions often prevent their ability to access all the funding they need to do a high volume of transactions.

For this reason, real estate investors are willing to pay higher interest rates than banks and mortgage lenders typically charge.

The private money lender, therefore, usually can get a much higher interest rate on their money than they would by having their money in a bank account.

Often private money lenders achieve higher rates of return than they would get by having their money in the stock market or other investments.

Comments (3)

  1. Tiny_1399768004-avatar-rios9000

    We generally offer 9% to our private lender ma and pa types. Out of curiosity, what do you usually offer?

  2. Tiny_1399397657-avatar-businessjohn

    Hi Andrew. That's what our investment company is offering. In the past we have offered more, including profit sharing, but that's only for particular transactions in a joint venture partnership.

  3. Tiny_1399768004-avatar-rios9000

    I've heard people start to get nervous that "it's too good to be true" when you get into double digits. 9% certainly has worked well for us and it sounds like you've had the same experience.

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