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Is Private Lending Right For You?

by Guest Blogger on January 9, 2009 · 3 comments

  

private lending moneyMore and more pension plan, IRA, CD, Stock Market investors are opening their eyes to trust deed investing because it allows them to be in charge of their money. Being a private lender is a way for someone to move from being a passive investor, which allows your stock broker or pension plan manager decide where to put your money, to more of an active, “self directed” investor. This means you are the one directing where your money is being put to work.

Oh my gosh if I hear one more person tell me that they don’t even open their statements anymore because they can’t bare the truth, I swear – I’m going to cry! There are options for investors to take over the direction their various money and investment accounts are going! I know because I am in the middle of all it!

The following questions are what I seem to be answering the most to help people decide if they are ready to become a private lender and get into the wonderful world of private investing!

There are a few things to consider when you are thinking of becoming a Private Lender.

  1. If your money is in an IRA or Pension, is it “Self Directed”? If so, then you are all set to start directing where your money is to be invested. If not, it is a simple process to move your money into a self directed account.
  2. Speaking of IRA’s— has your IRA, Money Market or Pension made you a return that you are happy with? Trust Deed investing is secured by real property collateral. There is no chance that you will loose money investing with the right company (key word being the right company! Please I beg of you to do some serious homework here or get major references).
  3. Do you plan on retiring on your investments in the next 15 years or less? Will you be able to at the current return you are receiving?
  4. Is diversifying your portfolio important to you?
  5. Are you able to invest your funds for the time frame of 6 to 12 months?

These are a few of the common questions people need to ask themselves in order to decide if being a Private Investor is what they are looking for.

With the current conditions of the stock market, traditional bank lending and the economy in general, it is hard pressed for regular people to earn a substantial rate of return on their investments.

The quote that I say over and over these days sums it all up:
“When there is Blood on the Streets… buy Real Estate”
Being a Private Lender is the perfect way to do so—without all the headaches of dealing with the property itself!

Photo Credit: emdot

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{ 3 comments… read them below or add one }

Erika Napoletano January 9, 2009 at 10:25 am

As someone who worked previously in the trust deed industry, I cannot stress enough the importance of due diligence. Treat each trust deed transaction as if you were moving forward with the purchase of your own home for your family.

Make sure you have asked the company for (1) copy of the appraisal (with a date inside of 30 days on it!) (2) if the property is being pitched as “pre-leased” get a copy of the signed lease agreement (you’re entitled!)(3) ask for the company’s current default rate for their portfolio – if it’s over 30%, keep shopping IMHO, and (4) have a clear understanding of how the company handles a potential default, know the foreclosure procedures (judicial, etc) for the state in which you’re agreeing to make the loan, an how the company expects you to participate financially and consensus-wise throughout the process.

Hope this helps!

Reply

Thomas Phelan January 9, 2009 at 10:47 am

Someone considering using an Self-Directed IRA for investing in another Company’s “Trust Deed” portfoilo should also consider investing closer to home.

For example working with a local Realtor who has clients with 25% – 35% down and are seeking a 1st Mortgage of 65% LTV – 75% LTV and willing to pay 7% – 9% interest plus a point or two.

Another way is to lend the IRA funds as “Hard Money” at 15%+ plus 2 – 5 points. Fix and Flippers will pay this for quick access to cash.

And the IRA can loan on a Non Recourse basis (very attractive) to another IRA that seeks financing with as much as 50% down and 50% LTV.

Tom Phelan
IRA Choices

Reply

Joshua Dorkin January 9, 2009 at 1:09 pm

Great tips, Erika and Thomas! Thanks for the input.

Reply

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