Investing in real estate is essentially one of the smartest and safest strategies to promote wealth building. With the proper foundation and knowledge, investing in real estate – or in this case,private lending – can prove to be highly lucrative for anyone.
Of particular interest, however, is what an investor can do with the money they make from a profitable career. While a portion of profits will undoubtedly be allocated to the lifestyle of their choice, investors are advised to be smart with their money. Of course you can reinvest your money into another property, but if you are looking for an alternative, there may be one option you haven’t considered yet. Investors who have the funds to do so should consider becoming a private money lender. Investing in private mortgages for real estate offers the same type of underlying security and profit potential as rehabbing or wholesaling, but without getting your hands dirty.
For those of you who may be unfamiliar with the concept of a private money lender, these individuals lend their own capital to other investors, while securing the loan with a mortgage against real estate. Essentially, private money lenders serve as an alternative to the traditional lending institutions (big banks) people are so familiar with.
Leaving your hard-earned savings in a passbook bank account is no way to protect and grow your assets. At the end of the day, you are securing a loan with real estate that is worth much more than the loan – there is a very strong equity position. Private money lending can sometimes be less risky than owning real estate, if done properly.
Real Estate loans typically come from banks, government agencies, insurance companies, and pension funds. However, the lenient standards that caused the mortgage meltdown has now lead us to a brave new lending world. One that has many strict requirements and a timeline that is not conducive to the average real estate investor. Thus, a need for an alternative lending source quickly developed.
It became apparent to many investors that their path to obtaining quicker easier financing was better served with private lenders. Now, private money lenders are a critical component to the real estate investment industry.
There are several benefits to taking on the role of a private money lender. If done correctly, offering alternative real estate financing options can mitigate risk while simultaneously establishing true wealth.
The new laws stipulate that investors should not invest more than 10% of their entire wealth into one single Trust Deed. Having a little extra money in the bank doesn’t mean that you should throw it at the first investor that comes your way, either. In fact, it is pretty straightforward: don’t become a private lender if you are not willing to take the time to understand the risks involved. However, if you are equipped to mitigate potential risks and take advantage of the opportunities that present themselves, becoming a private money lender is a wonderful and lucrative venture.