With the fluctuations in the stock market and unscrupulous corporate board members, as an investor you may be finding it difficult to earn a decent return on your investment dollars. It almost seems safer to stuff your money under the mattress since it isn’t growing anywhere else. However before you rip off the mattress cover consider becoming a private money lender.
Just like any other lender, as a Private Money Lender you will agree to lend a certain amount of funds to a borrower in return for interest in some type of collateral. Usually this collateral is commercial or residential real estate but private money lender funds are often sought for business equipment and start ups too.
Since you are a private investor, getting started is easy: What makes private money lending so attractive for the investor is the quick return of investment. Private Money loans are normally short-term loans usually under nine to twelve months, and you have the luxury of cherry picking your deals.
Unlike traditional lending institutions where everything has to be passed through a committee, you will have complete control over your investment dollars and who gets them. The typical private money real estate loan will have a loan-to-value ratio of no more than 65%. This way your investment is covered even if the deal goes bad. Once you learn the ropes you will be able to spot a good deal at a glance and minimize your risk.
You may be wondering, with the real estate market the way it is, why anyone in their right mind would consider investing in real estate. It’s simple supply and demand actually. Land is the only finite commodity, in other words they’re not making any more of it, and all that changes is who has it. People still need houses to live in and doctors need offices to practice from. The real issue is that banks are not lending.
They’re so scared of causing a board member to lose his bonus that they’ve neglected to do what they’re supposed to do which is to lend money. Since real estate still needs to be bought and sold, as a private money lender you will be in the perfect position to earn a nice income for yourself helping other real estate investors grow their incomes as well.
Building Wealth as a Hard Money Lender
If you are looking to build wealth through investing you have a couple of choices; you can either stick your money in a low performing mutual fund and assume the associated risk which helps no one or you can become a hard money lender and help other investors while earning a nice income for yourself.
A wise man said that you can get everything you want if you would only help enough other people get what they want. That wise man is ZigZiglar and while his messages are typically directed toward salespeople his wise advice is applicable to the investor looking for a decent return.
Hard money lenders are in the position to help real estate investors close deals. With the current state of the banking industry, “NO” has become the new buzzword for conventional lenders. This is really unfortunate because there’s just so much real estate available for pennies on the dollar, but the banks are not lending any money to buy these properties. As a hard money lender you will use your funds or access to funds to provide the necessary financing to purchase the properties.
The typical hard money loan has an interest-rate greater than 15%, plus you can also charge 3 to 5 points on the loan; this typically will give you a return on investment of 20%. To sweeten the pot even more for the hard money lender these loans are typically paid back within nine months. How many other investments can provide you that level of return within such a short amount of time and with the added safety of being secured by real estate?
Of course as with any investment it is not without risk, however the wise hard money lender will structure the deal to maximize yield and minimize risk. There are many courses available to help aspiring hard money lenders learn the ropes and take advantage the current of the lending environment.