Your Headache and Hassle Free Real Estate Investment Strategy
The majority of people are under the impression that “investing money into real estate” means you must either adopt the time consuming buy, fix and sell (“flipper”) strategy, or the headache producing buy and hold (landlord) strategy. While this may be traditional wisdom, it simply is not true. With that being said, ask yourself –
- Tired of the low rates of returns from your bank CD’s and/or bond yields?
- Looking for a way to avoid the high volatility of the stock market & the fees from your broker or fund manager?
- Interested in another financial strategy to diversify your funds?
Private real estate mortgage lending, although not a mainstream investment model, is a strategy to further diversify your money while at the same time both garnering higher returns compared to bank CD’s and bonds, and avoiding stock market volatility and uncertainty.
Private mortgage lending is simply a strategy that allows you to make money like the banks do. Because you act as the bank in the transaction, you are given the same protections a normal bank would receive.
What are the advantages of lending money to real estate investors? Here are some details of a typical private mortgage loan you would make with an individual investor:
- Will generate a FIXED interest rate per year
- Is COLLATERALIZED by a physical asset (the actual house)
- Is SECURED by a private mortgage recorded at the county register
- Is INSURED for your protection
- Contains EQUITY from the start
In most instances, private real estate mortgages do not provide any capital appreciation. They are geared towards those individuals who are seeking to generate a steady stream of fixed interest payments, which, in today’s market, should exceed current money market and bank CD rates. Unlike stocks, the underlying security is a tangible physical asset, where legal protections such as title insurance, and many other unique rights and remedies ensure the enforce-ability of a mortgage lien and provide substantial downside protection for the investor. We know we are repeating ourselves, but we want to emphasize the point that this strategy is nothing ground-breaking or new. It is the way that banks make their money.
The typical interest rate for a real estate private mortgage loan varies depending upon the time frame, the purpose, the loan-to-value ratio, the exit strategy, and other factors. The interest rate can be either fixed or floating, depending upon the way the transaction has been structured.
The key, as with any investment strategy, is to align yourself with a proficient and ethical team of experts with a verifiable track record. Has the investor done multiple real estate projects? Do they have investors you can call for further due diligence? The real estate investor must have access to a steady stream of high-quality properties that will result in worthwhile loan opportunities.
While most investment strategies today make you choose between high returns or low risk, Private Lending offers BOTH. You get a rate of return that is almost unbeatable compared to your local bank CD’s or bonds, your return is fixed (“goodbye” to stock market uncertainty), and your loan is secured by a physical tangible asset.
If you would like additional information regarding any facet of private mortgage real estate lending, please give us a call at 859-429-0444 or submit a contact form found by clicking here.