In the current economy, investors all around the world are looking for new methods of increasing investment returns while limiting risks. If you have excess investment capital lying dormant in a certificate of deposit, money market account, or an IRA, you may also be looking for new ways to get the most out of your capital. For investors that are looking to diversify outside of the stock market, becoming a private mortgage lender is a great opportunity to increase returns on capital by investing in collateralized investments.
There is a huge demand for private lenders, as it is becoming ever more difficult for real estate investors to find mortgage lenders and financial institutions that are actively financing properties. In addition to these difficulties, many finance companies simply do not have adequate capital to finance the enormous amount of investment properties that have become distressed during this market collapse.
Entrepreneurs who are actively pursuing real estate investment opportunities within their marketplace are in need of a financing source that will allow them to capitalize on these opportunities quickly. These entrepreneurs are willing to pay handsomely in order to gain access to this capital, because it is not the cost of the capital that is important but rather its accessibility. Most experienced real estate investors know that having quick access to capital will allow them to acquire distressed property, quickly, efficiently, and at the best price. This is where private lenders can benefit by partnering with these experienced professionals.
In becoming a private lender, you will fund the acquisition of investment properties that are being renovated and repositioned for sale or rent by experienced real estate professionals. In essence you become the bank by investing directly into a property. You will have complete control of how much money you wish to invest and in which property.
As a private lender your transaction will be legally documented in the same fashion as formal financial institutions. The real estate investor will sign a promissory note detailing the interest rate and the terms surrounding the loan. This transaction will also be secured by a mortgage against the property so that, in the event that the real estate professional does not perform under the terms of the contract, you will be able to gain ownership to the property for a greatly discounted price.
If you are serious about becoming a private lender and begin putting your excess capital to work, you first need to determine how much capital you would be comfortable lending at any given point in time. You also need to determine your time horizon for each investment. Typically, the term of a private mortgage is from 12 to 60 months, but is negotiable to fit the private lender’s objectives. Lastly, you need to network with real estate investors online, or through your local real estate investment association, in order to find an investor with a good reputation and a positive track record. If you follow these simple steps, you will be well on your way to becoming a private lender and obtaining above average investment returns through real estate. Share in the wealth created through real estate investing.
David Scheuring is President of Pembroke Property Solutions, Inc., a professional real estate investment organization. More information is available at www.privatemortgagenow.com. Please send any comments or requests for more information to: info@privatemortgagesnow.com
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