The Top 4 Advantages of Private Lending to Real Estate Investors
As markets continue to change, more and more people are turning to alternative investment options. Many investors are seeking opportunities as private lenders because it gives them more control over their investment.
A private money lender lends their own capital to a real estate investor who will use it to fund a rehab, construction, or commercial project. Over time the borrower repays the private lender with interest.
Being a private money lender is different than investing through “big banks” in many aspects, most of which are beneficial to the lender.
Keep reading to find out the unique benefits of working with real estate investors compared to other investment options…
#1 You are in control
As the lender, you decide the terms of the loan and get to control most of the process. You will take the reins and decide the interest rate and terms of the loan. Because of this, you can build a better portfolio for your personal financial objectives.
#2 Certainty over your returns
The most distinct difference between private money lending and other types of investments is that you aren’t at the mercy of the stock market or a financial planner. You can be more certain of your returns because you’ll know exactly how much to expect from borrowers each month.
Instead of hoping your investment has a profitable future, you’ll know that you can expect a certain return because you set the terms of the loan.
#3 Higher returns in less time
Private lending also gives you the opportunity to make a higher return than rates offered by most other investments. In fact, lenders can usually earn between an 8-12% annualized return on their investment.
On top of the higher returns, private money loans to real estate investors are usually short-term. Shorter loan periods mean that you can get your investment and interest back in a fraction of the time.
#4 Backed by real estate
Private lending gives more peace of mind than other investing options because the loan backed by a real estate property that you choose. If something goes wrong, you have a valuable asset to fall back on.
Also, borrowers are usually motivated to build a strong reputation with their lenders, so it’s unlikely that they will not pay back the loan. In the case that a borrower does default on the loan, the lender can seize the property through foreclosure and won’t suffer a loss.
The bottom line…
Private lending is an appealing investment choice, but understand the risks and decide if it’s a smart choice for you. Never invest beyond your knowledge base, and thoroughly research the best private money lending practices before you jump in.
To start being contacted by real estate investors with investment opportunities in residential real estate, become a lender on Private Money Goldmine today.