Deciding where to invest your money is a tough one. There are traditional investments such as stocks, mutual funds, and CDs. A CD has more certainty in its return than say, stocks where you are at the mercy of the whiplash moods of the market. Using your money as a private lender to a real estate investor is a good move, and here are five reasons why.
Great Returns on Your Investment
It is not uncommon for a private lender to get double-digit returns on their investment, often in the 10 to 12% range for a single property. When lending to a real estate investor for a property block, the returns can be even higher. Unless you get incredibly lucky picking a stock, no other type of investment will give you these types of returns.
Investments Are Short Term
One of the perks of being a private lender is your capital is only tied in the investment for a short period of time. The average is 3 to 12 months. This allows a private lender to get a fast return and then reinvest quickly, because the process for funding as a private lender can done in as little as 14 days. Many private lenders invest with real estate investors multiple times a year.
Transparency and Security
A private lender working with a real estate investor will enjoy the transparency of the investment. The investment will usually be for a single property. There is security in the transaction because money you invest is backed by real estate, and your investment in the property is recorded at the courthouse. This is as important as the value of the property being higher than the investment amount. For example, you invest $50,000 in a property worth $99,000. This difference is where the profit to a private lender comes in. Also, you have an additional protection that if the borrower defaults on the property, you as the private lender can take ownership at discount.
Great Source of Passive Income
When you choose to be a private lender to a real estate investor, your money is working for you without any hard effort on your part. You don’t have to deal with the hassles of tenants, zoning, or contractors. You lend the money to the real estate investor and watch your investment grow.
Plan for Your Retirement
If you have an existing 401K or IRA account, you can use those funds now as a private lender. If you have equity in your current home, you can also use those funds to lend to a real estate investor. Unless your 401K or IRA is returning 10% yearly, consider using those funds to help make retirement a little easier.
Becoming a private lender to a real estate investor is a great way to increase your personal wealth. The transparency of the transaction, fast returns, and painless ways to fund using your already existing savings accounts make it an easy option. If you’re looking for a way to invest with solid returns, investigate whether becoming a private lender is the right investment option for your individual situation.
Want to partner with a local, Jacksonville, NC real estate investor? Contact Blue Hen Homebuyers at info@bluehenhomebuyers.com.