Private money lending is a financing option that involves individuals or companies lending money to other individuals or companies for real estate investments. In essence, private money lenders act as an alternative source of funding for real estate investors who may not have the time to deal with traditional bank loan obstacles or slow timelines.
In this post, I’ll explain how private money lending can benefit you and how your funds and protected.
How Private Lending Can Benefit You
- Passive Income: Private money lending allows the lender to earn passive income without having to flip a house themselves. Instead, they can simply lend their money to a real estate investor and earn interest on the loan. This can be a great source of income for individuals looking for additional passive income streams.
- Diversification: Private money lending is a well-diversified portfolio addition. Rather than relying solely on the stock market, investors can diversify their portfolios by lending money to real estate investors. This provides an investment that is not at the mercy of the stock market’s volatility.
- Great returns: The returns on private money lending usually beat traditional bank returns.
- Utilization of Retirement Funds: By using the funds in your IRA or 401k to finance your loans, you can earn interest in addition to the repayment amount, effectively generating income through interest.
How Safe Is It?
There are several ways that your money is safeguarded:
- The promissory note acts as a legal contract between the lender and the borrower.
- The lender has collateral in the form of a lien on the property, which gives them a legal claim to the property if the borrower defaults on the loan. Nothing beats real estate for loan collateral!
- Good real estate investors will be easy to spot – they’ll have strong financials, good track records, and they’ll keep you in the loop throughout so that you see the progress of the project and the safety of your funds.
Want to know more?
If you’re ready to learn more about private money lending and how you could benefit from it, contact me today! I can fill in the details and show you some example properties, loan agreements and even returns I’ve been able to provide to previous lenders.